Variable Product Companies Cautioned To Be Vigilant On Money Laundering
By
Washington
Variable products are becoming an increasingly popular vehicle for illegal money laundering and law enforcement authorities will be taking a much closer look at them, panelists told a meeting of the National Association for Variable Annuities.
Janice B. Sharpstein, an attorney with the firm of Jorden Burt LLP, told NAVAs Regulatory Affairs Conference that variable product companies can stumble into money laundering in the ordinary course of conducting business.
She noted that the USA Patriot Act, which was enacted in the aftermath of the Sept. 11 terrorist attack and requires financial services providers to comply with federal anti-money laundering statutes, covers a variety of activities, not just terrorism.
Indeed, Sharpstein said, some 67 specific activities, including food stamp crimes, espionage, gambling and terrorism, are covered by anti-money laundering statutes.
Violation of these statutes, she said, can lead to indictment and conviction for money laundering.
Robert Watts, senior vice president and chief financial officer of John Hancock Financial, noted that some people in the insurance business still believe insurance products cannot be used for money laundering.
But he cited one real world example of how it was done.
An insurance company, which Watts did not name, was contacted by a cash-rich business that had a pool of money that representatives of the business said they wanted to shelter from the government.
The representatives, Watts said, were not interested in the details of the product. They were very hard to reach at times and declined to provide the insurer with any personal data.
The business address was the only address provided, Watts said, and the only telephone number provided was for a cell phone.
The representatives said they wanted to wire a large amount of cash, and wanted everything done quickly, Watts said. They suggested that if the insurer didnt agree, they would go elsewhere.
Finally, Watts said, the representatives promised future business, such as estate planning, to suggest the possibility of a long-term relationship.
Eventually, he said, the representatives wired $2.2 million for the purchase of three variable annuity contracts.
Only about two weeks later, Watts said, the insurance company received a request for full surrender of the contracts with the funds to be wired to a bank.
