Large brokerage reprimanded in credit card fraud case

The Insurance Council of British Columbia has reprimanded Westland Insurance Group Ltd. for failing to take appropriate action after becoming aware of a possible compromise of client information.

Council executive director Janet Sinclair found that while Westland co-operated with agencies investigating criminal activity involving client credit card data, “there is no record of [Westland] otherwise taking action to address the potential breach of important client personal information.” The brokerage also did not contact the Insurance Corporation of British Columbia (ICBC) about the suspicious transactions, even though they related to Autoplan policies.

“A significant mitigating factor was that the current nominee was able to demonstrate that the agency (Westland) has enhanced their privacy and related policies in the years since the incident with the former licensee,” Sinclair writes in the decision, which took effect Feb. 1. “Conversely, the most notable aggravating factor was that the agency had failed to reach out to ICBC at all, despite the suspicious transactions being related to Autoplan policies, and despite being contractually obligated to do so.”

The former licensee was a Level 1 general insurance salesperson authorized to represent Westland between January and June 2017, primarily responsible for conducting ICBC Autoplan transactions. In April 2020, he was charged under the Criminal Code with ten counts of identity theft, ten counts of unauthorized use of credit card data, and eight counts of fraud over $5,000. Council cancelled his licence in May 2020, considering him to pose an ongoing and serious risk to the public if allowed to continue conducting insurance business.

Royal Bank of Canada contacted the brokerage in June 2017 regarding an investigation into suspicious credit card transactions it had linked to the agency. The former licensee voluntarily resigned shortly after RBC’s contact. RCMP later concluded that although the former licensee was responsible for the compromise of a “series of client credit cards while employed at the agency and another agency, not all the agency transactions that had been flagged as suspicious were the result of compromised credit cards.”

Council recognizes brokerage staff were concerned about potentially interfering with the RCMP investigation, who did not provide them with information as to exactly which clients likely had their credit card or other information compromised by the licensee. Even so, the two co-nominees of the agency at the time should have been involved in the response to the situation, and ICBC should have been communicated with, writes Sinclair.

“It would have been best practice for the agency to have reported the former licensee’s conduct to Council, and to have sought guidance from Council as to how to handle the situation,” says Sinclair. “At the very least, the agency should have brought the matter to ICBC’s attention, as required by their agreement with ICBC, so that a mutual course of action could be discussed.”

Council also found both co-nominees providing oversight were competent and should not be personally sanctioned. “Council is satisfied that Nominee A and Nominee B had reached out to ICBC and Council in other circumstances involving staff misconduct, and likely would have done so regarding the former licensee had the matter been properly brought to their attention.”

As part of the decision, Westland was assessed investigation costs of $2,375 to be paid by May 2. If Westland fails to pay these costs by May 2, its general insurance licence will be automatically suspended and it will not be permitted to complete its 2023 annual licence renewal until the costs have been paid in full.

Feature image by iStock.com/kyoshino