Government Personnel Mutual Life Insurance Company. Anti-Money Laundering (AML) Program; Including Suspicious Activity Reports

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1 Government Personnel Mutual Life Insurance Company Anti-Money Laundering (AML) Program; Including Suspicious Activity Reports Policies, Procedures, Internal Controls For Compliance With the Patriot Act Adopted May 2, 2006

2 Table of Contents Page 1. Policy AML Compliance Officer Designation and Duties Applicability to Insurance and Insurance Agents...4 a. GPM will not apply this program to the covered products in these low risk situations:...4 b. GPM will apply this program to all of the rest of its covered products Giving AML Information to Federal Law Enforcement Agencies and Other Financial Institutions...5 a. FinCEN Requests Under PATRIOT Act Section b. Sharing Information With Other Financial Institutions Checking the Office of Foreign Assets Control Customer Identification and Verification...7 a. Required Customer Information...7 b. Customers Who Refuse to Provide Information...8 c. Verifying Information...8 d. Lack of Verification...10 e. Recordkeeping...11 f. Comparison with Government Provided Lists of Terrorists and Other Criminals...11 g. Notice to Customers...11 h. Reliance on Agents for Identity Verification Monitoring For Suspicious Activity...12 a. Emergency Notification to the Government by Telephone...12 b. Red Flags...13 c. Responding to Red Flags and Suspicious Activity Suspicious Transactions and BSA Reporting...15 a. Filing a Form SAR-IC...15 b. Currency Transaction Reports (CTR) AML Record Keeping...18 a. SAR-IC Maintenance and Confidentiality...18 b. Responsibility for AML Records and SAR Filing...18 c. Records Required

3 10. Training Programs...19 a. Employees...19 b. Agents and Brokers Testing the AML Program...23 a. Staffing...23 b. Evaluation and Reporting Monitoring Employee Conduct and Accounts Confidential Reporting of AML Non-Compliance Additional Areas of Risk Law Sources Senior Manager Approval

4 Government Personnel Mutual Life Insurance Company Anti-Money Laundering (AML) Program; Including Suspicious Activity Reports Policies, Procedures, Internal Controls For Compliance With the Patriot Act Adopted May 2, Policy It is the policy of Government Personnel Mutual Life Insurance Company ( GPM ) to prohibit and prevent actively money laundering and any activity that facilitates money laundering or the funding of terrorist or criminal activities, in accordance with applicable statutes and regulations. Money laundering is generally defined as engaging in acts designed to conceal or disguise the true origins of criminally derived proceeds so that the unlawful proceeds appear to have derived from legitimate origins or constitute legitimate assets. Generally, money laundering occurs in three stages. Cash first enters the financial system at the placement stage, where the cash generated from criminal activities is converted into monetary instruments, such as money orders or traveler s checks, or deposited into accounts or policies. At the layering stage, the funds are transferred or moved into other accounts or other financial institutions to further separate the money from its criminal origin. At the integration stage, the funds are reintroduced into the economy and used to purchase legitimate assets or to fund other criminal activities or legitimate businesses. Terrorist financing may not involve the proceeds of criminal conduct, but rather an attempt to conceal the origin or intended use of the funds, which will later be used for criminal purposes. This policy will be given to, or made available to all employees and agents. 2. AML Compliance Officer Designation and Duties GPM designates Betty Kuhn as its Anti-Money Laundering Program Compliance Officer, with full responsibility for its AML program. She is qualified by experience, knowledge and training, including 37 years working in customer service and premium collection. The duties of the AML Compliance Officer will include monitoring compliance with AML obligations, overseeing communication and training for employees, providing independent testing of the program, updating the program, and will also ensure that proper AML records are kept. When warranted, the AML Compliance Officer will ensure Suspicious Activity Reports (SAR-IC s, FinCEN Form 108) are filed. 3

