Real Estate NewsNew Effort To Track Financial Crooks Proposed On Capitol Hill
Legislation that would create a rogues gallery of crooked financial service professionals -- including those who operate in the mortgage business -- has been cleared by the Financial Services Committee of the House of Representatives.
Known as the "Financial Service Antifraud Network Act," the bill -- known as H.R. 1408 and introduced by Rep. Mike Rogers, R-Mich. -- is intended to prevent fraud by creating a network for information sharing among the nation"s 250 financial regulators about bad actors who often escape the authorities by moving from one state or business to another.
The bipartisan measure was cleared on a voice vote.
Many financial regulators already keep industry-specific databases on such predators. But the legislation would link the records via a network that could be accessed simply and easily by a computer search engine.
The network, said Committee Chairman Michael Oxley, R-Ohio, would be "a quick and expensive" way for both state and federal regulators to "effectively pool their information and shut down fraud at its inception."
The bill gives regulators six months to plan and two years to implement the new network. If these goals are not met, a new subcommittee to administer the network would be created within the President"s Working Group on Financial Markets.
It is expected the clearinghouse will prevent crimes such as those committed by Martin Frankel, who was barred from the securities industry before moving to the insurance industry and stealing hundreds of millions of dollars.
"Criminals come in all shapes and sizes," said Rep. Rogers, who, like Rep. Oxley, is a former special FBI agent. "Advances in modern technology and the Internet have created a new frontier for criminals, allowing them to defraud consumers with a mere click of a computer mouse. Our regulators need the same technological tools."
"Does anyone seriously doubt that there are hundreds, if not thousands, of would-be Martin Frankels still operating in our financial markets?" asks Financial Institutions and Consumer Credit Subcommittee Chairman Spencer Bachus, R-Ala.
"The anti-fraud network established by this legislation will help level the playing field between the Frankels of the world and the financial regulators charged with policing financial fraud and protecting consumers."
Financial regulators have begun to make agreements among themselves to share information, but these agreements cannot create a seamless, nationwide net, nor can they completely and reliably address privacy concerns.
Under the legislation, regulators will decide what information will be shared and the frequency of sharing. However, they may share only public final disciplinary and formal enforcement actions taken against financial companies and professionals.
The bill further conveys the congressional view that regulators should consider sharing additional anti-fraud information that is publicly available, as well as information from financial reports, affiliations, and applications which are factual and substantiated.
The bill does not require any new information collecting, and it does not create a new database. No information about consumers will be collected or shared.
The legislation also includes strict privacy protections for the financial professionals under review. Specifically, regulators cannot share information unless there are adequate privacy and confidentiality safeguards. The regulators may not rely on unconfirmed or unadjudicated information.
If a regulator uses information from the network to take any action against a financial services professional, the individual generally will be given the information first and must be given a chance to respond.
A provision in the legislation separate from the anti-fraud network would allow the FBI to run fingerprints of applicants for insurance licenses through its national fingerprint database if the particular state enacts a uniform or reciprocal agent licensing law.
Only screened FBI information would be provided to state insurance commissioners, including felony convictions, violent misdemeanors, failure to pay taxes or child support, and financial crimes. For example, indictments that did not result in conviction would not be provided to commissioners. There are strict penalties for the misuse of such information.
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