Start Here: 5 Things You MUST Know
The FCPA has two parts: anti-bribery provisions (no bribing foreign officials) and accounting provisions (accurate books and records)
The Patriot Act requires anti-money laundering compliance, suspicious activity reporting, and OFAC sanctions screening
The three WTO agreements: GATT (goods), GATS (services including insurance), TRIPS (intellectual property)
NAFTA was replaced by USMCA (2020) — same three countries: U.S., Mexico, Canada
APEC is the only inter-governmental body that operates on nonbinding commitments
1. Foreign Corrupt Practices Act (FCPA)
What Is the FCPA?
The FCPA prohibits U.S. companies and their agents from bribing foreign government officials to obtain or retain business. It is one of the most important compliance laws for international insurers.
Two Main Provisions
Anti-Bribery Provisions
Illegal to pay bribes to foreign government officials to win or keep business. This includes direct payments, gifts, or disguised payments through "consultants" or intermediaries.
Accounting Provisions
Companies must keep accurate books and records and maintain internal accounting controls. This prevents companies from hiding bribes as legitimate expenses.
Real-World Scenario: FCPA Violation
The Setup: A U.S.-based insurer wants to enter the market in Country X. The local insurance regulator hints that licensing could take "years" unless the insurer hires the regulator's brother-in-law as a "consultant" for $200,000.
What Happens: The insurer pays the "consulting fee." The license is approved within weeks.
The Result: This is an FCPA violation. The "consulting fee" is really a bribe disguised as a legitimate business expense. The insurer faces criminal prosecution, fines potentially in the hundreds of millions, and severe reputational damage. Both the company AND the individuals involved can be prosecuted.
Critical for Insurance
Bribes can be disguised as commissions, consulting fees, or "facilitation payments." The UK Bribery Act 2010 is even broader than the FCPA. International anti-corruption enforcement is now coordinated across multiple jurisdictions.
2. The Patriot Act and Anti-Money Laundering
The USA PATRIOT Act enhanced the government's ability to combat terrorism and money laundering. It amended numerous existing U.S. laws and created new compliance requirements for financial institutions, including insurers.
How the Patriot Act Affects Insurance
Enhanced Due Diligence
Extra scrutiny on international transactions, identity verification, and source of funds for large purchases.
Anti-Money Laundering (AML)
Insurers must have AML programs to detect and prevent money laundering through insurance products.
Suspicious Activity Reporting
Must file SARs (Suspicious Activity Reports) with FinCEN when transactions appear suspicious.
OFAC Sanctions Screening
Must screen policyholders and claimants against the SDN (Specially Designated Nationals) list. If matched, must block the transaction.
Real-World Scenario: Money Laundering Through Insurance
The Setup: A walk-in customer at an insurance office wants to purchase a $5 million single-premium whole life policy and pay with a cashier's check from an offshore bank.
What Happens: The compliance department flags this as suspicious — large single-premium life policies are a known money laundering vehicle (dirty money goes in as premium, clean money comes out as death benefit or cash value).
The Result: The insurer must file a Suspicious Activity Report (SAR) with FinCEN, conduct enhanced due diligence on the customer, and screen them against the OFAC SDN list. If the customer appears on the SDN list, the insurer must block the transaction and report it. Failure to comply can result in severe penalties.
U.S. Laws Changed by the Patriot Act (Know Any 5)
Wiretap Statute (Title III)
Electronic Communications Privacy Act
Computer Fraud and Abuse Act
Foreign Intelligence Surveillance Act (FISA)
Bank Secrecy Act
Money Laundering Act / Control Act
Right to Financial Privacy Act
Fair Credit Reporting Act
Immigration and Nationality Act
3. U.S. Tax Code (IRC) and International Insurance
The Internal Revenue Code (IRC) affects international insurance through rules on how foreign income is taxed, tax credits for foreign taxes paid, transfer pricing rules, and Controlled Foreign Corporation (CFC) rules.
Foreign Sales Corporation (FSC)
A special corporation U.S. exporters could create in foreign countries for tax benefits on export income. Ruled illegal by the WTO and replaced by ETI, which was also struck down.
Extraterritorial Income (ETI)
A tax exclusion that replaced FSCs. Also struck down by the WTO as an illegal export subsidy. Current U.S. export incentives operate under different structures.
Real-World Scenario: Tax Code Compliance
The Setup: A U.S. insurer operates through subsidiaries in Bermuda (a tax haven) and the UK.
What Happens: The Bermuda subsidiary earns $50M in premium income. Under CFC rules, the IRS may require the U.S. parent to include some of this income on its U.S. tax return, even though it was earned abroad.
The Result: The insurer cannot simply park profits in Bermuda to avoid U.S. taxes. CFC rules, transfer pricing scrutiny, and the 2017 tax reform (GILTI provisions) all work to ensure U.S. tax obligations on foreign earnings.