5 GPM will provide FinCEN with contact information for the AML Compliance Officer, including name, title, mailing address, address, telephone number and facsimile number. GPM will promptly notify FinCEN of any change to this information. 3. Applicability to Insurance and Insurance Agents The anti-money laundering and suspicious activity reporting regulations apply only to part of GPM s insurance business. They apply only to covered products. Covered products are i) a permanent life insurance policy (but not group life); ii) an annuity policy (but not group); and iii) any other insurance product with features of cash value or investment. The regulations contemplate that only products with cash values are likely to be used for laundering money. Term products and reinsurance are not covered, nor are structured settlements. Agents and Brokers do not have to have an anti-money laundering program, but GPM has to establish and implement policies, procedures, and internal controls reasonably designed to integrate its agents and brokers into its program, and to monitor their compliance. See Section 12. The anti-money laundering regulations require GPM to take a risk-based approach to its program. GPM believes appropriate risk factors are the size of the product applied for, whether the applicant/owner is a government employee, and whether the applicant/owner is connected by birth, occupation, marriage or otherwise with a high-risk nation or high risk geographic area. Applying these risk factors to GPM business results in the following: a. GPM will not apply this program to the covered products in these low risk situations: 1) Senior Market life insurance business (Secure-Mark applications and policies in which the policy face amount is limited to $35,000). 2) Military and Civil Service life insurance business (applicant/owner is a government employee presumably carefully pre-screened by the government, or government employee spouse) and most of the business is paid for by government allotment. 3) Civilian life insurance business where the face amount applied for is $50,000 or less, or the annualized premium is $10,000 or less. 4

6 4) Life contingent Immediate annuity applications where the premiums do not exceed $10,000. However, the appearance of red flag events in connection with any of these will require appropriate action. b. GPM will apply this program to all of the rest of its covered products. 4. Giving AML Information to Federal Law Enforcement Agencies and Other Financial Institutions a. FinCEN Requests Under PATRIOT Act Section 314 Under Treasury s final regulations (published in the Federal Register on September 26, 2002), we will respond to a Financial Crimes Enforcement Network (FinCEN) request about accounts, or transactions by immediately searching our records, to determine whether we maintain or have maintained any account (life insurance or annuity policy or supplemental contract) for, or have engaged in any transaction with, each individual, entity, or organization named in FinCen s request. Upon receiving an information request, we will designate one person to be the point of contact regarding the request and to receive similar requests in the future. Unless otherwise stated in FinCEN s request, we are required to search current accounts, accounts maintained by a named suspect during the preceding 12 months, and transactions conducted by or on behalf of or with a named subject during the preceding six months. If we find a match we will report it to FinCEN by completing FinCEN s subject information form. This form can be sent to FinCEN by secure electronic mail at sys314a@fincen.treas.gov, or by facsimile transmission to If the search parameters differ from those mentioned above (for example, if FinCEN requests longer periods of time or limits the search to a geographic location), we will limit our search accordingly. If we search our records and do not uncover a matching account or transaction, then we will not reply to a 314(a) request. We will not disclose the fact that FinCEN has requested or obtained information from us, except to the extent necessary to comply with the information request. We will maintain procedures to protect the 5

7 security and confidentiality of requests from FinCEN, such as those established to satisfy the requirements of Section 501 of the Gramm-Leach-Bliley Act. We will direct any questions we have about the request to the requesting Federal law enforcement agency as designated in the 314(a) request. Unless otherwise stated in the information request, we will not be required to treat the information request as continuing in nature, and we will not be required to treat the request as a list for purposes of the customer identification and verification requirements. We will not use information provided to FinCEN for any purpose other than (1) to report to FinCEN as required under Section 314 of the PATRIOT Act; (2) to determine whether to establish or maintain an account, or to engage in a transaction; or (3) to assist GPM in complying with a requirement of Section 314 of the PATRIOT Act. b. Sharing Information With Other Financial Institutions Presently, we do not plan to share information with other financial institutions. If this changes, we will share information about those suspected of terrorist financing and money laundering with other financial institutions for the purposes of identifying and reporting activities that may involve terrorist acts or money laundering activities and to determine whether to establish or maintain an account or engage in a transaction. We will file with FinCEN an initial notice before any sharing occurs and annual notices afterwards. We will use the notice form found at Before we share information with another financial institution, we will take reasonable steps to verify that the other financial institution has submitted the requisite notice to FinCEN, either by obtaining confirmation from the financial institution or by consulting a list of such financial institutions that FinCEN will make available. We understand that this requirement applies even with respect to financial institutions with whom we are affiliated, and so we will obtain the requisite notices from affiliates and follow all required procedures. We will employ procedures both to ensure that only relevant information is shared and to protect the security and confidentiality of this information, including segregating it from GPM s other books and records. 6

