August 26, 2015 by Alan Prochoroff
In less than a year, insurers across the U.S. will need to let regulators know what they’re doing in terms of corporate governance. June 1, 2016 will be the first due date for what will become an annual report to the National Association of Insurance Commissioners. No matter their size, premium volume or lines of business, they’ll have to offer concise information about their practices, including insights into their corporate governance structure, board of directors’ practices, management polices and areas of risk.
NAIC adopted the Corporate Governance Disclosure Model last November, along with an accompanying regulation and a corporate governance annual filing guidance manual.
The requirements could catch some insurers off guard, warns Carol Stern, a senior consultant with First Consulting & Administration in Kansas City. “Some health carriers have been so wrapped up complying with the Affordable Care Act that they’re just waking up and realizing they have this coming down the road. Others, like family-owned mutuals and smaller insurers that were exempted from Own Risk Solvency Assessments, may be surprised to find they have no exemption from corporate governance reporting.”
The disclosure model is part of the Solvency Modernization Initiative, which focuses on such initiatives as capital requirements, governance and risk management, group supervision, statutory accounting, financial reporting and reinsurance. Stern says the intended result is to give regulators more information, more often, about how insurance companies operate. Currently, they get updates about corporate governance practices every three to five years during financial exams. In between exams… not so much.
Starting next summer, this will no longer be the case. The requirements apply to every insurer, no exceptions. In fact, the NAIC decided not to exempt small companies from any corporate governance requirements.
“The NAIC Corporate Governance Working Group specifically wants small companies to improve their corporate governance structure and strengthen their risk management governance,” says Stern.
“Some trade associations asked us to exempt the small companies,” says Susan Donegan, Vermont insurance commissioner, “but the working group thought that small companies needed the oversight in these models because there are few checks and balances of small firms’ governance.”
Ordinarily, a story about a casino being fined for anti-money laundering violations is pretty far off the path of the P & C road. But hey, the compliance folks out there might think it’s cool, and we thought you’d like to know what happens when a U.S. corporate entity—in this case, Tinian Dynasty Hotel & Casino in the Northern Mariana Islands—completely ignores its obligations to comply with America’s Bank Secrecy Act.
In this case, the Financial Crimes Enforcement Network didn’t cite the casino for having a lackluster anti-money laundering program. According to the Assessment of a Civil Money Penalty, Tinian Dynasty had no program at all.
It didn’t have an officer for day-to-day compliance. It had no written policies and procedures and never filed a single currency transaction report or suspicious activity report. And it didn’t train anyone for how to monitor and report suspicious activity.
“Tinian Dynasty didn’t just fail to file a few reports,” said FinCEN director Jennifer Shasky Calvery. “It operated for years without an AML program in place. It failed to file thousands of CTRs [currency transaction reports] and its management willfully facilitated suspicious transactions and even provided helpful hints for skirting and avoiding the laws in the U.S. and overseas.”
In fact, casino employees sometimes told customers how to make transactions without attracting attention; keep transaction amounts below $10,000 whenever doing business in America, Australia and New Zealand.
The casino manager called this the “magic number” that would trigger a CTR filing.
For such stellar efforts, FinCEN assessed a $75-million civil money penalty for “willful and egregious” violations.
Alan Prochoroff is the Editor of Insurance Compliance Insight, where these articles first appeared.
Copyright 2015 Rogers Publishing Ltd. This article first appeared in the August 2015 edition of Canadian Insurance Top Broker magazine
This story was originally published by Canadian Insurance Top Broker.