Anti-Money Laundering

Table of Contents

 

Introduction

1

Anti-Money Laundering Program and Suspicious Activity Reporting Requirements for Insurance Companies

3

 

Terrorism Produces Insurer Risk

     FATF Recommendations

3

4

 

Legal Requirements Adopted

4

 

Broker-Dealer Requirements

6

 

     Customer Identification Programs (CIP)

6

 

AML Program Requirements

7

 

Insurers required by 5/2006 to develop/implement written AML program applicable to products they sell

8

 

Key provision of USA PATRIOT Act says various CE formats

8

 

     At minimum program required to incorporate policies, procedures & internal controls based on their product risk

8

 

     Each insurer designates a compliance officer

8

 

     USA PATRIOT Act: Know Your Customer (KYC)

10

 

Compliance

10

 

Suspicious Activity Reports Filing Requirements

10

 

     Threshold amt requiring insurer to report

10

A Change in Thinking

11

 

     Agents/brokers exempt from definition of “insurer”

11

 

     Placement stage of ML

12

 

     Layering Stage of ML

12

 

     Integration stage of ML

12

 

A Global Problem

12

 

     International community focused on life & cash value products

     Financial Action Task Force established in 1989 at summit

12

 

Covered Products

14

Blind Faith

14

 

     FATF studies methods/trends used to launder money

15

Insurance Policy Money Laundering Techniques

16

 

Nine Identified ML Methods

16

 

1. Single Premium Life Insurance Contracts

16

 

     Enable ML to purchase policy with lump sum payment

16

 

2. Early Policy Redemption

16

 

3. Claim Fraud

16

 

4. Cash Premium Payments

17

 

5. Free Look Periods for Newly Issued Policies

17

 

6. Collusion of Customer Intermediary/Insurer Employee

18

 

7. Third Party Premium Payments

18

 

8. Risks Involved in International Transactions

18

 

9. Fraudulent Customers, Insurers, or Reinsurance Co

18

Money Laundering Indicators Not Unique to Insurance Products

19

 

1. Large One-Off Cash Transactions

19

 

2. Use of False Addresses

19

 

3. Overseas Business From Higher Risk Jurisdictions

19

Policyholder Characteristics and Behavior

20

 

     Customer’s profile is way to differentiate between ML & other clients

20

 

     Elements to Consider

20

 

A Known Criminal or Criminal Associate or Relative

21

 

Erratic or Abnormal Use of Policies

21

 

High Premiums Compared to Verifiable Income

22

 

Lack of Concern Over Charges or Costs

22

 

Undue Interest in Payout Options

22

 

Change of Beneficiary

23

 

Insurance on Assets That Appear Inconsistent With Income

23

 

Early or Suspicious Claims

23

 

     When Opening a New Account, Consider

23

 

     Suspicious Activity

23

Product Characteristics and Maintenance

25

 

1. Policy Payments From Third Parties

25

 

2. Multiple Sources of Funds to Pay Premiums

25

 

3. Significant Premium Top-Ups to a policy

25

 

4. Overpayment of Premium

25

 

5. Using An Insurer Like a Bank

25

 

6. Early Redemption

26

 

7. Unusually High Commission Charges

26

Customer Due Diligence (CDD)

26

In Conclusion

29

Acronyms

30

Glossary of Terms

31

 

United Insurance Educators, Inc.

PO Box 1030

Eatonville, WA 98328

Telephone: (253) 846-1155

FAX: (253) 846-7536

 

www.uiece.com

 

Email:  mail@uiece.com