House Committee Approves Financial Services Anti-fraud Bill

Federal legislation aimed at helping prevent fraud from within the ranks of the rapidly converging financial service sector has been voted out of the House Financial Services Committee.

This legislation — the Fin-ancial Services Antifraud Network Act 2001 — gives state insurance regulators the ability to access criminal history records in the possession of their securities and banking regulator counterparts. Tom Rodell, the Council of Ins-urance Agents and Brokers chairman and managing director of Aon Risk Consultants Inc. of Chicago, stated, “we believe that it is imperative state regulators have this tool to protect consumers in the post-Gramm-Leach-Bliley financial services marketplace.”

The council recently adopted a policy position supporting a criminal history review for every producer as a part of the resident licensing process. H.R. 1408 will permit all state insurance regulators to gain the access to criminal history records needed to perform a comprehensive criminal history review and will facilitate the sharing of the results of the review among all state insurance regulators.

NAIC President and Kansas Insurance Commissioner Kathleen Sebelius, representing the nation’s insurance commissioners, has urged Congress to authorize insurance regulators greater access to critical FBI law enforcement information to perform background checks on those entering the insurance industry. Currently, only a limited number of state insurance regulators have the ability to do so.

While commending the Committee’s effort to protect regulatory confidentiality and enable cross-industry checking of criminal and enforcement information to help identify wrongdoers, Sebelius expressed specific concern regarding the bill’s FBI provisions, saying the bill imposes an unnecessary layer of federal regulation and bureaucracy to screen criminal history data supplied by the FBI before it is transmitted to state regulators.

“Insurance commissioners need to have the same regulatory and enforcement tools held today by banking and securities regulators for checking the backgrounds of financial services providers,” Sebelius said.

The bill would streamline the exchange of information enabling the more than 200 separate state and federal agencies that currently share responsibility for financial regulation in the U.S. to more effectively prevent fraud. The Independent Insurance Agents of America (IIAA) believes the bill would eliminate perpetrators of fraud from the entire financial services industry by giving regulators the proper tools with which to fight fraud.

The IIAA endorsed the measure after securing key changes minimizing the financial impact on agents. IIAA changes also stipulated that information unrelated to financial or fraudulent activities could not be shared and that access to such information be limited to financial regulators.

The network would be established through a new antifraud subcommittee of the President’s Working Group on Financial Markets. The new legislation features no new federal regulations, and no new collection of information. Confidentiality and liability protection would be provided for all networked information to allow regulators to share information without losing existing legal privileges.

The legislation authorizes the Treasury Department to commit $5 million to establish the network. Startup costs will be recouped by charging access fees to regulators who access the network.

Topics Fraud Agencies Legislation