[Federal Register Volume 67, Number 201 (Thursday, October 17, 2002)]
[Proposed Rules]
[Pages 64067-64075]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-26365]


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DEPARTMENT OF THE TREASURY

31 CFR Part 103

RIN 1506-AA36


Financial Crimes Enforcement Network; Amendment to the Bank 
Secrecy Act Regulations--Requirement That Insurance Companies Report 
Suspicious Transactions

AGENCY: Financial Crimes Enforcement Network (FinCEN), Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document contains an amendment to the regulations 
implementing the statute generally referred to as the Bank Secrecy Act. 
The amendment requires insurance companies to report suspicious 
transactions to the Department of the Treasury. The amendment 
constitutes a further step in the creation of a comprehensive system 
for the reporting of suspicious transactions by the major categories of 
financial institutions operating in the United States, as a part of the 
counter-money laundering program of the Department of the Treasury.

DATES: Written comments on all aspects of the proposal are welcome and 
must be received on or before December 16, 2002. See the Proposed 
Effective Date heading of the SUPPLEMENTARY INFORMATION for further 
dates.

ADDRESSES: Commenters are encouraged to submit comments by electronic 
mail because paper mail in the Washington, DC area may be delayed. 
Comments submitted by electronic mail may be sent to 
[email protected] with the caption in the body of the text, 
``ATTN: Section 352--Insurance Company Regulations.'' Comments 
(preferably an original and four copies) also may be submitted by paper 
mail to FinCEN, P.O. Box 39, Vienna, VA 22183, ATTN: Section 352--
Insurance Company Regulations. Comments

[[Page 64068]]

should be sent by one method only. Comments may be inspected at FinCEN 
between 10 a.m. and 4 p.m., in the FinCEN Reading Room in Washington, 
DC Persons wishing to inspect the comments submitted must request an 
appointment by telephoning (202) 354-6400 (not a toll-free number).

FOR FURTHER INFORMATION CONTACT: Office of Compliance and Regulatory 
Enforcement, FinCEN, (202) 354-6400; and Office of Chief Counsel, 
FinCEN, at (703) 905-3590 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

I. Background

A. Statutory Provisions

    The Bank Secrecy Act (BSA), Public Law 91-508, as amended, codified 
at 12 U.S.C. 1829b, 12 U.S.C. 1951-1959, and 31 U.S.C. 5311-5332, 
authorizes the Secretary of the Treasury, inter alia, to issue 
regulations requiring financial institutions to keep records and file 
reports that are determined to have a high degree of usefulness in 
criminal, tax, and regulatory matters, or in the conduct of 
intelligence or counter-intelligence activities to protect against 
international terrorism, and to implement counter-money laundering 
programs and compliance procedures.\1\ Regulations implementing Title 
II of the BSA (codified at 31 U.S.C. 5311 et seq.) appear at 31 CFR 
part 103. The authority of the Secretary to administer the BSA has been 
delegated to the Director of FinCEN.
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    \1\ Language expanding the scope of the BSA to intelligence or 
counter-intelligence activities to protect against international 
terrorism was added by section 358 of the Uniting and Strengthening 
America by Providing Appropriate Tools Required to Intercept and 
Obstruct Terrorism (USA PATRIOT Act) Act of 2001 (the USA Patriot 
Act), Public Law 107-56.
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    With the enactment of 31 U.S.C. 5318(g) in 1992,\2\ Congress 
authorized the Secretary of the Treasury to require financial 
institutions to report suspicious transactions. As amended by the USA 
Patriot Act, subsection (g)(1) states generally:
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    \2\ 31 U.S.C. 5318(g) was added to the BSA by section 1517 of 
the Annunzio-Wylie Anti-Money Laundering Act, Title XV of the 
Housing and Community Development Act of 1992, Public Law 102-550; 
it was expanded by section 403 of the Money Laundering Suppression 
Act of 1994 (the Money Laundering Suppression Act), Title IV of the 
Riegle Community Development and Regulatory Improvement Act of 1994, 
Public Law 103-325, to require designation of a single government 
recipient for reports of suspicious transactions.

The Secretary may require any financial institution, and any 
director, officer, employee, or agent of any financial institution, 
to report any suspicious transaction relevant to a possible 
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violation of law or regulation.

Subsection (g)(2)(A) provides further that

[i]f a financial institution or any director, officer, employee, or 
agent of any financial institution, voluntarily or pursuant to this 
section or any other authority, reports a suspicious transaction to 
a government agency--
    (i) the financial institution, director, officer, employee, or 
agent may not notify any person involved in the transaction that the 
transaction has been reported; and
    (ii) no officer or employee of the Federal Government or of any 
State, local, tribal, or territorial government within the United 
States, who has any knowledge that such report was made may disclose 
to any person involved in the transaction that the transaction has 
been reported, other than as necessary to fulfill the official 
duties of such officer or employee.

Subsection (g)(3)(A) provides that neither a financial institution, nor 
any director, officer, employee, or agent of any financial institution

that makes a voluntary disclosure of any possible violation of law 
or regulation to a government agency or makes a disclosure pursuant 
to this subsection or any other authority * * * shall * * * be 
liable to any person under any law or regulation of the United 
States, any constitution, law, or regulation of any State or 
political subdivision of any State, or under any contract or other 
legally enforceable agreement (including any arbitration agreement), 
for such disclosure or for any failure to provide notice of such 
disclosure to the person who is the subject of such disclosure or 
any other person identified in the disclosure.