8 5. Checking the Office of Foreign Assets Control ( OFAC ) List Before opening an account (issuing ANY policy), and on an ongoing basis, we will check to ensure that a customer does not appear on Treasury s OFAC Specifically Designated Nationals and Blocked Persons List (SDN List) (See the OFAC Web Site at which is also available through an automated search tool on and is not from, or engaging in transactions with people or entities from, embargoed countries and regions listed on the OFAC Web Site. Because the OFAC Web Site is updated frequently, we will consult the list on a regular basis and subscribe to receive updates when they occur. We may access these lists through various software programs to ensure speed and accuracy. We will also review existing accounts against these lists when they are updated and we will document our review. In the event that we determine a customer, or someone with or for whom the customer is transacting, is on the SDN List or is from or engaging in transactions with a person or entity located in an embargoed country or region, we will reject the transaction and/or block the customer s assets and file a blocked assets and/or rejected transaction form with OFAC. We will also call the OFAC Hotline at Customer Identification and Verification GPM and other insurance companies are not subject to the regulations which implement the customer identification and verification requirements of Section 326 of the PATRIOT Act. However, the antimoney laundering regulations require GPM to obtain all relevant customer-related information necessary for an effective anti-money laundering program. Usually, the applicant is also the proposed insured, the proposed owner, and the premium payor. If the applicant and proposed insured and proposed owner and premium payor, or any combination of these, are different, GPM s customers are for a pending application the applicant and premium payor, and for an inforce policy they are the owner and the premium payor. a. Required Customer Information For Covered Products, which are not excluded by Section 3.a., before issuing a policy we will collect the following information, if applicable, for any customer: the name, date of birth (for an individual); an 7

9 address, which will be a residential or business street address (for an individual), an Army Post Office ( APO ) or Fleet Post Office ( FPO ) number, or residential or business street address of next of kin or another contact individual (for an individual who does not have a residential or business street address), or a principal place of business, local office or other physical location (for a person other than an individual); an identification number, which will be a taxpayer identification number (for U.S. persons) or one or more of the following for non-u.s. persons: a taxpayer identification number, passport number and country of issuance, alien identification card number or number and country of issuance of any other government-issued document evidencing nationality or residence and bearing a photograph or other similar safeguard. In the event that a customer has applied for, but has not received, a taxpayer identification number, we will take steps to confirm that the application was filed before the policy is issued and to obtain the taxpayer identification number within a reasonable period of time after the policy is issued. Use the Agent s certificate portion of the application to write information required above for which the application does not have a designated place for insertion. Before issuing a policy to non-u.s. citizens, we will apply our underwriting rules applicable to non-u.s. citizens. If such person does not have an identification number, we will request alternative governmentissued documentation certifying the existence of such person [GPM form No. M50.00(1204)]. Nothing in this statement implies that we will accept such individuals who otherwise do not qualify for insurance according to our current underwriting rules. b. Customers Who Refuse to Provide Information If a potential or existing customer either refuses to provide the information described above when requested, or appears to have intentionally provided misleading information, GPM will not issue a new policy, and after considering the risks involved, will consider rescinding any existing policy. In either case, our AML Compliance Officer will be notified so that we can determine whether we should report the situation to FinCEN (i.e., file a Form SAR-IC). c. Verifying Information 8

10 Based on the risk, and to the extent reasonable and practicable, we will ensure that we have a reasonable belief that we know the true identity of our covered policy customers by using risk-based procedures to verify and document the accuracy of the information we get about our customers. In verifying customer identity, we will analyze any logical inconsistencies in the information we obtain. We will verify customer identity through documentary evidence, non-documentary evidence, or both. We will use documents to verify customer identity when appropriate documents are available. In light of the increased instances of identity fraud, we will supplement the use of documentary evidence by using the non-documentary means described below whenever possible. We may also use such non-documentary means, after using documentary evidence, if we are still uncertain about whether we know the true identity of the customer. In analyzing the verification information, we will consider whether there is a logical consistency among the identifying information provided, such as the customer s name, street address, zip code, telephone number (if provided), date of birth, and social security number. Appropriate documents for verifying the identity of customers include, but are not limited to, the following: For an individual, an unexpired government-issued identification evidencing nationality, residence, and bearing a photograph or similar safeguard, such as a driver s license or passport; and For a person other than an individual, documents showing the existence of the entity, such as certified articles of incorporation, a government-issued business license, a partnership agreement, or a trust instrument. We understand that we are not required to take steps to determine whether the document that the customer has provided to us for identity verification has been validly issued and that we may rely on a governmentissued identification as verification of a customer s identity. If, however, we note that the document shows some obvious form of fraud, we must consider that factor in determining whether we can form a reasonable belief that we know the customer s true identity. We will use the following non-documentary methods of verifying identity: Contacting a customer; 9

