Anti-Money Laundering

 

Table of Contents

 

Introduction

3

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

5

 

Terrorism Produces Insurer Risk

     FATF Recommendations

5

6

 

Legal Requirements Adopted

7

 

Broker-Dealer Requirements

9

 

     Customer Identification Programs (CIP)

10

 

AML Program Requirements

10

 

     Insurers required by 5/2006 to develop/implement written AML

                program applicable to products they sell

11

 

     Key provision of USA PATRIOT Act says various CE formats okay

11

 

     At minimum program required to incorporate policies, procedures &

               internal controls based on their product risk

12

 

     Each insurer designate a compliance officer

12

 

     USA PATRIOT Act: Know Your Customer (KYC)

13

 

Compliance

14

 

Suspicious Activity Reports Filing Requirements

14

 

     Threshold amt requiring insurer to report

14

A Change In Thinking

15

 

     Agents/brokers exempt from definition of “insurer”

15

 

     Integration stage of ML

16

 

     Layering Stage of ML

16

 

     Placement stage of ML

16

 

A Global Problem

17

 

     International community focused on life & cash value products –

                Financial Action Task Force established in 1989 at summit

17

 

Covered Products

18

Blind Faith

19

 

     FATF studies methods/trends used to launder money

20

Insurance Policy Money Laundering Techniques

21

 

Nine Identified ML Methods

22

 

1. Single Premium Life Insurance Contracts

22

 

     Enable ML to purchase policy with lump sum pymt

22

 

2. Early Policy Redemption

22

 

3. Claim Fraud

22

 

4. Cash Premium Payments

22

 

5. Free Look Periods for Newly Issued Policies

23

 

6. Collusion of Customer Intermediary/Insurer Employee

24

 

7. Third Party Premium Payments

24

 

8. Risks Involved in International Transactions

24

 

9. Fraudulent Customers, Insurers, or Reinsurance Co

24

Money Laundering Indicators Not Unique to Insurance Products

25

 

1. Large One-Off Cash Transactions

25

 

2. Use of False Addresses

25

 

3. Overseas Business From Higher Risk Jurisdictions

26

Policyholder Characteristics and Behavior

26

 

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

26

 

     Elements to Consider

27

 

A Known Criminal or Criminal Associate or Relative

28

 

Erratic or Abnormal Use of Policies

28

 

High Premiums Compared to Verifiable Income

29

 

Lack of Concern Over Charges or Costs

29

 

Undue Interest in Payout Options

30

 

Change of Beneficiary

30

 

Insurance on Assets That Appear Inconsistent With Income

30

 

Early or Suspicious Claims

30

 

     When Opening a New Account, Consider

31

 

     Suspicious Activity

32

Product Characteristics and Maintenance

33

 

1. Policy Payments From Third Parties

33

 

2. Multiple Sources of Funds to Pay Premiums

33

 

3. Significant Premium Top-Ups to a policy

33

 

4. Overpayment of Premium

33

 

5. Using An Insurer Like a Bank

34

 

6. Early Redemption

34

 

7. Unusually High Commission Charges

34

Customer Due Diligence (CDD)

35

In Conclusion

38

Acronyms

40

Glossary of Terms

41

 

 

United Insurance Educators, Inc.

8213 – 352nd Street East

Eatonville, WA 98328-8638

Telephone: (253) 846-1155

FAX: (253) 846-7536

 

www.uiece.com

www.CheapCE.com