AML Regulations in the Insurance Sector

AML Regulations in the Insurance Sector

Devising and strictly implementing AML regulations is necessary in the Insurance Sector. Read on to know these directives laid out by the local and international regulators, including the European Union and the FATF.

The AML-TRACE software by SMART Infotech is the one-stop solution that helps your organization achieve AML compliance without wasting your valuable time and other resources. Without further ado, let us get to the rules set by the concerned authorities:

Know Your Customer

Having this process in place helps insurance companies thoroughly identify and assess the risk levels of the individuals with whom they are doing business. Simply put, the KYC procedure involves collecting personal data to verify the customer’s identity. The company officials also verify the client's credentials and the ultimate beneficiary ownership. 

All firms need to identify individuals, foundations, and the legal entities buying insurance products from them. Many risk indicators reveal possible money laundering threats. For example, if the insurance policy’s purpose seems suspicious, the chances are that the client will commit financial fraud. 

PEP, Adverse Media and Sanctions List Screening

The official authorities need to ensure that a potential customer or prospect does not appear on the Sanctions or PEP list. These lists include the names of individuals or entities barred from buying particular life insurance products. AML-TRACE helps you identify such clients and leverages the power of AI to analyze actual adverse media context at scale.

If any prospect is found suspicious, the organization must immediately block such transactions or even freeze assets, if necessary. If an entity still attempts to purchase a life insurance policy, the officials concerned should at once report the activity to the relevant authorities. PEP and Sanctions List Screening must be carried out during customer onboarding till the culmination of the customer lifecycle. 

Transaction Monitoring

All insurance companies need to monitor transactions concerning annuity contracts, permanent life insurance policies and any other insurance product that has the features of an investment or accumulates cash value. 

The firms have to file Suspicious Activity Reports (SARs) to the regulatory authority if any transaction regarding the covered products is found suspicious. The form filled in by the officials should contain client data from several sources, including agents and insurance brokers. 

Some red flags include:

  • An insurance product not meeting a customer’s needs.
  • Payments being directed to a third party.
  • An early surrender wherein the client pays the penalty.
  • Unusual payment methods.
  • Customer’s reluctance to provide personal data. 
  • Request refunds of premiums during a cooling-off period.

Customer Due Diligence and Adequate Supervision

The process determines the customers’ risk level–low, medium, high, or very high. It is ascertained by the line of business in which the customer operates. Last but not least, all of the measures mentioned above need to be adequately implemented & enforced. 

For that, the Board of Directors must thoroughly execute the AML program. It involves hiring an AML compliance officer who conducts adequate supervision; ensuring that AML risks are managed, and the company is achieving AML compliance.

Undoubtedly, the compliance officer’s expertise regarding anti-money laundering goes a long way in saving the company’s reputation from getting tarnished. But wherever manual intervention is involved, there are always chances of errors. To avoid that, harness the potential of AML-TRACE. Let nothing come in the way of you and your company achieving compliance.