11 Independently verifying the customer s identity through the comparison of information provided by the customer with information obtained from a consumer reporting agency, public database, or other source; Checking references with other financial institutions; or Obtaining an acceptable financial statement. We will use non-documentary methods of verification in the following situations: (1) when the customer is unable to present an unexpired government-issued identification document with a photograph or other similar safeguard; (2) when GPM is unfamiliar with the documents the customer presents for identification verification; (3) when the customer and GPM do not have face-to-face contact; and (4) when there are other circumstances that increase the risk that GPM will be unable to verify the true identity of the customer through documentary means. We will verify the information within a reasonable time before or after the policy is issued. Depending on the nature of the policy and requested transactions, we may refuse to complete a transaction before we have verified the information, or in some instances when we need more time, we may, pending verification, restrict the types of transactions or dollar amount of transactions. If we find suspicious information that indicates possible money laundering or terrorist financing activity, we will, after internal consultation with GPM s AML compliance officer, file a SAR-IC in accordance with applicable law and regulation. We recognize that the risk that we may not know the customer s true identity may be heightened for certain types of policies, such as a policy owned by a corporation, partnership or trust that is created or conducts substantial business in a jurisdiction that has been designated by the U. S. as a primary money laundering concern or has been designated as non-cooperative by an international body. We will identify customers that pose a heightened risk of not being properly identified. Therefore, we will take appropriate additional measures that may be used to obtain information about the identity of the individuals associated with the customer when standard documentary methods prove to be insufficient, such as obtaining information about individuals with authority or control over such entities or policies. d. Lack of Verification 10

12 When we cannot form a reasonable belief that we know the true identity of a customer, we will do the following: (1) not issue a policy; (2) impose terms under which a customer may conduct transactions while we attempt to verify the customer s identity; (3) refuse to process a transaction after attempts to verify customer s identity fail; and (4) file a SAR-IC in accordance with applicable law and regulation. e. Recordkeeping We will document our verification, including all identifying information provided by a customer, the methods used and results of verification, and the resolution of any discrepancy in the identifying information. We will keep records containing a description of any document that we relied on to verify a customer s identify, noting the type of document, any identification number contained in the document, the place of issuance, and if any, the date of issuance and expiration date. With respect to nondocumentary verification, we will retain documents that describe the methods and the results of any measures we took to verify the identity of a customer. We will maintain records of all identification and verification information for five years after the policy has been terminated. f. Comparison with Government Provided Lists of Terrorists and Other Criminals From time to time, we may receive notice that a Federal government agency has issued a list of known or suspected terrorists. Within a reasonable period of time after ANY application is received or ANY policy is issued (or earlier, if required by another Federal law or regulation or Federal directive issued in connection with an applicable list), we will determine whether a customer appears on any such list of known or suspected terrorists or terrorist organizations issued by any Federal government agency and designated as such by Treasury in consultation with the Federal functional regulators. We will follow all Federal directives issued in connection with such lists. We will continue to comply with Treasury s Office of Foreign Asset Control rules prohibiting transactions with certain foreign countries or their nationals. g. Notice to Customers If information is requested by a customer we will provide notice to customers that GPM is requesting information from them to verify their identities,. We will send a paper or or fax notice saying: 11

13 Important Information About Procedures for Life Insurance and Annuity Customers To help the government fight the funding of terrorism and money laundering activities, Federal law requires all life insurance companies to obtain, verify, and record all relevant information necessary for an anti-money laundering program. What this means for you: When you apply for a policy, we may ask for your name, address, date of birth and other information that will allow us to identify you. We may also ask to see your driver s license or other identifying documents. h. Reliance on Agents for Identity Verification We may rely on the performance by our agents and brokers for some or all of the elements of our customer identification program with respect to any customer, when such reliance is reasonable under the circumstances. 7. Monitoring For Suspicious Activity We will manually or through automated means if available, monitor a sufficient amount of policy activity to permit identification of patterns of unusual size, volume, pattern or type of transactions, geographic factors such as whether jurisdictions designated as non-cooperative are involved, or any of the red flags identified in Section 7.b. below. We will look at transactions, including cash payments and wire transfers, in the context of other policy activity to determine if a transaction lacks financial sense or is suspicious because it is an unusual transaction or strategy for that customer. The AML Compliance Officer or her designee will be responsible for this monitoring, will document when and how it is carried out, and will report suspicious activities to the appropriate authorities. Among the information we will use to determine whether to file a Form SAR-IC are exception reports that include transaction size, location, type, number, and nature of the activity. We will create employee guidelines with examples of suspicious money laundering activity and lists of high-risk customers whose accounts may warrant further scrutiny. Our AML Compliance Officer and our SIU will conduct an appropriate investigation before a SAR-IC is filed. a. Emergency Notification to the Government by Telephone 12