4. Multinational Organizations and Agreements
United Nations (UN)
Purposes: maintain international peace and security, develop friendly relations among nations, cooperate in solving economic/social/humanitarian problems, promote human rights, and harmonize the actions of nations.
World Trade Organization (WTO)
Governs international trade through three primary agreements:
GATT
General Agreement on Tariffs and Trade
Covers goods
GATS
General Agreement on Trade in Services
Covers services (including insurance)
TRIPS
Trade-Related Aspects of Intellectual Property
Covers intellectual property
Dumping: Selling goods in a foreign country below cost or below domestic price. The WTO has anti-dumping rules to prevent this unfair practice.
NAFTA / USMCA
Applies to Canada, Mexico, and the United States. NAFTA eliminated nearly all tariffs between these countries. It was replaced by the USMCA (United States-Mexico-Canada Agreement) in 2020, with updated provisions on digital trade, labor standards, environmental protections, and auto rules of origin.
European Union (EU)
Operates a Common Market with free movement of goods, services, capital, and people. The Euro is the common currency of the Eurozone. EU insurance directives harmonize regulation, and Solvency II sets capital requirements. Note: Brexit (2020) means UK insurers lost "passporting" rights to serve EU clients directly.
Real-World Scenario: EU Passporting and Brexit
The Setup: Before Brexit, a London-based insurer could use its UK license to write policies for clients in any EU country — this was called "passporting."
What Happens: The UK leaves the EU in 2020. Passporting rights are lost.
The Result: London insurers had to set up new EU subsidiaries (many chose Dublin, Luxembourg, or Paris) to continue serving EU clients. This added significant cost and regulatory complexity to the international insurance market.
ASEAN
Association of Southeast Asian Nations
Members: Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei, Vietnam, Laos, Myanmar, Cambodia. Purposes: accelerate economic growth and promote regional peace and stability.
APEC
Asia-Pacific Economic Cooperation
Facilitates economic growth, trade, and investment in the Asia-Pacific. The only inter-governmental body that operates on nonbinding commitments, open dialogue, and equal respect for all participants.
Cheat Sheet
Print this page for quick referenceU.S. Laws
- FCPA = anti-bribery + accounting provisions
- Patriot Act = AML, SARs, OFAC screening
- FSC and ETI = both struck down by WTO
- CFC rules = prevent parking profits in tax havens
WTO Agreements
- GATT = goods
- GATS = services (including insurance)
- TRIPS = intellectual property
- Dumping = selling below cost abroad (prohibited)
Trade Agreements
- USMCA = U.S., Mexico, Canada (replaced NAFTA)
- EU = Common Market, Euro, Solvency II
- ASEAN = 10 Southeast Asian nations
- APEC = nonbinding commitments (unique)
Insurance AML Requirements
- File SARs with FinCEN for suspicious activity
- Screen against OFAC SDN list
- Enhanced due diligence on international transactions
- Life insurance = known money laundering vehicle
Exam Trap Alerts
1. FCPA Has TWO Provisions, Not Just Anti-Bribery
Most people only remember the anti-bribery part. The FCPA also requires accurate books and records (accounting provisions). Know both.
2. GATT vs. GATS vs. TRIPS
GATT = goods. GATS = services (this is where insurance falls). TRIPS = intellectual property. The exam may ask which WTO agreement covers insurance — the answer is GATS.
3. NAFTA Is Now USMCA
If the exam references NAFTA, know it was replaced by USMCA in 2020. Same three countries: U.S., Mexico, Canada. Updated rules on digital trade and auto manufacturing.
4. APEC = Nonbinding Commitments
APEC is the ONLY inter-governmental body that operates on nonbinding commitments. This is a unique characteristic the exam may test. All other organizations (WTO, UN, EU) have binding rules or treaties.
5. FSC and ETI Were Both Struck Down
Foreign Sales Corporations were ruled illegal by the WTO. The replacement (ETI) was ALSO struck down. Both are outdated. Know this history but recognize neither exists today.
6. Know ANY 5 Laws Changed by the Patriot Act
The exam may ask you to list five. Easiest to remember: Bank Secrecy Act, Money Laundering Act, FISA, Wiretap Statute, Computer Fraud and Abuse Act.
Quick Reference Summary
FCPA
Anti-bribery + accounting provisions. Prohibits bribing foreign officials. Both company and individuals face prosecution.
Patriot Act / AML
Enhanced due diligence, SARs, OFAC screening. Insurers must prevent money laundering.
WTO Agreements
GATT (goods), GATS (services/insurance), TRIPS (IP). Anti-dumping rules.
USMCA
Replaced NAFTA (2020). U.S., Mexico, Canada. Tariff elimination + updated trade rules.
EU & Solvency II
Common Market, Euro currency, harmonized insurance regulation. Brexit ended UK passporting.
APEC
Only body with nonbinding commitments. Asia-Pacific economic cooperation.