Compliance - Antifraud in Insurance and Reinsurance - SSN Resolution No. 38,477

On July 17, 2014 the National Superintendence of Insurance (“SSN” for its acronym in Spanish) issued Resolution No. 38,477 (the “Resolution”), published in the Official Gazette on July 23, 2014. The Resolution came into force on August 22 and full compliance will be required as from 180 calendar days counted from its publication in the Official Gazette, which is from January 19, 2015.
The Resolution provides that the insurance and reinsurance entities subject to the supervision of the SSN (the “Supervised Entities”) shall approve, under the responsibility and through its Administrative Body, “Rules on Policies, Procedures and Internal Controls to Combat Fraud” (the “Anti-Fraud Policies”). The Antifraud Policies will take effect with the sole approval of the mentioned Administrative Body. Supervised Entities must adapt as necessary to comply with the Anti-Fraud Policies.
The Anti-Fraud Policies shall apply without prejudice to the full validity of the applicable rules in accordance with Law No. 25,246 (“Anti-Money Laundering Act”), as amended and complemented, and to all statutory regulation issued in consequence by the Financial Intelligence Unit and by the SSN.
The contents of the Resolution are minimal and mandatory. The entities must complement them according to the insurance coverage they provide, to the extent of their scope or complexity, in order to make up a control environment conducive to combat fraud in the insurance sector, according to the nature of their activities and own parameters. As a minimum, the Anti-Fraud Policies must stipulate the Supervised Entities relationships with cedants, brokers, retrocessions, hiring and training of their staff and/or outsourced services and monitor their behavior, and a scheme for the resolution of conflicts of interest.
The Resolution also establishes specific requirements for certain types of Supervised Entities as Labor Risk Insurers (“ART” for its acronym in Spanish) and reinsurers.
In general, similar to other compliance requirements, the Resolution requires:
• The elaboration of a manual of procedures for combating fraud,
• The appointment of a responsible contact,
• The elaboration of a report of each case investigated on suspicion of insurance fraud,
• The implementation of a program of verification of compliance with the Anti-Fraud Policies,
• The establishment of a specific regime for the recruitment of staff to ensure their suitability and probity,
• Providing ongoing training to all employees and officers of the entity, including executive and managerial levels, and
• If the entity operates with intermediaries or insurance marketing agents, it must provide them with a document minimally containing recommendations, questions and data that shall be gathered for the adoption of measures of anti-fraud security.
Entities that already have their own anti-fraud compliance program should take into account the requirements of the Resolution to adjust to them, regardless of any additional anti-fraud policy.
The Resolution includes 4 annexes. Annex I provides a Guide to Eradicate Disloyal and Abusive Practices even when they are not criminal behavior.
Annex II is a Guide of suggestions and examples of measures to prevent detect report and remedy insurance fraud.
Annex III sets out the minimum and mandatory Guidelines for the development of the Anti-Fraud Policies. Among other things, this Annex provides that the SSN can observe the approved procedures, including those that are non-compulsory, especially when these contravene other rules and when they ostensibly hinder the proper exercise of the rights of the insured.
As for sanctions, Annex III provides that failure to comply with the Anti-Fraud Policies can constitute a situation likely to fall within Articles 58 and 59 of Law No. 20,091, i.e., warning, fine, suspension, etc.
Annex IV is a Guide of recommendations on processes of deterrence, prevention and detection.
As usual in cases of compliance, what should also be considered -beyond what is required by the Resolution- is the impact that a breach of these rules can generate on the occurrence of acts of fraud and its possible reputational consequences for the company.