Finally, subsection (g)(4) requires the Secretary of the Treasury, ``to 
the extent practicable and appropriate,'' to designate ``a single 
officer or agency of the United States to whom such reports shall be 
made.'' \3\ The designated agency is in turn responsible for referring 
any report of a suspicious transaction to ``any appropriate law 
enforcement, supervisory agency, or United States intelligence agency 
for use in the conduct of intelligence or counterintelligence 
activities, including analysis, to protect against international 
terrorism.'' Id. at subsection (g)(4)(B).
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    \3\ This designation does not preclude the authority of 
supervisory agencies to require financial institutions to submit 
other reports to the same agency or another agency ``pursuant to any 
other applicable provision of law.''
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    The provisions of 31 U.S.C. 5318(h), also added to the BSA in 1992 
by section 1517 of the Annunzio-Wylie Anti-Money Laundering Act, 
authorize the Secretary of the Treasury ``[i]n order to guard against 
money laundering through financial institutions * * * [to] require 
financial institutions to carry out anti-money laundering programs.'' 
31 U.S.C. 5318(h)(1). Those programs may include ``the development of 
internal policies, procedures, and controls'; ``the designation of a 
compliance officer'; ``an ongoing employee training program'; and ``an 
independent audit function to test programs.'' 31 U.S.C. 5318(h)(A-D).
    Section 352 of the USA Patriot Act amended section 5318(h) to 
mandate compliance programs for all financial institutions defined in 
31 U.S.C. 5312(a)(2). Section 352 of the USA Patriot Act became 
effective April 24, 2002. In April 2002, FinCEN deferred the anti-money 
laundering program requirement contained in 31 U.S.C. 5318(h) that 
would have applied to the insurance industry. 67 FR 21110 (April 29, 
2002). The purpose of the deferral was to provide Treasury time to 
study the insurance industry and to consider how anti-money laundering 
controls could best be applied to that industry, taking into account 
differences in size, location, and services within the industry. In 
September 2002, FinCEN issued a notice of proposed rulemaking 
prescribing minimum standards applicable to insurance companies 
regarding the establishment of anti-money laundering programs. 67 FR 
60625 (September 26, 2002). That proposed rule applies to businesses 
offering life insurance policies, annuity contracts, and other 
insurance products with similar features, and only requires insurance 
companies, rather than their agents or brokers, to establish and 
maintain an anti-money laundering program. This focused approach is 
reflected in the proposed rule contained in this document regarding the 
reporting of suspicious transactions.

B. Overview of Insurance Companies

    Insurance can generally be described as ``a contract by which one 
party (the insurer), for a consideration that is usually paid in money, 
either in a lump sum or at different times during the continuance of 
the risk, promises to make a certain payment, usually of money, upon 
the destruction or injury of `something' in which the other party (the 
insured) has an interest.''\4\ In other words, the purpose of insurance 
is to transfer risk from the insured to the insurer. Insurance 
companies act as financial intermediaries by providing a financial risk 
transfer service that is funded by the payment of insurance premiums 
that they receive from policyholders.
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    \4\ Lee R. Rus & Thomas F. Segalla, Couch on Insurance Sec.  
1:6, at 1-11 (3d ed.).
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    The insurance industry in the United States can generally be 
divided into

[[Page 64069]]

three major sectors based on a company's line of business: (1) life; 
(2) property/casualty; and (3) health.\5\ Life insurance provides 
protection against the death of an individual in the form of payment to 
a beneficiary. Life insurance may also offer ``living benefits'' in the 
form of a cash surrender value or income payments. Recently, life 
insurers have developed products that offer a variety of investment 
components, such as interest indexed universal life (which has interest 
credits linked to external factors) and variable life (where the amount 
and duration of benefits are linked to investment experience), and that 
offer the insured the ability to overpay the premium for a fixed rate 
of return. Such products are marketed to investors as part of a 
diversified portfolio, often with tax benefits. Annuities, which are 
generally considered part of the life insurance sector, are purchased 
to provide a stipulated income stream over a period of time, and are 
frequently used for retirement planning purposes. Property insurance 
indemnifies an insured whose property is stolen, damaged, or destroyed 
by a covered peril. Casualty insurance provides coverage primarily for 
the liability of an individual or organization that results from 
negligent acts and omissions that cause bodily injury and/or property 
damage to a third party. Health insurance covers the costs of health 
care. Many insurance companies, particularly the larger ones, offer 
more than one kind of insurance product.
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    \5\ In 2000, the insurance industry in the United States 
consisted of more than 7000 domestic insurance companies and total 
gross direct premiums exceeded $956 billion. Net premiums written in 
both the life and property/casualty sectors grew annually between 
1992 and 2000. In 2000, the insurance industry, including insurance 
companies, agents, brokers, and service personnel, employed 
approximately 2.3 million people. National Association of Insurance 
Commissioners, 2000 Insurance Department Resources Report.
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    An insurance company may offer its products through a number of 
different distribution channels. Some insurance companies sell their 
products through direct response marketing in which the insurance 
company sells a policy directly to the insured. Other companies employ 
agents, who may either be captive or independent. Captive agents 
represent only one insurance company; independent agents may represent 
a variety of insurance carriers. Insurance may also be purchased 
through other third parties, all of whom must be licensed insurance 
agents, but may describe themselves to customers as financial planners 
or investment advisors. A limited number of companies offer certain 
types of policies via the Internet. A customer also may employ a broker 
(i.e., a salesperson who searches the marketplace for insurance in the 
interest of the customer rather than the insurer) to obtain insurance.
    The insurance industry in the United States has traditionally been 
subject to state, rather than federal, regulation.\6\ Matters that are 
subject to state regulation include the overall organization and 
capitalization of insurance companies, permissible investments, 
licensing of insurance companies and insurance agents, and the form and 
content of policies. In some states, insurance companies are already 
subject to anti-money laundering statutes, currency reporting 
requirements, and/or suspicious activity reporting requirements. 
According to an unpublished survey conducted by the National 
Association of Insurance Commissioners (NAIC) of state statutes or 
rules applicable to insurance companies, thirty-eight states have money 
laundering statutes, twenty-one have currency reporting requirements, 
and one has a suspicious activity reporting requirement.
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    \6\ See the McCarran-Ferguson Act, codified at 15 U.S.C. 1011 et 
seq. See also the Gramm-Leach-Bliley Act, Public Law 106-102, 
sections 104(a) and 301.
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C. Importance of Suspicious Transaction Reporting in Treasury's 
Counter-Money Laundering Program

