[Congressional Record Volume 147, Number 49 (Thursday, April 5, 2001)]
[Extensions of Remarks]
[Page E577]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




  INTRODUCTION OF THE FINANCIAL SERVICES ANTIFRAUD NETWORK ACT OF 2000

                                 ______
                                 

                            HON. MIKE ROGERS

                              of michigan

                    in the house of representatives

                        Wednesday, April 4, 2001

  Mr. ROGERS of Michigan. Mr. Speaker, recently, indicted financier 
Martin Frankel was extradited to the United States to face felony 
charges stemming from financial fraud. Originally a stockbroker, 
Frankel was permanently barred from the securities industry but 
migrated to the insurance industry. The Frankel case is illustrative of 
how bad actors can too easily cross state or industry lines in order to 
deceive financial regulators.
  The Financial Services Antifraud Network Act of 2001 is designed with 
the Frankel case in mind as it seeks to protect the taxpayers and 
policyholders who end up paying for these scams and to assist the 
regulators in preventing them.
  There are nearly 200 Federal and State financial regulators in the 
United States, each with their own separate filing systems and anti-
fraud records. Over the past three decades, the agencies have attempted 
to computerize and coordinate their systems, first internally and then 
within each industry.
  For example, the securities regulators have established the Central 
Registration Depository run by the National Association of Securities 
Dealers (NASD) to keep track of most securities brokers. The insurance 
regulators have been working through the National Association of 
Insurance Commissioners (NAIC) to establish several databases on 
licensing, disciplinary actions, and consumer complaints of agents and 
companies. The banking regulators have been working through the 
Financial Crimes Enforcement Network to coordinate suspicious activity 
reports for all banks.
  Unfortunately, efforts to coordinate information across industry 
lines have proven much more difficult. Financial regulators have been 
developing individual agreements to allow the transfer of information 
on an ad hoc basis in specific cases. However, the sheer number of 
regulators, concerns about the confidentiality of shared information, 
and the technical difficulties with networking computer systems have 
prevented regulators from being able to share information on an 
automated basis.
  The need to coordinate regulatory anti-fraud efforts is particularly 
important in light of the recent integration of the financial services 
industries, such as the implementation of the Gramm-Leach=Bliley Act.
  On March 6, 2001, the Subcommittee on Oversight and Investigations 
and the Subcommittee on Financial Institutions and Consumer Credit of 
the House Committee on Financial Services held a hearing featuring the 
regulators and the regulated entities. Following compelling testimony 
from all the witnesses, I remarked that it was a rare sight to see the 
regulators and the regulated actually agreeing on the concept of 
sharing information about fraudulent actors across financial sectors.
  Taking the suggestions of our witnesses, the Financial Services 
Antifraud Network Act was drafted. This pro-consumer legislation has 
five primary purposes. One, it safeguards the public from ongoing 
fraud. Two, the bill streamlines regulators' anti-fraud coordination 
efforts. Three, it reduces duplicative information requests by 
regulators. Four, the legislation assists regulators in detecting 
patterns of fraud. Five, new technology is utilized to modernize fraud 
fighting.
  The organization of the network is based around the creation of a 
computerized network linking existing anti-fraud databases of Federal 
and State financial regulators and law enforcement agencies. An Anti-
Fraud Subcommittee (AFS) would be established within the President's 
Working Group on Financial Markets to administer the network. The 
regulators would be able to network anti-fraud information on entities 
and key professionals in the financial services industry; information 
would not be shared that is unrelated to financial or fraudulent 
activities, and shared information would only be available to financial 
regulators. Under the legislation, criminal conviction reviews 
currently required for licensing would be coordinated for greater 
efficiency, consumer protection, and cost savings. Most importantly, 
confidentiality and liability protection would be provided for all 
networked information to allow the regulators to share information 
without losing existing legal privileges.
  In addition to the primary purposes of the Financial Services 
Antifraud Network Act, the bill does not create any new federal 
bureaucracy, there are no new regulations, no new collection of 
information is authorized, and absolutely no information is shared on 
consumers.
  In closing, I would like to thank House Financial Services Chairman 
Mike Oxley and his hardworking committee staff for their guidance and 
assistance in crafting common-sense legislation that will ensure 
greater protection for consumers.

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