14 When conducting due diligence or underwriting or issuing a policy, we will immediately call Federal law enforcement when necessary, and especially in these emergencies: customer engaged in a transaction is listed on or located in a country or region listed on the OFAC list, a policy is owned by an entity that is owned or controlled by a person or entity listed on the OFAC list, a customer tried to use bribery, coercion, or similar means to obtain a policy or carry out a suspicious activity, we have reason to believe the customer is trying to move illicit cash out of the government s reach, or we have reason to believe the customer is about to use the funds to further an act of terrorism. We will first call the OFAC Hotline at The other contact numbers we will use are: Financial Institutions Hotline ( ), local U. S. Attorney s Office ( ), local FBI office ( ), and the applicable state insurance department. b. Red Flags Red flags that signal possible money laundering or terrorist financing include, but are not limited to: The customer makes premium payments and/or settlements in multiple cash equivalents or by/to third parties, or the customer insists on dealing only in cash equivalents, or asks for exemptions from our policies relating to the deposit of cash equivalents. The customer purchases insurance by payment of large premiums and subsequent return of funds through free look refunds of premium The customer makes a request to borrow the maximum cash value of a single premium policy very soon after paying for it. The customer prematurely surrenders a policy for cash without regard to surrender charges. The customer makes policy loans and withdrawals followed soon by premium deposits. The customer makes fraudulent claims. The customer maintains policies with several insurance companies without good reason. The transaction has no discernable connection with the customer s normal business or normal personal activities and needs. An inquiry is made through unknown intermediaries or intermediaries whose role in the transaction would be unusual. A prospective customer is reluctant to disclose the ultimate beneficiary. 13

15 GPM receives inquiries from prospective customers that have been only recently established or have no established financial record. A customer exhibits unusual concern about GPM s compliance with government reporting requirements and GPM s AML policies (particularly concerning his or her identity, type of business and assets), or is reluctant or refuses to reveal any information concerning business activities, or furnishes unusual or suspicious identification or business documents. The customer wishes to engage in transactions that lack business sense or apparent investment strategy, or are inconsistent with the customer s stated business or investment strategy. The information provided by the customer that identifies a legitimate source for funds is false, misleading, or substantially incorrect. Upon request, the customer refuses to identify or fails to indicate any legitimate source for his or her funds and other assets. The customer (or a person publicly associated with the customer) has a questionable background or is the subject of news reports indicating possible criminal, civil, or regulatory violations. The customer exhibits a lack of concern regarding risks, commissions, or other transaction costs. The customer appears to be acting as an agent for an undisclosed principal, but declines or is reluctant, without legitimate commercial reasons, to provide information or is otherwise evasive regarding that person or entity. The customer has difficulty describing the nature of his or her business or lacks general knowledge of his or her industry. The customer attempts to make frequent or large deposits of currency, insists on dealing only in cash, or asks for exemptions from GPM s policies relating to the deposit of cash. The customer engages in transactions involving cash or cash equivalents or other monetary instruments that appear to be structured to avoid the $10,000 government reporting requirements, especially if the cash or monetary instruments are in an amount just below reporting or recording thresholds. For no apparent reason, the customer has multiple policies under a single name or multiple names, with a large number of withdrawals. The customer is from, or has accounts in, a country identified as a non-cooperative country or territory by the FATF, or a tax or money laundering haven. 14

16 The customer s policy has unexplained or sudden extensive withdrawals, especially in a policy that had little or no previous activity. The customer s policy shows numerous currency or cashier s check transactions aggregating to significant sums. The customer s policy has a large number of withdrawals to unrelated third parties inconsistent with the customer s legitimate business purpose. The customer s policy has withdrawals that have no apparent business or personal purpose to or from a country identified as a money laundering risk or a bank secrecy haven. The customer makes a funds deposit followed by an immediate request that the money be wired out or transferred to a third party, or to another firm, without any apparent business or personal purpose. The customer makes a premium payment for the purpose of purchasing a policy followed shortly thereafter by a request for withdrawal, incurring a surrender charge. The customer requests that a transaction be processed to avoid GPM s normal documentation requirements. The customer maintains multiple accounts, or maintains accounts in the names of family members or corporate entities, for no apparent purpose. The customer s policy has inflows of premium well beyond the known income or resources of the customer. Any other activity you think is suspicious. c. Responding to Red Flags and Suspicious Activity When GPM personnel detect any red flags he or she will investigate further under the direction of the AML Compliance Officer. This may include gathering additional information internally or from third-party sources, contacting the government, freezing transactions relating to the policy, or filing a Form SAR-IC. 8. Suspicious Transactions and BSA Reporting a. Filing a Form SAR-IC 15