    The Congressional authorization for requiring the reporting of 
suspicious transactions recognizes two basic points that are central to 
Treasury's counter-money laundering and counter-financial crime 
programs. First, it is to financial institutions that money launderers 
must go, either initially, to conceal their illegal funds, or 
eventually, to recycle those funds back into the economy. Second, the 
employees and officers of those institutions are often more likely than 
government officials to have a sense as to which transactions appear to 
lack commercial justification (or in the case of gaming establishments, 
transactions that appear to lack a reasonable relationship to 
legitimate wagering activities) or that otherwise cannot be explained 
as constituting a legitimate use of the insurance company's financial 
services.
    The importance of extending suspicious transaction reporting to all 
relevant financial institutions, including non-bank financial 
institutions, relates to the concentrated scrutiny to which banks have 
been subject with respect to money laundering. This attention, combined 
with the cooperation that banks have given to law enforcement agencies 
and banking regulators to root out money laundering, have made it far 
more difficult than in the past to pass large amounts of cash directly 
into the nation's banks unnoticed. As it has become increasingly 
difficult to launder large amounts of cash through banks, criminals 
have turned to non-bank financial institutions, including insurance 
companies, in attempts to launder funds. Indeed, many non-banks have 
already recognized the increased pressure that money launderers have 
come to place upon their operations and the need for innovative 
programs of training and monitoring necessary to counter that pressure.
    The reporting of suspicious transactions is also recognized as 
essential to an effective counter-money laundering program in the 
international consensus on the prevention and detection of money 
laundering. One of the central recommendations of the Financial Action 
Task Force Against Money Laundering (the FATF)\7\ is that ``[i]f 
financial institutions suspect that funds stem from a criminal 
activity, they should be required to report promptly their suspicions 
to the competent authorities.'' Financial Action Task Force Annual 
Report (June 28, 1996), Annex 1 (Recommendation 15). The recommendation 
applies equally to banks and non-banks.\8\
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    \7\ The FATF is an inter-governmental body whose purpose is the 
development and promotion of policies to combat money laundering. 
Originally created by the G-7 nations, its membership now includes 
Argentina, Australia, Austria, Belgium, Brazil, Canada, Denmark, 
Finland, France, Germany, Greece, Hong Kong, Iceland, Ireland, 
Italy, Japan, Luxembourg, Mexico, the Kingdom of the Netherlands, 
New Zealand, Norway, Portugal, Singapore, Spain, Sweden, 
Switzerland, Turkey, the United Kingdom, and the United States, as 
well as the European Commission and the Gulf Cooperation Council.
    \8\ This recommendation revises the original recommendation, 
issued in 1990, that required institutions to be either ``permitted 
or required'' to report. (Emphasis supplied.) The revised 
recommendation reflects the international consensus that a mandatory 
suspicious transaction reporting system is essential to an effective 
national counter-money laundering program and to the success of 
efforts of financial institutions themselves to prevent and detect 
the use of their services or facilities by money launderers and 
others engaged in financial crime.
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    Similarly, the European Community's Directive on Prevention of the 
Use of the Financial System for the Purpose of Money Laundering calls 
for member states to

ensure that credit and financial institutions and their directors 
and employees cooperate fully with the authorities responsible for 
combating money laundering * * * by [in part] informing those 
authorities, on their own initiative, of any fact which might be an 
indication of money laundering.


[[Page 64070]]


EC Directive, O.J. Eur. Comm. (No. L 166) 77 (1991), Article 6. Accord, 
the Model Regulations Concerning Laundering Offenses Connected to 
Illicit Drug Trafficking and Related Offenses of the Organization of 
American States, OEA/Ser. P. AG/Doc. 2916/92 rev. 1 (May 23, 1992), 
Article 13, section 2.\9\ All of these documents also recognize the 
importance of extending the counter-money laundering controls to ``non-
traditional'' financial institutions, not simply to banks, both to 
ensure fair competition in the marketplace and to recognize that non-
bank providers of financial services as well as depository 
institutions, are an attractive mechanism for, and are threatened by, 
money launderers. See, e.g., Financial Action Task Force Annual Report, 
supra, Annex 1 (Recommendation 8).
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    \9\ The Organization of American States (OAS) reporting 
requirement is linked to the provision of the Model Regulations that 
institutions ``shall pay special attention to all complex, unusual 
or large transactions, whether completed or not, and to all unusual 
patterns of transactions, and to insignificant but periodic 
transactions, which have no apparent economic or lawful purpose.'' 
OAS Model Regulation, Article 13, section 1.
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    The international consensus is that insurance companies are 
vulnerable to abuse not only by money launderers but also by those 
wishing to finance terrorist activity. On October 31, 2001, FATF issued 
its Special Recommendations on Terrorist Financing. Special 
Recommendation Four provides that:

[i]f financial institutions, or other businesses or entities subject 
to anti-money laundering obligations, suspect or have reasonable 
grounds to suspect that funds are linked or related to, or are to be 
used for terrorism, terrorist acts or by terrorist organisations, 
they should be required to report promptly their suspicions to the 
competent authorities.

For purposes of FATF's Special Recommendation Four, the term 
``financial institutions'' is intended to refer to both banks and non-
bank financial institutions including, among other non-bank financial 
institutions, insurance companies.\10\ Similarly, in January 2002, the 
International Association of Insurance Supervisors (IAIS)\11\ issued 
anti-money laundering guidance for insurance supervisors and insurance 
entities stating that:
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    \10\ See Guidance Notes for the Special Recommendations on 
Terrorist Financing and the Self-Assessment Questionnaire, Special 
Recommendation Four, paragraph 19 (March 27, 2002).
    \11\ The IAIS is an international association representing 
insurance regulatory authorities from more than 100 jurisdictions. 
Established in 1994, the IAIS was formed to promote cooperation 
among insurance regualtors, set international standards for 
insurance supervision, provide training to members, and coordinate 
work with regulators in other financial sectors and international 
financial institutions.

[f]inancial institutions including insurance entities, have become 
major targets of money laundering operations because of the variety 
of services and investment vehicles offered that can be used to 
conceal the source of money. Money laundering poses significant 
reputational and financial risk to insurance entities, as well as 
the risk of criminal prosecution if insurance entities become 
involved in laundering of the proceeds of crime.\12\
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    \12\ IAIS Anti-Money Laundering Guidance Notes for Insurance 
Supervisors and Insurance Entities, January 2002, at 4.
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D. Money Laundering and Terrorist Financing Risks Associated With 
Insurance Companies

