Thursday, August 10, 2006

Doing the Laundry...

Sometimes, when I just can’t help it, I sell life insurance. My clientele generally runs to the middle class, although I do count as clients one state representative, a Public Utilities commissioner, and an engineer.
But, because I am in the “financial services” industry, I am apparently subject to new rules put in place by the Financial Crimes Enforcement Network (FinCEN, not to be confused with CENTCOM).
HIPAA, Sarbanes-Oxley, and FinCen; insurance carriers are now required to set up “anti-money laundering” processes, and to file “Suspicious Activity Reports.” Thankfully, we peons (literally: insurance agents) are absolved from actually establishing and maintaining our own such programs.
Still, we are required to be familiar with our carriers’ plans, and to undergo special training to learn about them, and to be aware of the scope of “the problem.” Although I’m not really convinced that Abdul is going to walk in with a cool 10 G’s, looking for a “hot life policy,” I’m subject to this requirement, and recently spent part of an afternoon fulfilling it.
I find CBT (Computer Based Training) to be both a pain in the, um, PC and pretty cool. I miss the interactivity of classroom learning, but it’s also fun to go at my own pace, and make snarky comments while absorbing the material. The purpose of this online program was to raise my awareness of “anti-money laundering rules” [ed: shouldn’t that be anti “money-laundering?”], in order to be more adept at spotting such activities.
Actually, I had never thought about how the life insurance business could be used for this sort of thing. Since cash value policies (e.g. Whole or Universal life, annuities, etc) all have onerous cash surrender penalties in the early years, it seemed to me that they would be poor choices for quickly moving large sums of cash.
Turns out, though, that I just wasn’t devious enough in my thinking: one of the consumer-friendly features of such policies is the “free look” provision, which is “where the action is.” In this scenario, a prospective customer comes in, and plunks down $10,000 for a single premium annuity. I submit that, along with the completed application, to the insurer. The policy is issued, and the client says “um, y’know what, never mind, I really don’t want this after all.” I send the policy back to the carrier, and a few weeks later, a refund check drawn on the carrier’s account comes back to the “prospect.” He’s just laundered the loot.
Granted, I probably would have had some questions of my own in this case, but it illustrates how even innocuous vehicles like annuities can be used for illicit purposes. And the course gave numerous other examples, as well, which also surprised me. For my part, I’m now more aware of clues and tell-tale signs, and cognizant of the potential for abuse.
All in all, I’d have to say: 45 minutes well-spent.
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