Why Insurers
need AML/CFT ?

Insurance policies are prone to abuse by fraudulent persons and criminals. Policies other than life and accident covers, flexible investment opportunities, surrender and withdrawals with ease; pose high risks of fraud and money laundering (ML).


Insurance products involve huge disbursements, transfer of ownership/beneficiaries, and various schemes that make it vulnerable to money laundering (ML). Products like single premium policies, annuity policies, policy loans, top-up insurance policies and high regular premium savings policy; are exposed to the risks of being used to launder illicit funds, as they allow the diverting of funds or disposing of huge amounts. Surrender of policies, withdrawals or redemptions and fraudulent claims are other issues that the insurance sector deals with.


Insurance is a high-risk area, which involves rigorous risk assessment and underwriting. To keep the bad actors away, a thorough client verification (KYC) and risk scoring at each point of onboarding or transfer of ownership; are mandated. Insurers can remain compliant by identifying the ultimate beneficial owner, ensuring enhanced due diligence (EDD) of high-risk policy products and high-value transactions, and implementing customer due diligence (CDD) right up to the claims stage.


The nature of some of the insurance products creates a barrier to effective AML/CTF compliance. The ability to buy single premium policies or life insurance policies covering huge amounts, are some ways illicit funds can be used. Transfer of ownership, lack of detailed information on the financial status of the client, withdrawal of funds before maturity, deliberate over-payment of premium, a refund of premiums and using payouts for other investments, are ways illegal money integrates into the legitimate economy creating challenges for the insurance sector.