    FinCEN believes that the most significant money laundering and 
terrorist financing risks in the insurance industry are found in life 
insurance and annuity products because such products allow a customer 
to place large amounts of funds into the financial system and 
seamlessly transfer such funds to disguise their true origin. Permanent 
life insurance policies that have a cash surrender value are 
particularly inviting money laundering vehicles. Such cash value can be 
redeemed by a money launderer or can be used as a source of further 
investment of his tainted funds--for example, by taking out loans 
against such cash value. Term life insurance policies also pose a 
significant risk of money laundering because they possess elements of 
stored value and transferability that make them attractive to money 
launderers.\13\ Similarly, annuity contracts also pose a significant 
money laundering risk because they allow a money launderer to exchange 
his illicit funds for an immediate or deferred income stream. The 
elements described above generally do not exist in insurance products 
offered by property and casualty insurers, much less by title or health 
insurers, although, to the extent that these sectors develop products 
with similar investment features, or features of stored value and 
transferability, the proposed rule includes a functional definition 
intended to include them within its scope.\14\ FinCEN does not believe 
that money laundering risk should be predicated solely on the existence 
of an ability to obtain a refund on a purchased financial product. 
Rather, the focus should be on the ability of a money launderer to use 
a particular financial product to store and move illicit funds through 
the financial system. Therefore, the proposed rule captures only those 
insurance products with investment features, and insurance products 
possessing the ability to store value and to transfer that value to 
another person.
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    \13\ For example, a narcotics trafficker based in a foreign 
jurisdiction can purchase a term policy from a U.S. insurer with one 
large, up-front premium made up of illicit funds using an elderly or 
ill front person as the insured, and collect the cleansed proceeds 
when the insured dies.
    \14\ Theoretically, a money launderer could purchase property or 
casualty insurance for a business with tainted funds, and transfer 
the business to a confederate who could cancel the policy and obtain 
a refund of the cleansed funds. However, this does not mean that 
such products possess the elements of stored value and 
transferability that pose a significant money laundering risk. 
Underwriting practices generally would prevent the conveyance of a 
property and casualty insurance policy upon the purchase of a 
business, except in the case of a change in control of a public 
company, in which the costs and regulatory disclosures required to 
change control would appear to far outweigh any potential benefit to 
a would-be launderer. Moreover, as property and casualty insurers 
determine premiums by the value of the insured property and the 
perceived risk, the products they issue are not effective vehicles 
for laundering predetermined sums.
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    The identified instances of money laundering through insurance 
companies generally have been confined to life insurance products. Such 
products appear to have been particularly attractive to narcotics money 
launderers. For example, as a result of a joint investigation into the 
narcotics trafficking and money laundering activities of Colombian drug 
cartels, federal law enforcement authorities have discovered that these 
cartels have been hiding their illicit proceeds by, among other things, 
purchasing life insurance policies. The money laundering scheme 
involves the purchase, through several insurance brokers, of life 
insurance policies with cash surrender values in an offshore 
jurisdiction. Cartel associates are named as beneficiaries to such 
policies. The life insurance policies are funded by narcotics proceeds 
that are forwarded to the insurance companies by third parties from all 
over the world. Although the cash surrender value of the life insurance 
policies is often far less than the amount invested because of 
liquidation penalties, particularly if the policies only have been in 
existence for a few years, the beneficiaries soon elect to liquidate 
the policies for their cash surrender value. Although the beneficiaries 
thereby suffer a substantial financial loss, the funds received, in the 
form of insurance proceeds, are effectively laundered.\15\ In another 
case, the U.S. Customs Service obtained the forfeiture of illicit drug 
money paid to purchase three term life insurance policies in Austin, 
Texas. The purchase

[[Page 64071]]

had been made with a number of structured monetary instruments, 
followed shortly afterward by an attempted redemption of the 
policies.\16\ Law enforcement also has seen similar attempts to launder 
funds through the purchase of variable annuity contracts.\17\ In 
addition, some financial institutions have reported to FinCEN 
suspicious transactions involving the structured purchase of life 
insurance and annuities, followed by the receipt of checks from life 
insurance companies, and the wiring of the funds to foreign countries.
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    \15\ United States v. The Contents of Account No. 400941058 At 
JP Morgan Chase Bank, New York, New York, Mag. Docket No. 02-1163 
(S.D.N.Y. 2002) (Warrant of Seizure).
    \16\ In the Matter of Seizure of the Cash Value and Advance 
Premium Deposit Funds, Case No. 2002-5506-000007. (W.D. Tex. 2002).
    \17\ See Steven Brostoff, Variable Product Companies Cautioned 
to be Vigilant On Money Laundering, National Underwriter, July 1, 
2002, at 40.
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    The international community also has focused on life insurance 
policies and those insurance products with investment features as the 
target of anti-money laundering measures. The interpretative note to 
Recommendation 8 of the FATF Forty Recommendations, relating to the 
establishment of anti-money laundering programs, states that ``[t]he 
FATF [Forty] Recommendations should be applied in particular to life 
insurance and other investment products offered by insurance 
companies.'' In addition, the IAIS, in its anti-money laundering 
guidance to insurance businesses, states that such guidance is 
``primarily aimed at life insurance business[es] which [are] the 
predominant class being used by money launderers.'' \18\
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    \18\ IAIS Anti-Money Laundering Guidance Notes for Insurance 
Supervisors and Insurance Entities, January 2002, at 6.
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    FinCEN understands that many insurance products are sold through 
agents of insurance companies. Because of their direct contact with 
customers, insurance agents are in a unique position to observe the 
kind of activity that may be indicative of money laundering. In some 
cases, suspicious activity detected by agents--such as the lump-sum 
purchase of a life insurance policy with multiple money orders or the 
purchase of annuity contracts by customers who express little or no 
interest in the details of such products, like surrender charges--may 
not be information that is normally known by the insurance company. 
This may be especially true when insurance agents sell investment 
products that do not need to be thoroughly scrutinized by the insurance 
company for underwriting purposes because they lack a health or death 
contingency. Thus, the proposed rule requires an insurance company to 
obtain all the relevant information necessary from its agents and 
brokers for purposes of filing reports of suspicious transactions. 
Whether an insurance company sells its products directly or through 
agents, FinCEN believes that it is appropriate to place on the 
insurance company (which develops the products and bears their risks) 
the responsibility for obtaining all relevant information necessary to 
comply effectively with a suspicious transaction reporting requirement.
    31 U.S.C. 5318(g)(1) authorizes Treasury to require suspicious 
transaction reporting not only by financial institutions, but also by 
``any director, officer, employee, or agent of any financial 
institution.'' This proposed rule addresses reporting by insurance 
companies, but not by individual employees or agents of an insurance 
company. FinCEN does not intend to reduce in any way the obligations of 
an insurance company's employees or agents, within the context of an 
insurance company's general regulatory or specific BSA compliance 
programs, but wants simply to avoid at this time creating an obligation 
on the part of insurance company employees and agents independent of 
those general obligations.
    FinCEN anticipates that the measures currently employed by 
insurance companies to detect and combat fraud may assist such 
companies when implementing programs to detect and report suspicious 
transactions. However, insurance companies should note that the risks 
associated with fraud and money laundering are not identical, and that 
combating money laundering will necessarily require the establishment 
of additional measures. An anti-fraud policy is concerned that premium 
payments clear, not with whether they are made with structured 
instruments or from suspicious sources. Moreover, although a person who 
purchases a life insurance policy with a single, lump-sum payment and 
subsequently redeems the policy for its cash value may not inflict any 
economic harm on the insurance company, such a person can use this 
process to cleanse his illicit funds in exchange for paying the 
requisite penalty or fee.

