Insurers can use technology to stop money laundering. (Technology Notes).

Breaking up an $80 million money-laundering ring involving international life insurance shouldn't be seen as a sign of a systemic problem within the industry, said a spokesman for the American Council of Life Insurers.

How much of an effect the federal USA PATRIOT Act would have had on stopping this scheme isn't clear, and while the act only applies to life and annuity writers, creative property/casualty insurers should be joining life insurers in deploying information technology to catch or prevent possible money laundering, experts said.

In the $80 million case, Colombian drug-trafficking organizations were buying investment-grade life insurance policies in the United States, the Isle of Man, and other locations, with cartel associates as the beneficiaries.

Carl Wilkerson, chief counsel for securities and litigation with the ACLI said any U.S. company subject to the PATRIOT Act would have to have a risk-based approach in its anti-money-laundering compliance program. The Treasury Department's Financial Crimes Enforcement Network also issued proposed rules that require life insurers to file reports of any suspicious activities such as money laundering to the federal government. "It's certainly a large-dollar incident that merits attention," Wilkerson said. "It shouldn't be over-read to suggest there is a systemic deficiency in the life insurance industry. The industry response and Treasury regulations would filter out these types of organized money-laundering activities."

The Treasury Department has already recognized the importance of applying anti-money-laundering controls to the life insurance industry and, as part of the PATRIOT Act, issued proposed rules that for the first time require some insurance companies to establish anti-money-laundering programs. President Bush signed the PATRIOT Act into law in October 2001 to hinder the finances of terrorists after the Sept. 11 attacks.