17 The regulations require the filing of a Form SAR-IC for any policy activity conducted or attempted through GPM involving (or in the aggregate) $5,000 or more of funds where we know, suspect, or have reason to suspect: 1) the transaction or a pattern of transactions involves funds derived from illegal activity or is intended or conducted in order to hide or disguise funds or assets derived from illegal activity (including, without limitation, the ownership, nature, source location, or control of such funds or assets) as part of a plan to violate or evade federal law or regulation or to avoid any transaction reporting requirement under federal law or regulation, 2) the transaction is designed, whether through structuring or otherwise, to evade any requirements of applicable regulations, 3) the transaction has no business or apparent lawful purpose or is not the sort in which the customer would normally be expected to engage, and we know, after examining the background and other facts, of no reasonable explanation for the transaction, or 4) the transaction involves the use of GPM to facilitate criminal activity. The regulations also require the filing of a SAR-IC to report any suspicious transactions involving a covered product that is relevant to a possible violation of law. We are permitted, even though not required by regulations, to file an SAR-IC to report any suspicious transaction that we believe is relevant to the possible violation of law. We will not base our decision on whether to file a SAR-IC solely on whether the transaction falls above a set threshold. We will file a SAR-IC and notify law enforcement of all transactions that raise an identifiable suspicion of criminal, terrorist, or corrupt activities. In high-risk situations, we will notify the government immediately (see Section 7.a. for contact numbers) and will file a SAR- IC with FinCEN. All SAR-IC s will be periodically reported to senior management, with a clear reminder of the need to maintain the confidentiality of the SAR-IC. In situations that require immediate attention, such as terrorist financing or ongoing money laundering schemes, GPM will immediately notify by telephone an appropriate law enforcement authority in addition to filing timely a SAR-IC. We will call the Financial Crimes Enforcement Network s Financial Institutions Hotline at

18 We will report suspicious transactions by completing a SAR-IC and we will collect and maintain supporting documentation as required by the regulations. We will file a SAR-IC no later than 30 calendar days after the date of the initial detection of the facts that constitute a basis for filing a SAR-IC. If no suspect is identified on the date of initial detection, we may delay filing the SAR-IC for an additional 30 calendar days pending identification of a suspect, but in no case will the reporting be delayed more than 60 calendar days after the date of initial detection. We will retain copies of any SAR-IC filed and the originals or business record equivalent of any supporting documentation for five years from the date of filing the SAR-IC. We will identify and maintain supporting documentation and make such information available to FinCEN, any other appropriate law enforcement agencies, or federal or state regulators, upon request. We will not notify any person involved in the transaction that the transaction has been reported, except as permitted by regulations. We understand that anyone who is subpoenaed or required to disclose a SAR-IC or the information contained in the SAR-IC, except where disclosure is requested by FinCEN, or another appropriate law enforcement or regulatory agency, will decline to produce the SAR-IC or to provide any information that would disclose that a SAR-IC was prepared or filed. We will notify FinCEN of any such request and our response. b. Currency Transaction Reports (CTR) CTRs are filed only for certain transactions involving cash. Cash is U.S. and foreign coin and currency; a traveler s check, money order, bank draft, or cashier s check; a check without personal identifying information (instruments where the source of funds is not determinable). GPM accepts cash in limited circumstances, published from time to time, but only if accompanied by a cash receipt, and the source of the cash is reasonably explained. Agents and those who process premiums will be informed of this. If we discover cash has been received, we will file with FinCEN CTRs for transactions involving cash that exceed $10,000. Multiple transactions will be treated as a single transaction if they total more than $10,000 in two or more related transactions. We will use CTR form This is the only Bank Secrecy Act (BSA) 17

19 currency transaction requirement currently applying to insurance companies. If more BSA requirements are made applicable to insurance companies GPM will amend its AML program. 9. AML Record Keeping GPM must establish procedures to maintain AML program records and reviews. This requirement includes the records required to be kept as part of GPM s customer identification responsibility. a. SAR-IC Maintenance and Confidentiality We will hold SAR-IC s and any supporting documentation confidential. We will not inform anyone outside of a law enforcement or regulatory agency or securities regulator about a SAR-IC. We will refuse any subpoena requests for SAR-IC s or SAR-IC information and immediately tell FinCEN of any such subpoena we receive. We will segregate SAR-IC filings and copies of supporting documentation from other firm books and records to avoid disclosing SAR-IC filings. Our AML Compliance Officer will handle all subpoenas or other requests for SAR-SI s. We will share information with our SIU about suspicious transactions in order to determine when a SAR-IC should be filed. b. Responsibility for AML Records and SAR Filing Our AML Compliance Officer and his or her designee will be responsible to ensure that AML records are maintained properly and that SAR-IC s are filed as required. c. Records Required As part of our AML program, GPM will create and maintain SAR-IC s, CTR s, relevant documentation on customer identity and verification (See Section 6 above) and funds transfers and transmittals as well as any records related to customers listed on the OFAC list. We will maintain SAR-IC s and their accompanying documentation for at least five years. We will keep other documents according to existing record keeping requirements. 18