II. Section-by-Section Analysis

    Section 103.16(a) defines the key terms used in the proposed rule. 
The definition of an insurance company reflects Treasury's 
determination that a suspicious transaction reporting requirement 
should be imposed on those sectors of the insurance industry that pose 
the most significant risk of money laundering and terrorist financing. 
The definition of an insurance company therefore includes any person 
engaged within the United States as a business in: (1) The issuing, 
underwriting, or reinsuring of a life insurance policy; (2) the 
issuing, granting, purchasing, or disposing of any annuity contract; or 
(3) 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. The sectors of the insurance industry 
offering life insurance and annuity products are both covered by the 
definition. The last category incorporates a functional approach, and 
encompasses any business offering currently, or in the future, any 
insurance product with an investment feature, and any insurance product 
possessing both stored value and transferability.\19\
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    \19\ The definition of an insurance company is not intended to 
include those entities that offer annuities or similar products as 
an incidental part of their business--e.g., tax-exempt organizations 
that offer charitable gift annuities (as defined in section 
501(m)(5) of the Internal Revenue Code) as a vehicle for planned 
charitable giving, and that would not otherwise fall within the 
definition of an insurance company. FinCEN intends this exclusion to 
apply to the definition of an insurance company for purposes of its 
proposed rule requiring insurance companies to establish anti-money 
laundering programs. See 67 FR 60625 (September 26, 2002). Comments 
are specifically invited on the appropriate scope of the definition 
of an insurance company.
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    The definition of an insurance company does not include insurance 
agents or brokers. Agents and brokers would therefore not be required 
under the rule independently to report suspicious transactions. 
However, as explained in greater detail below, an insurance company 
would be required to obtain all the relevant information necessary from 
its agents and brokers in order to comply with its requirement to 
report suspicious transactions. Comments are specifically invited on 
whether the above definition is appropriate in light of money 
laundering risks in the industry. Comments also are specifically 
invited on whether the final rule also should require insurance agents 
and brokers, or any subsets of agents or brokers, to report suspicious 
transactions.
    Section 103.16(b) contains the rules setting forth the obligation 
of insurance companies to report suspicious transactions that are 
conducted or attempted by, at, or through an insurance company and 
involve or aggregate at least $5,000 in funds or other assets. It is 
important to recognize that transactions are reportable under

[[Page 64072]]

this rule and 31 U.S.C. 5318(g) whether or not they involve 
currency.\20\
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    \20\ Many currency transactions are not indicative of money 
laundering or other violations of law, a fact recognized both by 
Congress, in authorizing reform of the currency transaction 
reporting system, and by FinCEN in issuing rules to implement that 
system (See 31 U.S.C. 5313(d) and 31 CFR 103.22(d), 63 FR 50147 
(September 21, 1998)). But many non-currency transactions, (for 
example, funds transfers) can indicate illicit activity, especially 
in light of the breadth of the statutes that make money laundering a 
crime. See 18 U.S.C. 1956 and 1957.
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    Section 103.16(b)(1) contains the general statement of the 
obligation to file reports of suspicious transactions. The obligation 
extends to transactions conducted or attempted by, at, or through the 
insurance company. The second sentence of section 103.16(b)(1) is 
designed to encourage the reporting of transactions that appear 
relevant to violations of law or regulation, even in cases in which the 
rule does not explicitly so require, for example in the case of a 
transaction falling below the $5,000 threshold in the rule.
    Section 103.16(b)(2) specifically describes the four categories of 
transactions that require reporting. An insurance company is required 
to report a transaction if it knows, suspects, or has reason to suspect 
that the transaction (or a pattern of transactions of which the 
transaction is a part): (i) Involves funds derived from illegal 
activity or is intended or conducted to hide or disguise funds or 
assets derived from illegal activity; (ii) is designed, whether through 
structuring or other means, to evade the requirements of the BSA; (iii) 
has no business or apparent lawful purpose, and the insurance company 
knows of no reasonable explanation for the transaction after examining 
the available facts; and (iv) involves the use of the insurance company 
to facilitate criminal activity. The final category of reportable 
transactions is intended to ensure that transactions involving legally 
derived funds that the insurance company suspects are being used for a 
criminal purpose, such as terrorist financing, are reported under the 
rule.\21\
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    \21\ The fourth reporting category has been added to the 
suspicious activity reporting rules promulgated since the passage of 
the USA Patriot Act to make it clear that the requirement to report 
suspicious activity encompasses the reporting of transactions in 
which legally derived funds are used for criminal activity, such as 
the financing of terrorism.
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    A determination as to whether a report is required must be based on 
all the facts and circumstances relating to the transaction and 
customer of the insurance company in question. Different fact patterns 
will requires different judgments. In some cases, the facts of the 
transaction may indicate the need to report. Some examples of ``red 
flags'' associated with existing or potential customers include, but 
are not limited to, the following:

    [sbull] The purchase of an insurance product that appears to be 
beyond a customer's normal pattern of business;
    [sbull] Any unusual method of payment, particularly by cash or cash 
equivalents;
    [sbull] The purchase of an insurance product with monetary 
instruments in structured amounts;
    [sbull] The early termination of an insurance product, especially 
at a loss, or where cash was tendered and/or the refund check is 
directed to a third party;
    [sbull] The transfer of the benefit of an insurance product to an 
apparently unrelated third party;
    [sbull] Little or no concern by a customer for the performance of 
an insurance product, but much concern about the early termination of 
the product;
    [sbull] The reluctance by a customer to provide identifying 
information when purchasing an insurance product, or who provides 
minimal or fictitious information; and
    [sbull] The borrowing of the maximum cash surrender value of an 
insurance policy soon after paying for the policy.
    The means of commerce and the techniques of money laundering are 
continually evolving, and there is no way to provide an exhaustive list 
of suspicious transactions. FinCEN expects to continue its dialogue 
with the insurance industry about the manner in which a combination of 
government guidance, training programs, and government-industry 
information exchange can smooth the way for operation of the new 
suspicious activity reporting system in as flexible and cost-efficient 
a way as possible.
    Section 103.16(b)(3) provides that the obligation to identify and 
properly and timely to report a suspicious transaction rests with the 
insurance company involved in the transaction. Insurance agents and 
brokers are not independently required to report suspicious 
transactions. Section 103.16(b)(3) also states that to the extent that 
a transaction is conducted through an insurance agent or broker, an 
insurance company shall obtain all the relevant information necessary 
to ensure its compliance with the requirements of this section. As 
explained above, an insurance company's assessment of customer-related 
information, such as methods of payment, is a key component to an 
effective anti-money laundering program. Thus, an insurance company 
must obtain and assess all the relevant information necessary to comply 
effectively with its obligation to report suspicious transactions. Such 
information includes, but is not limited to, relevant customer 
information collected and maintained by the insurance company's agents 
and brokers, including observations and assessments by agents and 
brokers at the point-of-sale. The specific means to obtain such 
information is left to the discretion of the insurance company, 
although Treasury anticipates that the insurance company may need to 
amend existing agreements with its agents and brokers to ensure that 
the company receives necessary customer information.
    The proposed rule is intended to require that an insurance company 
evaluate customer activity and relationships for money laundering 
risks, and design a suspicious transaction monitoring program that is 
appropriate for the particular insurance company in light of such 
risks. FinCEN anticipates that the design and implementation of such a 
program, rather than solely individual instances of non-reporting, will 
be instrumental when examining an insurance company for compliance with 
the requirements of the rule.
    An insurance company's suspicious transaction monitoring program 
must ensure that the company is provided with customer information at 
the point-of-sale. FinCEN understands that obtaining such information 
will necessarily entail the cooperation of entities that are separate 
from an insurance company--namely, the company's independent agents and 
brokers. Comments are specifically invited on this approach, and the 
extent to which it may be necessary for FinCEN to place a direct 
obligation upon insurance agents and brokers for the purpose of 
ensuring an effective suspicious transaction reporting requirement.
    Section 103.16(c) sets forth the filing procedures to be followed 
by insurance companies making reports of suspicious transactions. 
Within 30 days after an insurance company becomes aware of a suspicious 
transaction, the business must report the transaction by completing a 
Suspicious Activity Report by Insurance Companies (SAR-IC) and filing 
it in a central location, to be determined by FinCEN. The SAR-IC will 
resemble the SAR used by banks to report suspicious transactions, and a 
draft form will be made available for comment by publication in the 
Federal Register.
    Supporting documentation relating to each SAR-IC is to be collected 
and maintained separately by the insurance

[[Page 64073]]

company and made available to law enforcement and regulatory agencies 
upon request. Special provision is made for situations requiring 
immediate attention, in which case insurance companies are to telephone 
the appropriate law enforcement authority in addition to filing a SAR-
IC.
    Section 103.16(d) provides an exception to the reporting 
requirement for false information submitted to the insurance company to 
obtain a policy or support a claim, unless such activity is related to 
money laundering or terrorist financing. Comments specifically are 
invited on whether the final rule should contain an express exception 
from reporting for any other particular activity in order to avoid 
unnecessary, duplicative reporting, or for any other reason.
    Section 103.16(e) provides that filing insurance companies must 
maintain copies of SAR-ICs and the original related documentation for a 
period of five years from the date of filing. As indicated above, 
supporting documentation is to be made available to FinCEN and other 
appropriate law enforcement and regulatory authorities, on request.
    Section 103.16(f) reflects the statutory bar against the disclosure 
of information filed in, or the fact of filing, a suspicious activity 
report (whether the report is required by the proposed rule or is filed 
voluntarily). See 31 U.S.C. 5318(g)(2). Thus, the paragraph 
specifically prohibits persons filing SAR-ICs from making any 
disclosure, except to appropriate law enforcement and regulatory 
agencies, about either the reports themselves or supporting 
documentation. 31 U.S.C. 5318(g), as amended by the USA Patriot Act, 
provides protection from liability for making reports of suspicious 
transactions, and for failures to disclose the fact of such reporting. 
Section 351 of that Act clarifies that the safe harbor applies to the 
voluntary reporting of suspicious transactions, and the proposed rule 
reflects this clarification.
    Section 103.16(g) notes that compliance with the obligation to 
report suspicious transactions will be examined, and provides that 
failure to comply with the rule may constitute a violation of the BSA 
and the BSA regulations.
    Section 103.16(h) provides that the new suspicious activity 
reporting rule is effective 180 days after the date on which the final 
regulations to which this notice of proposed rulemaking relates are 
published in the Federal Register.
    Finally, section 103.16(i) states that an insurance company that is 
registered or is required to register with the Securities and Exchange 
Commission (SEC) shall be deemed to have satisfied the requirements of 
this section for those activities regulated by the SEC to the extent 
that the company complies with the suspicious activity reporting 
requirements applicable to such activities that are imposed under 31 
CFR 103.19. Thus, for example, an insurance company that is required to 
register as a broker-dealer in securities because it sells variable 
annuities may satisfy the suspicious transaction reporting requirements 
under the proposed rule for that activity by complying with the 
suspicious transaction reporting requirements applicable to such 
activity that are under 31 CFR 103.19. To the extent that the issuance 
of annuities, or any other activity by an insurance company, is not 
addressed by 31 CFR 103.19, then such activity would be subject to the 
suspicious transaction reporting requirements of the proposed rule.

Proposed Effective Date

    The suspicious transaction reporting rule would be effective 180 
days after the date on which the final regulation to which this notice 
of proposed rulemaking relates is published in the Federal Register.

III. Request for Comments

    FinCEN invites comment on all aspects of the proposed regulation, 
and specifically seeks comment on the following issues:
    1. Whether the scope of the definition of an insurance company is 
appropriate in light of money laundering risks in the industry.
    2. Whether the rule also should require insurance agents (captive, 
independent, or both), or any subset of agents, to report suspicious 
transactions to FinCEN.
    3. Whether the rule also should require insurance brokers, or any 
subset of insurance brokers, to report suspicious transactions to 
FinCEN.
    4. Whether any reporting dollar threshold, including the $5,000 
threshold in the proposed rule, is appropriate.
    5. Whether the exception from reporting for routine insurance fraud 
unrelated to money laundering or terrorist financing is appropriate, 
and whether any other exceptions should be included in the rule.

