He reported that the Hartford sent representatives to talks last year between members of the industry and the U.S. Department of the Treasury. Those discussions convinced the agency that the property-casualty end of the business was not a likely candidate for money laundering, Mr. Mansolillo pointed out.

Company systems also need to screen for names of designated terrorists. A list of such individuals and groups is issued by the federal Office of Foreign Assets Control (OFAC). Screening is a requirement that applies to all lines of insurance, including property-casualty, Mr. Mansolillo noted.

For life insurance and annuity products as well as mutual funds, the Hartford has developed policies and procedures to ensure that potential money laundering and other suspicious activities are flagged and reported to the Treasury Department, he said.

As with all financial service organizations, the Hartford already has the needed computer systems and software for detecting suspicious activity, due to existing IRS rules aimed at combating racketeering and tax evasion, noted Mr. Mansolillo.

“We already have formal policies, fairly detailed business procedures, and know-your-customer type processes and screening abilities,” he explained.

With the advent of the USA Patriot Act, the Hartford beefed up training and education of employees and agents to keep them aware of the red flags to look for in spotting illegalities in insurance transactions, he added.

The company also established a project group to look at the Acts requirements and implement the needed policies and procedures to guide them, he said.

“There [is] tons of technology from third-party vendors, pretty much the same vendors who developed it for the banking industry 15-to-20 years ago,” Mr. Mansolillo said.

Anti-money-laundering programs must be able to aggregate transactions, he noted, so that an individual with more than one account under the same name, or who is listed as beneficiary on a number of policies, can be spotted.

The Hartford plans to use a mixture of software bought off-the-shelf and designed in-house, Mr. Mansolillo said.

“We may buy some technology for OFAC screening for some parts of the company,” he explained. “In other parts, it made more sense to build a system.”

Even though Treasurys final regulations on life insurance have not yet been issued, Mr. Mansolillo is convinced the Hartfords existing system will be fully in compliance.

“I think weve probably been more cautious than we needed to be, and as compliance officer, that makes me feel good,” he said.

James Tuite, associate general counsel for State Farm Insurance Companies, Bloomington, Ill., said his company was already familiar with many of the Patriot Acts requirements because it owns a bank and hence comes under the similar requirements of the much older Bank Secrecy Act.

The company did make one change in procedures in response to the USA Patriot Act, he reported. It established a company-wide compliance office. Previously, it had a compliance overseer for its bank only, Mr. Tuite noted.

A great deal of State Farms compliance monitoring is concerned with helping agents develop anti-money-laundering safeguards and to audit their transactions for suspicious activity, he added.

Curt Penrod, a State Farm spokesperson, added that the company has automated many of its screening procedures. The company built its program for monitoring insurance transactions on existing computer systems it had established to meet requirements of the Bank Secrecy Act, he said.

Other experts expressed concern about the impact of new anti-terrorism requirements on producers.

“I dont believe theres a producer who wouldnt be proud to report and help,” said Bob Nelson, vice president, Grace/Mayer Insurance Agency, Omaha. “But how do you enforce it at the broker/dealer and wholesaler level?” he asked. “Thats where the rub is.”

Most agencies wont have to change their existing computer systems to help them detect money laundering or OFAC activity, Mr. Nelson believes.

“Were constantly upgrading computers anyway, so I dont see why it would be necessary” to do so in response to anti-money-laundering rules, he explained.

Besides, to spot unlawful activities, few agents need a computer, Mr. Nelson pointed out.

“In my practice, I know who my customers are,” he said. “A seasoned professional knows who theyve been doing business with. If you came to my office with a briefcase full of cash, we wouldnt do business,” he said. “I dont want the liability and, most of all, I dont want to aid terrorist activity.”

As for screening names of insurance applicants against the OFAC list, Mr. Nelson thinks that should be the insurance companys job.

“Its more cost effective for them,” he said.

One New Jersey-based agency consultant reported that many agents are concerned that their responsibilities under anti-money-laundering rules are unclear.

“They are trying their best to meet the requirements of the act,” said the consultant, who asked that his name be withheld.

OFAC and money-laundering screening software, and training people to use it, has been costly for some agencies, the consultant insisted.

“A lot of [agencies] downsized, so they didnt have the [information technology experts] available” to deal with the tightened security requirements, he explained. “They had to go out and buy it.”

He noted that many of these costs have been spread out over time and are hard to track, but he believes they are heavy for some agencies.

Largely, however, agencies are already meeting the requirements, he added.

“No one in their right mind would want to get on the wrong side of this issue,” he concluded.

Insurance agencies “are always concerned about cumbersome reporting requirements,” added Mr. Nelson of Grace/Mayer Insurance. “But the stakes are high, and we ought to do everything we can.”

Trevor Thomas is an assistant editor for NUs Life & Health/Financial Services Edition.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, June 2, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.