Anti-Money Laundering
Customer identification program
Contains customer identify verification procedures, verification recordkeeping, government list comparison, and notification to customers
Securities and Exchange Commission
An insurer that sells variable annuities; satisfies the AML program requirement for an insurance company in correlation
Related transaction
Any transaction conducted between a payer or its agent and the recipient
IRS Form 8300
Captures the identity of the individual from whom the cash was received; the person on whose behalf the transaction was conducted; a description of the transaction and the method of payment; and the name of the business that received the cash; may be filed voluntarily
Placement
Putting dirty money into financial institutions or the retail economy
Money laundering
The process of making dirty money appear legitimate
Patriot Act of 2001
Expanded the scope of BSA by bringing all financial institutions under its regulations; require: the establishment of an anti-money laundering program, the creation of customer identification and verification programs, enhanced recordkeeping and reporting, and enhanced suspicious activity reporting
Suspicious Activity Report by Insurance Companies
Filed in a central location determined by FinCEN; shared with appropriate law enforcement; must be supported by documentation and kept on file for five years
Right to Financial Privacy Act
Generally prohibits financial institutions from disclosing a customer's financial record to a government agency without service of legal process, notice to the customer, and an opportunity to challenge the disclosure; does not apply when providing information to FinCEN or a supervisory agency
Currency transaction report
Generally required when an insurer receives more than $10,000 in cash in one transaction or in two or more related transactions; made on IRS form 8300
Bank Secrecy Act of 1970
Intended to prevent banks are other financial institutions from being used as intermediaries to transfer, disguise, or hide money derived from criminal activity; imposes strict reporting and recordkeeping requirements on financial institutions
Money Laundering Control Act of 1986
Made money laundering a criminal activity
Financial Institution
Must conduct its own assessment to evaluate the money laundering risks it faces on the bases of its products, customer base, and customer activity
Requirements for an AML
Must include training for all appropriate persons that provide an understanding of money laundering risks in general; provide for independent testing on an ongoing basis to ensure that it complies with the regulations and continues to function as it was designed
Financial Crimes Enforcement Network
Purposed to present signs of possible illicit activity that some insurance companies have identified, and thus raise awareness of possible risks and vulnerabilities
Suspicious activity report
Reporting requirement of suspicious transactions; authorizes a financial institution to report any suspicious transaction that is relevant to a possible violation of law or regulation
Financial Action Task Force
Represents over 20 countries and supports suspicious activity reporting
Money Laundering Suppression Act of 1994
Required regulators to enhance examination procedures an upgrade examiner training to improve the identification of money laundering schemes in financial institutions
Compliance officer
Responsible for the administration of the insurer's anti-money laundering program; may be a single individual or a committee; must be empowered to develop and enforce appropriate policies and procedures and ensure that company personnel are appropriately trained and educated
Government list comparison
The company must determine if the customer's name appears on any list of known or suspected terrorist organizations issued by the federal government within a reasonable time after the customer's account is opened or a product is purchased
Notification to customers
The company must provide customers with adequate notice that it is requesting information to verify their identities
Customer identity verification procedures
The customer must provide identifying information and the company must verify the accuracy of the information provided
Verification recordkeeping
The information provided by the customer must be recorded and maintained for five years after his account is closed
Layering
Using multiple and complex financial transactions to hide illicit funds and obscure the audit trail
Intergration
When the washed funds are put back into the legitimate economic and financial system
Suspicious transaction
Any activity in which it appears that a person is attempting to prevent the filing of Form 8300 or cause a false or incomplete filing, or any transaction in which there is an indication of possible legal activity; involves at least $5,000; activity that appears to violate the laws
Insurance company
Any person engaged in the United States as a business in the issuing, underwriting, or reinsuring of a life insurance policy; the issuing, granting, purchasing, or disposing of any annuity contract; or the issuing, underwriting, or reinsuring of any insurance product with investment features similar to those of a life insurance policy or an annuity contract, or which can be used to store value and transfer that value to another person
Structuring
Breaking large transactions are broken into smaller exchanges