B.C.’s broker regulator has suspended a broker for a year and ordered him fined $10,000 for his “lackadaisical” handling of an auto insurance policy cancellation scheme related to the export of cars from B.C.
Former Level 3 broker Wayne Lin was an oversight authority for his brokerage between Jan. 3, 2019, and Sept. 12, 2019, when the brokerage processed at least 27 transactions involving purchases and cancellations on the same policy within 48 hours, the Insurance Council of B.C’ says in its Dec. 17 decision.
“On Nov. 4, 2019, ICBC determined that the [brokerage] was issuing full-coverage annual policies, which were then cancelled on the same day or the next day,” the broker regulator wrote in its decision. “As a result of these transactions, ICBC paid a large amount of commissions to the [brokerage’s] agents and merchant fees for the credit card transactions.
“Further, ICBC concluded that these transactions were not ‘in the best interest of ICBC’ and ‘elements of tax evasion and potential money laundering were also discovered during the investigation.’ The transactions had not been reported to ICBC, contravening the Autoplan Procedures Manual.”
Council noted the province’s public auto insurer, Insurance Corporation of B.C. (ICBC), issued bulletins on July 4, 2018, and Feb. 16, 2020, advising on when Temporary Operation Permits (TOP) should be sold.
“ICBC reminded licensees that when a vehicle is licensed, it must be for the purpose of operating on a British Columbia highway,” the council’s decision states. “If a licensee is aware that the only reason a policy is being sold is to facilitate the export of the vehicle, and the customer intends to cancel the policy within days of issuance, the customer should only be sold a TOP.”
But Lin told the agency’s Level 1 brokers who sold the policies that it was not their responsibility if the client cancelled the policies outside of the office on a different day, council’s investigation found.
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ICBC’s investigation found 22 of the 27 transactions under investigation were conducted by four main auto insurance buyers — two were individuals and two were companies. All four are identified only by their initials in the council’s decision.
“IH” was a director of a company called “Company WL” and a salesperson for “Company EA.” He was associated with a person identified by council only as “JW.” ICBC’s investigation found IH and JW were associated. Lin, who had past ties with the auto dealership industry, told council IH was a business associate of the brokerage’s previous owner.
“The 27 ICBC Autoplan policies issued and cancelled by the agency had combined total premiums of $328,002,” council noted in its decision. “The average premium per policy was $12,148, which was seven times higher than the 2019 average auto premium in B.C. ($1,832), according to the Insurance Bureau of Canada.”
ICBC’s data showed an additional 59 policies were purchased variously by IH, JW, Company EA, and Company WL. “The combined total premiums of the 86 policies issued by the agency amounted to $1,143,437.85 and the policies had premiums greater than B.C.’s 2019 average auto premium,” council’s decision states.
“In addition, ICBC’s investigation concluded that IH (including Company EA and Company WL) obtained new vehicles both locally and from out of province and subsequently purchased full-coverage annual policies by credit card at the agency,” council’s decision found.
“IH would then routinely cancel the policies the same day and request a refund by cheque. ICBC noted that ‘the refund by cheque also provided the prospect to launder money’ and ‘the vehicles are then believed to be exported out of the country.’ IH would purchase the full policy instead of the standard non-licence or TOP to ‘conceal from the manufacturer that the vehicles were purchased for exportation.’”
Council did not find Lin was involved in the exportation of vehicles. The broker told council he did not believe IH offered any bribes to the brokers to conduct the transactions.
“After speaking with ICBC, [Lin] knew the [brokerage] should not continue to conduct these transactions,” Council’s decision found. “[Lin] believed that his brother [a manager at the brokerage] had a meeting with the agency’s staff. [Lin] discussed with his brother the possibility of discontinuing business with IH and two or three other businesses that were also doing business in a similar manner.”
But after a time, Lin decided that, as long as the transactions were not cancelled at his brokerage on the same day as purchase, it was okay to sell the policies, since he could not stop the clients from cancelling the policies elsewhere.
“Council found [Lin’s] attitude to be lackadaisical,” the council ruled in its disciplinary order. “Although [he] eventually took responsibility for the transactions, there was a lack of accountability for the transactions at the time that they occurred during the transaction period.”
Also, council found, Lin “breached the usual practice of dealing with insurers. [He] did not make reasonable inquiries into the risk of the ICBC transactions, and did not question the appropriateness of the transactions.”
Feature image courtesy of iStock.com/Tramino
