COVID-19 Fraud Bill Could Affect Life and Annuity Sellers

The COVID-19 crisis could give life and annuity sellers a gift: a new fraud bill. Members of the U.S. House Financial Services national security subcommittee talked about the proposed legislation, the Senior Investor Pandemic and Fraud Protection Act bill draft, today at a virtual hearing on how bad actors are exploiting the financial system during the COVID-19 pandemic.

Resources

• A link to COVID-19 financial fraud hearing resources, including a link to a video recording of the hearing, is available here.
• An article about how Fran Tarkenton says advisors can prevent elder fraud is available here.

Rep. Emanuel Cleaver, D-Mo., the subcommittee chairman, said the onset of COVID-19-related financial fraud has been obvious. "We are seeing criminal actors here at home and around the world redoubling their efforts to target families, financial institutions and even auditors of the government," Cleaver said at the hearing, which was streamed live on the public internet. The Federal Trade Commission has received nearly 1,000 reports of COVID-19-related fraud, totaling more than $500,000, for Missouri alone, Cleaver said. Rep. French Hill, R-Ark., the highest ranking Republican on the subcommittee, said the impact on financial institutions is also obvious. The number of cybersecurity incidents reported to the FBI Internet Crime Complaint Center has increased to about 4,000 per day, from about 1,000 per day before COVID-19 came along, and about 80% of banks are reporting a year-over-year increase in cyber attacks. Amanda Senn, the chief deputy director of the Alabama Securities Commission, was the one who brought up the senior investors protection bill. Senn appeared at the hearing on behalf of the North American Securities Administrators Association (NASAA). She's the chair of NASAA's cybersecurity committee. "Regulators are confronted with numerous evidentiary challenges, which, given limited resources, make it difficult to investigate and prosecute cases," Senn said. The Senior Investor Pandemic and Fraud Protection Act bill draft would give regulators cash they could use to conduct more and better investigations, Senn said. Here are three things to know about the bill draft.

1. It could directly affect sellers of life insurance and annuities.

The draft text refers specifically to violations of any model regulations developed by the National Association of Insurance Commissioners relating to the "use of senior-specific certifications and professional designations in the sale of life insurance annuities." The draft also refers to misleading sales or marketing practices that are "illegal under state securities or insurance laws."

2. The draft could breathe life into a provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Dodd-Frank authorized a senior investor protection grant program for state regulators, but that provision was never put into effect, Senn said. The proposed senior protection bill would provide up to $500,000 in grants per year for state regulators that would use the cash to fight financial fraud. Regulators could use the funds to fight pandemic-related fraud, but they could also use it to pay for investigating any kinds of securities or insurance fraud against seniors.

3. Subcommittee members weren't that interested in life insurance and annuities.

Lawmakers seemed to be much more interested in talking about banking, health care and cyber fraud. They did not bring up anecdotes about life insurance or annuity fraud during the hearing. Hearing participants talked about bad actors targeting insurance companies, and about how new forms of insurance might help consumers and businesses, but they did not talk about fraud involving the sale or use of life insurance or annuities. — Read 5 Scams That Target the Elderly, on ThinkAdvisor. — Connect with ThinkAdvisor Life/Health on Facebook, LinkedIn and Twitter.