20 10. Training Programs a. Employees We will develop ongoing employee training under the leadership of the AML Compliance Officer and senior management. Our training will occur on at least an annual basis. It will be based on GPM s size, its customer base, and its resources. Our training will include, at a minimum: How to identify red flags and signs of money laundering that arise during the course of the employees duties; what to do once the risk is identified; what employees roles are in the firm s compliance efforts and how to perform them; the firm s record retention policy; and the disciplinary consequences (including civil and criminal penalties) for noncompliance with their responsibilities under the PATRIOT Act. A failure to comply with these responsibilities will be grounds for discipline up to and including termination of the employee s employment. We will develop training inside of GPM, or contract for it. Delivery of the training may include educational pamphlets, videos, intranet systems, in-person lectures, and explanatory documents. Currently our training program involves in-person lectures and explanatory documents. b. Agents and Brokers Under the anti-money laundering rules governing insurance companies, insurers are required to integrate agents and brokers into their anti-money laundering programs with respect to covered products. See sections 3.a. and 3.b. for the definition of covered products. Agents and brokers play an important part in GPM s AML program. During the sales process and from time to time over the life of an insurance product, they have the initial contact with customers. As a result, the agent or broker will often be in a critical position of knowledge as to the source of financial assets, the nature of the client, and the objectives for which the insurance products are being purchased. To make best use of this perspective in GPM s AML program, agents and brokers will have responsibilities in four principal areas. 19

21 Information Gathering: Effective customer due diligence is based on appropriate and accurate information about the client. Agents will be responsible for obtaining this information at point of sale. Methods of Payment: GPM has established rules for acceptable and unacceptable forms of payment. (See section 9.b. and Methods of Payment below.) Agents will be responsible for ensuring that appropriate payment rules are followed, and that attempts to engage in inappropriate payment behavior are reported to the company. Communication: Agents are the first line of defense in the detection of suspicious activity. They will be responsible for bringing potentially suspicious behavior that they are best positioned to observe to the company s attention and cooperate with company requests for information in the course of reviews of clients and client activities. Training: Agents and brokers that sell covered products must receive appropriate antimoney laundering training, either from GPM or a third-party. Reading and studying this program is part of that training. A failure to comply with these responsibilities will be grounds for discipline up to and including termination of the agent s or broker s appointment. In addition, violations of anti-money laundering laws expose those involved to substantial penalties under Federal law. Information Gathering - Customer Due Diligence Agents and brokers are responsible for obtaining and providing complete and accurate information in ALL applications, and other documentation requested by GPM for the issuance of a covered product or a transaction involving a covered product. Agents and brokers should notify GPM s AML Compliance Officer, Betty Kuhn, of any instance in which a customer has resisted providing information, appears to have provided false or misleading information, or has provided information that cannot be verified. Agents and brokers are also responsible, in cooperation with the Compliance Officer, for performing any due diligence necessitated by the presence of any red flags that may arise concerning all products, not just covered products. 20

22 Methods of Payment GPM accepts personal checks, bank drafts, military and civil service allotments, payroll deduction, and to a limited extent cash. The limits on cash are set forth in Section 9.b. of this program. Agents and brokers must be aware of these methods of payment. Agents and brokers have the following responsibilities with respect to these methods: Agents and brokers should communicate the restrictions on acceptable payment to his/her customers in advance of accepting payment. If a customer gives the agent or broker an unacceptable form of payment, the agent or broker should explain what forms of payment are acceptable and return the unacceptable payment immediately. If the agent or broker encounters difficulty dealing with a customer regarding the company s methods of acceptable and unacceptable forms of payment, he or she should call the AML Compliance Officer. Agents and brokers may be asked by company personnel to obtain information with respect to forms of payment received by the company. Communication Regarding Suspicious Transactions Red Flags Red flags that may warrant consideration of a suspicious activity report are set forth at Section 9. New Business Red Flags. The selling agent/broker may be in a key position to identify suspicious activity during the sales process. Accordingly, agents and brokers should be notified that they should be alert for, and should report, any new business red flags to the AML Compliance Officer. In Force Policy Red Flags. While an insurance policy or annuity is in force, customers may, but need not, involve an agent or broker in subsequent transactions. Agents and brokers should be notified that they should be alert for, and should report, any in force red flags to the AML Compliance Officer. 21

