- The Washington Times - Friday, November 21, 2003

Thousands of insurance companies across the country are combing millions of client records to make sure those people are not suspected terrorists.

Insurance industry executives and U.S. officials say companies that provide any kind of financial service — including real estate agents and banks as well as insurers — are obligated to make sure that they are not dealing with any of the more than 5,000 names on the Treasury Department’s list of what it calls “specially designated nationals and blocked persons.”

Aetna Inc. has searched the records of all the 13 million people it covers, spokesman Fred Laberge said.

Mr. Laberge said the search “did not compromise privacy or medical records in any way.”

The 127-page list, maintained by the Treasury Department’s Office of Foreign Assets Control (OFAC), is updated frequently. It bears the names of individuals and companies that are thought involved in terrorism, money laundering, drug dealing or sanctions busting — with any aliases or other identities they are believed to use.

“Generally, under the regulations, the onus is on the business to check that it is complying” by not providing financial services to anyone on the list, said Ken Schloman, spokesman for the Alliance of American Insurers.

Federal officials say the regulations are necessary in the war on terrorism.

But critics and civil liberties advocates say the regulations make private companies do the government’s dirty work.

The regulations “require that everyone is treated as a potential terrorist,” said Tim Edgar, legislative counsel for the American Civil Liberties Union. He said he expects protests about the rules as increasingly stringent enforcement means that “more and more ordinary Americans who are just trying to open bank accounts or get insurance come up against” the measures.

“This is one of a series of obligations the government has placed on the private sector that we’re concerned about,” said Ari Schwartz, associate director of the privacy advocacy group Center for Democracy and Technology. “They’re basically getting companies to spy on their customers.”

Treasury officials say the legal powers on which the regulations are based pre-date the September 11 terrorist attacks, but the climate following the attacks has strengthened enforcement efforts, industry representatives say.

“The laws that are administered by OFAC have always applied to insurers,” said Pat Watts, assistant vice president for the Alliance of American Insurers. But the suicide hijackings have “brought into focus” the need for insurers to comply. OFAC did not begin recruiting state insurance commissioners — the industry’s regulators — to help them enforce the rules until after September 11.

“Prior to September 11, the entities on this list were almost entirely foreign-based.” The issue of compliance did not arise for health insurers or similar companies “because no one imagined anyone on the list would be trying to settle [in the United States] and get health insurance,” said Treasury spokeswoman Ann Womack.

“All that’s changed.”

OFAC does not issue guidance for companies, which leaves them in a difficult position, industry representatives say.

“There are concerns, because making a small mistake can have serious consequences,” Mr. Watts said.

Criminal violations can result in corporate and personal fines of up to $1 million and 12 years in prison.

The agency generally doesn’t “come down hard” on companies found in violation but are making a “good-faith effort” to comply, Mr. Watts said.

The regulations oblige insurers to check the names of anyone who applies for insurance of any kind. “OFAC has made it clear that insuring someone on the list and receiving premiums from them is a breach of the regulations,” he said.

Anyone whose name comes up as a match would not be issued insurance until it was confirmed that he or she were not the person named on the list, he said. Existing customers would have their policies blocked or frozen, with any premiums they paid or payouts due to them reverting to the U.S. government.

But critics say it is too easy for innocent people to be targeted through false matches.

“Many of the names on the list are very common,” said Chris Hoofnagle, associate director of the Electronic Privacy Information Center. “There are a lot of variations” with slightly different spellings on many names because of the inconsistency of translation from Arabic and other languages.

Mr. Schloman and Mr. Watts confirmed that the insurance trade group has received reports of false matches from companies around the country, but declined to give details or numbers.

Mr. Watts said that there was no standard procedure for companies to investigate matches. Companies should “call OFAC and make sure you’re doing whatever it is they want you to do.”

He added that under state law, “generally, anyone refused coverage or who has a claim denied has a right to be told why.”

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