Insurance Industry provides different types of products including investment related products, savings schemes, and risk transfer products to various customers across the globe.
The clientele of an insurance company can range from individuals to corporate entities and government organisations.
One of the most important aspects of the Insurance industry that should be considered while assessing ML/CFT risks is that it operates its business and transactions through intermediaries including Insurance agents and brokers.
Money Laundering and Terrorist Financial Red Flags in Insurance Sector:
While there is no exhaustive list of tried-and-true suspicious activity indicators , there are many common pointers that can help us identify Financial Crime, Money laundering and Terrorist Financing in Insurance Sector.
Methods of Money laundering are getting more sophisticated as the complexity of transactions and financial relationships is growing over the period.
Financial institutions, LFIs and NBFIs play a critical role in identifying and disrupting the movement of funds used to support and carry out terrorist attacks.
Some of the situations which may require additional scrutiny to identify money laundering and CFT methods in the insurance sector are:
- Cash Payments: Purchase of Insurance policies using cash payments.
- Use of different modes of payment: Use of multiple currency equivalents such as cashier checks and money orders to make payments for an insurance policy or annuity payments.
- Request for Compensations: Request for refunds during “Free Look Period.”
- Overlooking potential losses while cancellation of the policy: Lack of concern for significant tax or other penalties while cancelling the policy.
- Redemption in cross border Jurisdiction: Redemption of insurance bonds originally subscribed by an individual in one country, by a business entity in another country.
- Usage of Offshore accounts: Policy premiums paid on behalf of the policy holder from unrelated foreign offshore accounts.
- Cancellation of the Insurance policy within a short period of time: The customer requests for cancellation of the policy in a short period of time after making large premium payments.
- Third Party Funding: The funding of the insurance policy done by third parties who have not been subject to KYC process and the source of funds and the relationships between policyholder and third party is unclear.
A key factor in assessing money laundering and terrorist financing risks in the insurance sector is determining whether the company allows customers to use cash or cash equivalents to purchase insurance products.
When evaluating ML/CTF risks in this sector, it’s important to consider whether customers are permitted to purchase policies with a single lump-sum payment or if the company allows customers to borrow money against the value of an insurance product.
As per the prevalent regulations within the UAE, only life insurance and other investment related insurance products are subject to the UAE’s AML/CFT legal and regulatory framework. For more information contact please contact renu@affiniax.com
