AML Compliance Solutions for Insurance Firms

In the UK, insurers and insurance brokers are not lawfully subject to official money laundering regulations. That being said, firms in the insurance sector still have a responsibility to implement measures against financial crime – and they are subject to the Proceeds of Crime Act 2002. Without adequate preventative systems in place, insurers are not only vulnerable to money launderers, but could also incur penalties from regulatory bodies, like steep fines or trade restrictions.

In order to detect money laundering, terrorism or other forms of financial crime, there are several common red flags which insurance firms can look out for. These include:1, Any customer that is reluctant to provide information that can confirm their identification. 2, Any customer who purchases an insurance product that they have no need for. 3, Any customer that borrows the largest sum available, very soon after their insurance policy begins. 4, Any customer who uses unusual methods of payment, making purchases in large quantities of cash, or opts to pay via a third party. 5, Any customer who overpays on a policy and then seeks a refund soon afterwards.

According to the FATF, criminals are increasingly turning to the insurance sector as a means of laundering money. They might do this by purchasing expensive items like cars, insuring them, and then making false claims in order to obtain legitimate funds. They might also overfund high-value policies like life insurance using the proceeds of crime, and then ask to be reimbursed, again granting them access to “clean” money.

According to the Financial Action Task Force (FATF) - the independent inter-governmental body that develops and promotes policies to protect the global financial system against money laundering and terrorist financing – Red Flags can be divided into four categories: client, source of funds, professional advice and the nature of the transaction.