IV. Regulatory Flexibility Act

    It is hereby certified, pursuant to the Regulatory Flexibility Act 
(5 U.S.C. 601 et seq.), that the proposed rule is not likely to have a 
significant economic impact on a substantial number of small entities. 
The BSA authorizes Treasury to require financial institutions to report 
suspicious activities. The proposed rule requires insurance companies, 
rather than their agents or brokers, to file reports of suspicious 
transactions. Most insurance companies are larger businesses. In 
addition, Treasury has issued a separate proposed rule that requires 
insurance companies to establish and maintain anti-money laundering 
programs. 67 FR 60625 (September 26, 2002). Treasury anticipates that 
compliance with an anti-money laundering program requirement, in 
particular, the requirement for an insurance company to obtain all the 
relevant information necessary from its agents and brokers to make its 
program effective, will assist greatly in the reporting of suspicious 
transactions. Moreover, all insurance companies, in order to remain 
viable, have in place policies and procedures to prevent and detect 
fraud. Such anti-fraud measures should assist insurance companies in 
reporting suspicious transactions.
    In drafting the rule, FinCEN carefully considered the importance of 
suspicious transaction reporting to the administration of the BSA. 
Congress considers suspicious transaction reporting a ``key ingredient 
in the anti-money laundering effort.'' \22\ Moreover, the legislative 
history of the BSA demonstrates that money launderers will shift their 
activities away from more regulated to less regulated financial 
institutions.\23\ Finally, there is no alternative mechanism for the 
government to obtain this information other than by requiring insurance 
companies to detect and report suspicious activity.
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    \22\ H.R. Rep. No. 438, 103d Cong., 2d Sess. 15 (1994).
    \23\ ``It is indisputable that as banks have been more active in 
prevention and detection on money laundering, money launderers have 
turned in droves to the financial services offered by a variety of 
[non-bank financial institutions].'' Id. at 19.
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V. Paperwork Reduction Act

    The collection of information contained in this proposed rule is 
being submitted to the Office of Management and Budget for review in 
accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3507(d)). Comments on the collection of information should be sent 
(preferably by fax (202-395-6974)) to Desk Officer for the Department 
of the Treasury, Office of Information and Regulatory Affairs, Office 
of Management and Budget, Paperwork Reduction Project (1506), 
Washington, DC 20503 (or by the Internet to

[[Page 64074]]

[email protected]), with a copy to FinCEN by mail or the Internet at 
the addresses previously specified. Comments on the collection of 
information should be received by December 16, 2002. In accordance with 
the requirements of the Paperwork Reduction Act of 1995, 44 U.S.C. 
3506(c)(2)(A), and its implementing regulations, 5 CFR 1320, the 
following information is presented to assist those persons wishing to 
comment on the information collection.
    FinCEN anticipates that this proposed rule, if adopted as proposed, 
would result in the annual filing of a total of 1,200 suspicious 
activity reports by insurance companies. This result is an estimate 
based on the estimated number of respondents under the rule.
    Description of Respondents: Insurance companies as defined in 31 
CFR 103.16(a).
    Estimated Number of Respondents: 1,200.
    Frequency: As required.
    Estimate of Burden: The reporting burden of 31 CFR 103.16 will be 
reflected in the burden of the form used by insurance companies to 
report suspicious transactions. The recordkeeping burden of 31 CFR 
103.16 is estimated as an average of 3 hours per form, which includes 
internal review of records to determine whether the activity requires 
reporting.
    Estimated Total Annual Recordkeeping Burden: 3,600 hours.
    FinCEN specifically invites comments on: (a) Whether the proposed 
recordkeeping requirement is necessary for the proper performance of 
the mission of FinCEN, and whether the information will have practical 
utility; (b) the accuracy of FinCEN's estimate of the burden of the 
proposed recordkeeping requirement; (c) ways to enhance the quality, 
utility, and clarity of the information required to be maintained; (d) 
ways to minimize the burden of the recordkeeping requirement, including 
through the use of automated collection techniques or other forms of 
information technology; and (e) estimates of capital or start-up costs 
and costs of operation, maintenance, and purchase of services to 
maintain the information.
    In addition the Paperwork Reduction Act of 1995 requires agencies 
to estimate the total annual cost burden to respondents or 
recordkeepers resulting from the collection of information. Thus, 
FinCEN also specifically requests comments to assist with this estimate 
and requests commenters to identify any additional costs associated 
with the completion of the form. These comments on costs should be 
divided into two parts: (1) Any additional costs associated with 
reporting; and (2) any additional costs associated with recordkeeping.

VI. Executive Order 12866

    It has been determined that this proposed rule is not a significant 
regulatory action for purposes of Executive Order 12866. Accordingly, a 
regulatory impact analysis is not required.

List of Subjects in 31 CFR Part 103

    Administrative practice and procedure, Authority delegations 
(Government agencies), Insurance companies, Currency, Investigations, 
Law enforcement, Reporting and recordkeeping requirements.

Authority and Issuance

    For the reasons set forth in the preamble, part 103 of title 31 of 
the Code of Federal Regulations is proposed to be amended as follows:

PART 103--FINANCIAL RECORDKEEPING AND REPORTING OF CURRENCY AND 
FINANCIAL TRANSACTIONS

    1. The authority citation for part 103 continues to read as 
follows:

    Authority: 12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5314, 
5316-5332; title III, secs. 312, 313, 314, 319, 352, Pub. L. 107-56, 
115 Stat. 307.

    2. Subpart B of part 103 is amended by adding new Sec.  103.16 to 
read as follows:


Sec.  103.16  Reports by insurance companies of suspicious 
transactions.

