Bill Introduced In Florida House Of Representatives Is Designed to Combat MSB Facilitated Workers’ Compensation Fraud
On February 1, 2012, the Florida House of Representatives Insurance and Banking Subcommittee approved HB 1277 which is designed to combat MSB facilitated workers compensation fraud in Florida. Over the past year, MSB facilitated workers compensation fraud has been in the crosshairs of the Florida government.
As we previously reported, on August 2, 2011, the Financial Services Commission of the Florida Office of Financial Regulation (“OFR”) issued a report to Governor Rick Scott and his Cabinet regarding workers compensation fraud in the State of Florida. The cabinet report revealed that money services businesses have played an active, critical, and sometimes unknowing part in defrauding the workers compensation insurance market. A complete overview of the fraud scheme can be read here.
At the time of our prior report on this matter, Florida C.F.O. Jeff Atwater announced the creation of the “MSB Facilitated Workers Compensation Fraud Workgroup” to develop comprehensive reforms to combat the fraud scheme. The efforts of the Workgroup culminated with its report and recommendations which were presented to the Insurance and Banking Subcommittee on November 2, 2011. A summary of the Workgroups report and recommendations can be read in our previous report here.
Many of the Workgroups recommendations were adopted by the Subcommittee in drafting HB 1277. First, HB 1277 would allow the Office of Financial Regulation (“OFR”) to make unannounced visits to inspect MSBs. This change would eliminate the requirement under § 560.303, Fla. Stat. that state regulators give check cashers 15 days notice before conducting an examination of their records. The goal of this revision is to prevent those MSBs that are facilitating the fraud from hiding, destroying, or tampering with records and evidence prior to an OFR inspection.
Second, HB 1277 eliminates the requirement that new MSB licensees be inspected by OFR within six months of the issuance of its license. However, the bill still requires that all MSBs undergo an examination every five years. The hope is that by eliminating the mandatory six-month inspection, OFR can better allocate its resources to investigating suspected fraudulent and high risk MSBs first then moving on to investigate lower risk MSBs at a later time.
HB 1277 also adopted two other recommendations of the Workgroup requiring that check cashers deposit all checks into a single commercial bank account maintained at a federally insured financial institution, and eliminating the ability of companies to cash third-party checks in check cashing facilities. The Workgroup believes that these changes will enhance fraud detection because the Workgroup perceives banks to be in a stronger position to monitor and filter out unlawful transactions. The bill will now proceed to the House floor for reading and debate.
Fuerst Ittleman will continue to monitor the progress of HB 1277 with a keen eye as the passage of HB 1277 will result in changes to regulatory compliance for the Florida MSB industry. If you have questions pertaining to HB 1277, the Florida Office of Financial Regulation, anti-money laundering compliance, or how to ensure that your business maintains regulatory compliance at both the state and federal levels, please contact us at firstname.lastname@example.org.