23 Timing of Reports of Suspicious Activity. Agents and brokers will be notified that they are required to report suspicious activity to the company immediately, through the AML Compliance Officer, and to seek further guidance and instructions. Follow-up and Reporting. When an agent or broker detects any red flag, he or she may be requested to investigate further under the direction of the AML Compliance Officer. When the agent or broker is affiliated with another broker/dealer, life insurance company, or bank, this direction may come from the affiliate s AML Compliance Officer. Further investigation may include gathering or attempting to verify additional information from the customer or from third-party sources. GPM will have, under the direction of the AML Compliance Officer, sole responsibility for making a determination as to whether to file a SAR and whether a SAR should be filed jointly with other entities subject to federal anti-money laundering rules. The AML Compliance Officer will be solely responsible for determining what information should be provided in response to requests for information concerning suspicious activity from customers, employees, agents, and brokers. The AML Compliance Officer will maintain appropriate records. Confidentiality. SAR-IC s will be filed by company employees rather than agents or brokers. However, agents and brokers may find themselves in a position to know that a SAR has been filed on a client. The fact that a SAR has been filed or considered, and the contents of any SAR that has been filed, are strictly confidential. The AML Compliance Officer has the sole responsibility for responding to any inquiry regarding the subject matter of any SAR. An employee, agent, or broker must not, under any circumstances, disclose the fact that a SAR has been filed or considered, or the contents of a SAR, to the subject of a SAR or to any other person. Violations may result in civil and/or criminal penalties. This should be communicated clearly to agents or brokers. Training for Agents and Brokers Agents and brokers will be trained in the Company s AML program as follows: 22

24 Agents may be trained, or certified as trained, through one or more of the following methods: 1. They may read and study this Program. 2. They may take a GPM AML training course. 3. If the agent is also a registered representative of a broker/dealer, an agent with another insurance company, or a representative of a bank, with its own AML course, GPM will accept, in lieu of its training, training by the other financial institution. GPM will accept certification by the individual agent or the other financial institution as to the fact and nature of the training. 4. GPM will also accept training administered by a vendor. Cooperation With Testing of AML Program GPM will conduct independent testing as to the effectiveness of its anti-money laundering program. Agents and brokers are required to cooperate with testing. 11. Testing the AML Program a. Staffing The testing of our AML program will be performed by an independent third party, or by personnel of GPM. To ensure that they remain independent, we will separate their functions from other AML activities. b. Evaluation and Reporting After we have completed the testing, those testing will report their findings to senior management. We will address each of the resulting recommendations. 12. Monitoring Employee Conduct and Accounts We will subject employee accounts (policies) to the same AML procedures as customer policies, under the supervision of the AML Compliance Officer. We will also review the AML performance 23

25 of supervisors, as part of their performance review. The AML Compliance Officer s accounts will be reviewed by GPM s Controller or Treasurer. 13. Confidential Reporting of AML Non-Compliance Employees will report any violations of GPM s AML compliance program to the AML Compliance Officer, unless the violations implicate the Compliance Officer, in which case the employee shall report to the General Counsel. Such reports will be confidential, and the employee will suffer no retaliation for making them. 14. Additional Areas of Risk GPM has reviewed all areas of its business to identify potential money laundering risks that may not be covered in the procedures described above. No major additional areas of risk were discovered. 15. Law Sources Anti Money Laundering: 31 USC 5318(h) and 31 CFR Suspicious Activity Reports: 31 USC 5818((g) and 31 CFR Currency Transactions: 31 USC Senior Manager Approval I have approved this AML Program as reasonably designed to achieve and monitor our firm s ongoing compliance with the requirements of the BSA and the implementing regulations under it. Signed: Title: Chairman of the Board, President and CEO Date: May 2,

26 TRAINING CERTIFICATE Please complete and return to Betty Kuhn, GPM Life s AML Compliance Officer. Check one or more of the following boxes: I have received and studied GPM Life s Anti-Money Laundering (AML) Program. I have received AML training from another insurance company, bank, or broker/dealer. Briefly describe the source and nature and date of the training: Source: Nature: Date of Training: I have received AML training from a vendor (vendor s name). Briefly describe the source and nature and date of the training: Source: Nature: Date of Training Signature of Agent Print Name of Agent 25