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Combat Money laundering in Insurance Sector with AML-TRACE

Combat Money laundering in Insurance Sector with AML-TRACE

Money laundering and insurance claim fraud has long been a common concern among the authorities concerned. This risk occurs due to massive funds inflow and outflow, a significant aspect of the daily business activities of an insurance company. Such firms offer highly flexible policies and investment products that allow clients to make deposits and withdraw large amounts of cash. But there is a catch: the customers can do so as the total amount is subject to only a minor reduction in value. Hence, governments and international authorities have implemented a wide range of anti-money laundering regulations. 

There has been a release of regulations concerning the insurance sector. If non-compliant, the violating parties have to pay heavy penalties, including fines or imprisonment, or both. So, insurers must understand their obligations and implement them as part of their AML policy to avoid money laundering in the insurance sector. Use AML-TRACE to minimize financial fraud in this field while achieving regulatory compliance.

AML Requirements for Insurance Companies

All professionals in the insurance sector need to maintain the documents and records containing client data for at least five years after the insurance policy’s expiration date and the reinsurance contract. Perform due diligence concerning customers who:

  • Pay insurance premiums from accounts kept in countries having no legal framework to counter money laundering.
  • Generally conduct business associated with precious goods like gold, jewelry, antiquities, cars, real estate, and leasing.
  • Regularly travel to countries known for trading and farming drugs.
  • Show no interest regarding the insurance premium amount or commissions or any other matter related to insurance coverage.

Insurance companies must comply with the targeted financial sanctions imposed by international and governmental authorities on entities, customers, and individuals. If any of the clients (beneficiaries or policyholders) appear on sanctions lists, insurance companies should block transactions or freeze assets & report to the authorities concerned.

To minimize money laundering in the insurance sector, the sanctions compliance policy must include:

  • Risk-Based Selection 

Companies should select watchlists that properly align with the risk posed by their clients and the jurisdictions where they operate.

  • Deploy Ongoing Screening

The sanctions program must screen customers on an ongoing basis to accommodate changes in risk profiles and reduce the chances of insurance claim fraud. 

  • Have a Confirmation Process in Place

If a customer's details match a sanctions list, the Board of Directors must have a process to confirm the customer’s identity and inclusion on the list.

  • Reliable Error Detection Mechanisms

It is one of the most crucial AML requirements for insurance companies. The sanctions programs must have fail-safe measures to catch employee errors or deliberate attempts to circumvent the screening process.

Need for Customer Due Diligence For Accurate Money Laundering Detection

CDD allows the insurers to confirm that their clients are truthful about their identities or their names are added to the sanctions lists. So, the insurers’ AML/CFT programs should include relevant Customer Due Diligence measures to verify customer identities.

AML-TRACE is an automated software that generates accurate details of thousands of clients and verifies their data within minutes. Its AI-backed customer screening and transaction monitoring processes remove the scope of errors occurring due to manual intervention.

Why Choose the AML-TRACE Software?

A massive amount of data goes under the lens during the transaction monitoring and sanctions screening processes. Automate your AML/CFT programs and save time and costs with the in-built innovative technology of AML-TRACE.

Moreover, the compliance software helps you enhance the speed and accuracy of monitoring and screening processes and, eventually, avoid costly compliance penalties. You can deploy this one-stop AML solution in-site or on-Cloud. Further, configure it as per your business needs across practically all business types.

AML-TRACE follows transaction monitoring rules to identify various possible money laundering or insurance claim fraud scenarios via artificial intelligence. Based on this, it provides recommendations for the optimal tuning of customer segmentation, rules, scenarios, and thresholds. 

Steps to Take After Detecting Suspicious Insurance Transactions

  • ​The firm should freeze the transaction and notify the Unit by generating a Suspicious Transaction Report if there is reasonable doubt about the insurance transaction being linked with terrorism financing or criminal organizations.
  • Meanwhile, the entity should not disclose any information about the procedure to the customer or the beneficiary. Only competent authorities can have access to this information. 

Which documents are required to verify the customer's identity?

  • Natural Persons

The details must include nationality, full name, place, date of birth, permanent residence, current address, and location of work. The insurer should check individual customers' identity cards or passports and maintain their certified copy. 

  • Juridical Persons

The complete information and all documents should be obtained, including the commercial registration, Articles of Association, and the Memorandum of Incorporation showing the renewal date. The insurer must maintain copies of each of these documents.

Also, obtain the owners' and partners' addresses, names, and nationalities. If it is a public shareholding company, the names, and addresses of the Board of Directors, Chairman, and shareholders (who have more than 5% of the holdings) must also be obtained.

What are the AML red flags in the insurance sector?

  • An insurance product has been bought and does not reflect a client’s known needs.
  • A policyholder surrenders an insurance product and directs the refund to a third party.
  • The customer incurs a cost for the early surrender of an insurance product.
  • They purchase insurance products through unusual payment methods like cash or cash equivalents or monetary instruments in structured amounts.
  • The customer is not concerned with the investment performance of a purchased insurance product. At the same time, they show great concern for its early surrender terms.
  • The customer borrows the maximum available amount from their insurance product soon after purchase.
  • When purchasing the insurance product, the customer is reluctant to provide identifying information.
  • The customer purchases low-premium insurance and pays premiums by making regular payments. Meanwhile, they buy insurance suddenly by making a lump-sum premium payment for no valid reason.

Are you looking to scale business growth and fulfill AML requirements for insurance companies without worrying about financial fraud risk? To minimize the chances of insurance claim fraud, avail the benefits of AML-TRACE today.