Feds to widen money-laundering rules

Jewelers, insurers must report transactions that smack of terror

Star and news service report
November 3, 2004

Tiffany & Co., American International Group Inc. and other jewelry and insurance businesses will be the next group of companies required to train staff and check transactions with clients to catch money launderers.

The U.S. Treasury’s Financial Crimes Enforcement Network plans to issue rules in the next 30 days to extend the 2001 USA Patriot Act’s anti-money laundering and terrorist-financing rules, which were first applied to banks, credit unions, casinos, securities broker-dealers and mutual funds.

President Bush signed the law 45 days after the Sept. 11 attacks.

Jewelry retailers and insurers are concerned they will have additional expenses to study transactions with a low risk of money laundering. Enforcement officials want to prevent terrorists from using other cash-intensive businesses as alternatives after banks and casinos implemented the law. “As you tighten control in the formal financial sector, banks for example, people will look to move elsewhere to try and integrate dirty money into the system,” said William Langford, associate director for regulatory policy at the network, on Monday.

Insurance companies also would be required to file suspicious-activity reports to the government. “Both rules, I hope, will be out in the next month,” Langford said.

Jewelers and insurers are among the industries Congress identified as most susceptible to money laundering. The agency focused on implementing the law’s rules at banks and casinos first but needed additional time “defining the scope of these industries we’ve never regulated before,” Langford said.

“We’ve got to do it right, and we’ve got to treat people squarely.”

Companies will have to train workers to recognize suspicious transactions, appoint compliance officers to run the programs and conduct independent tests to monitor the effectiveness of anti- laundering programs. The goal is to identify money launderers or terrorists when they first try to make their money look legitimate.

“It’s the entry into the financial system, however that occurs. That’s where they’re at their most vulnerable,” said John Roth, who was a senior counsel on the National Commission on Terrorist Attacks Upon the United States and a co-author of a commission report on terrorist financing.

Several Indianapolis-area jewelers said they had not heard about the new requirements. They insisted that money launderers pose little threat in their business.

“I’m not sure how you would even launder money through (a jewelry store),” said Mary Khamis-Rowe, president of the Indiana Jewelers Association.

William Pierce, owner of Pierce Jewelers in Carmel, said he does not think the requirements are necessary.

“In 36 years in the business, I never heard of money laundering,” said Pierce.

Jerry Hupp owns Hupp Jewelers, located in Fishers. Hupp said he does not oppose the requirements, but does not see why they are necessary.

“I would be shocked if anyone could use (a small jewelry business) for that crime,” he said.

The American Council of Life Insurers said the agency is wrong when it claims drug dealers or terrorists could buy a term insurance policy for an elderly or sick person and “collect the cleansed proceeds when the insured dies.”

The buyer must have an interest in keeping the person alive, the group said.

“A number of life insurance products, including group life insurance, credit life insurance, term life insurance products without stored value and reinsurance, do not fit FinCEN’s profile of a product that carries money-laundering risk, and they should be excluded from the final rules,” the Financial Services Roundtable, an industry lobbying organization, wrote in a letter to the agency.

The enforcement network’s proposed expanded rules acknowledge there is no significant money-laundering risk in health or property and casualty insurance.