    (a) Definitions. For purposes of this section:
    (1) Annuity contract means any agreement between the insurer and 
the insured whereby the insurer promises to pay out a stipulated income 
or a varying income stream for a period of time.
    (2) Insurance company. (i) Except as provided in paragraph 
(a)(2)(ii) of this section, the term ``insurance company'' means any 
person engaged within the United States as a business in:
    (A) The issuing, underwriting, or reinsuring of a life insurance 
policy;
    (B) The issuing, granting, purchasing, or disposing of any annuity 
contract; or
    (C) 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.
    (ii) An insurance company shall not mean an agent or broker of any 
business described in paragraph (a)(2)(i) of this section.
    (3) Life insurance policy means an agreement whereby the insurer is 
obligated to indemnify or to confer a benefit upon the insured or 
beneficiary to the agreement contingent upon the death of the insured, 
including any investment component of the policy.
    (b) General. (1) Every insurance company shall file with FinCEN, to 
the extent and in the manner required by this section, a report of any 
suspicious transaction relevant to a possible violation of law or 
regulation. An insurance company may also file with FinCEN, by using 
the form specified in paragraph (c)(1) of this section, or otherwise, a 
report of any suspicious transaction that it believes is relevant to 
the possible violation of any law or regulation but whose reporting is 
not required by this section.
    (2) A transaction requires reporting under the terms of this 
section if it is conducted or attempted by, at, or through an insurance 
company, and involves or aggregates at least $5,000 in funds or other 
assets, and the insurance company knows, suspects, or has reason to 
suspect that the transaction (or a pattern of transactions of which the 
transaction is a part):
    (i) Involves funds derived from illegal activity or is intended or 
conducted in order to hide or disguise funds or assets derived from 
illegal activity (including, without limitation, the ownership, nature, 
source, location, or control of such funds or assets) as part of a plan 
to violate or evade any federal law or regulation or to avoid any 
transaction reporting requirement under federal law or regulation;
    (ii) Is designed, whether through structuring or other means, to 
evade any requirements of this part or of any other regulations 
promulgated under the Bank Secrecy Act, Public Law 91-508, as amended, 
codified at 12 U.S.C. 1829b, 12 U.S.C. 1951-1959, and 31 U.S.C. 5311-
5332;
    (iii) Has no business or apparent lawful purpose or is not the sort 
in which the particular customer would normally be expected to engage, 
and the insurance company knows of no reasonable explanation for the 
transaction after examining the available facts, including the 
background and possible purpose of the transaction; or
    (iv) Involves use of the insurance company to facilitate criminal 
activity.
    (3) The obligation to identify and properly and timely to report a 
suspicious transaction rests with the insurance company involved in the 
transaction. To the extent that a transaction involving an insurance

[[Page 64075]]

company is conducted through an insurance agent or broker, the 
insurance company shall obtain all the information necessary to ensure 
its compliance with the requirements of this section.
    (c) Filing procedures--(1) What to file. A suspicious transaction 
shall be reported by completing a Suspicious Activity Report by 
Insurance Companies (SAR-IC), and collecting and maintaining supporting 
documentation as required by paragraph (d) of this section.
    (2) Where to file. The SAR-IC shall be filed with FinCEN in a 
central location, to be determined by FinCEN, as indicated in the 
instructions to the SAR-IC.
    (3) When to file. A SAR-IC shall be filed no later than 30 calendar 
days after the date of the initial detection by the insurance company 
of facts that may constitute a basis for filing a SAR-IC under this 
section. If no suspect is identified on the date of such initial 
detection, an insurance company may delay filing a SAR-IC for an 
additional 30 calendar days to identify a suspect, but in no case shall 
reporting be delayed more than 60 calendar days after the date of such 
initial detection. In situations involving violations that require 
immediate attention, such as ongoing money laundering schemes, the 
insurance company shall immediately notify by telephone an appropriate 
law enforcement authority in addition to filing timely a SAR-IC. 
Insurance companies wishing voluntarily to report suspicious 
transactions that may relate to terrorist activity may call FinCEN's 
Financial Institutions Hotline at 1-866-556-3974 in addition to filing 
timely a SAR-IC if required by this section.
    (d) Exception. An insurance company is not required to file a SAR-
IC to report the submission to it of false or fraudulent information to 
obtain a policy or make a claim, other than where such submission 
relates to money laundering or terrorist financing.
    (e) Retention of records. An insurance company shall maintain a 
copy of any SAR-IC filed and the original or business record equivalent 
of any supporting documentation for a period of five years from the 
date of filing the SAR-IC. Supporting documentation shall be identified 
as such and maintained by the insurance company, and shall be deemed to 
have been filed with the SAR-IC. An insurance company shall make all 
supporting documentation available to FinCEN, any other appropriate law 
enforcement agencies, or state regulators upon request.
    (f) Confidentiality of reports; limitation of liability. No 
insurance company, and no director, officer, employee, or agent of any 
insurance company, that reports a suspicious transaction under this 
part, may notify any person involved in the transaction that the 
transaction has been reported. Thus, any person subpoenaed or otherwise 
requested to disclose a SAR-IC or the information contained in a SAR-
IC, except where such disclosure is requested by FinCEN or another 
appropriate law enforcement or regulatory agency, shall decline to 
produce the SAR-IC or to provide any information that would disclose 
that a SAR-IC has been prepared or filed, citing this paragraph (f) and 
31 U.S.C. 5318(g)(2), and shall notify FinCEN of any such request and 
its response thereto. An insurance company, and any director, officer, 
employee, or agent of such insurance company, that makes a report 
pursuant to this section (whether such report is required by this 
section or made voluntarily) shall be protected from liability for any 
disclosure contained in, or for failure to disclose the fact of, such 
report, or both, to the extent provided by 31 U.S.C. 5318(g)(3).
    (g) Compliance. Compliance with this section shall be audited by 
the Department of the Treasury, through FinCEN or its delegees, under 
the terms of the Bank Secrecy Act. Failure to satisfy the requirements 
of this section may constitute a violation of the reporting rules of 
the Bank Secrecy Act and of this part.
    (h) Effective date. This section applies to transactions occurring 
180 days after publication of the final rule based on this document.
    (i) Suspicious transaction reporting requirements for insurance 
companies registered or required to register with the Securities and 
Exchange Commission. An insurance company that is registered or is 
required to register with the Securities and Exchange Commission shall 
be deemed to have satisfied the requirements of this section for those 
activities regulated by the Securities and Exchange Commission to the 
extent that the company complies with the suspicious activity reporting 
requirements applicable to such activities that are imposed under Sec.  
103.19.

    Dated: October 10, 2002.
James F. Sloan,
Director, Financial Crimes Enforcement Network.
[FR Doc. 02-26365 Filed 10-16-02; 8:45 am]
BILLING CODE 4810-02-P