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 amount 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	13
	Integration stage of ML	13
	A Global Problem	13
	International community focused on life & cash value products      Financial Action Task Force established in 1989 at summit	13
	Covered Products	14
Blind Faith		15
	FATF studies methods/trends used to launder money	15
Insurance Policy Money Laundering Techniques		17
	Nine Identified ML Methods	17
	1. Single Premium Life Insurance Contracts	17
	Enable ML to purchase policy with lump sum payment	17
	2. Early Policy Redemption	17
	3. Claim Fraud	17
	4. Cash Premium Payments	18
	5. Free Look Periods for Newly Issued Policies	18
	6. Collusion of Customer Intermediary/Insurer Employee	19
	7. Third Party Premium Payments	19
	8. Risks Involved in International Transactions	19
	9. Fraudulent Customers, Insurers, or Reinsurance Co	19
Money Laundering Indicators Not Unique to Insurance Products		20
	1. Large One-Off Cash Transactions	20
	2. Use of False Addresses	20
	3. Overseas Business from Higher Risk Jurisdictions	20
Policyholder Characteristics and Behavior		21
	Customer’s profile is way to differentiate between ML & other clients	21
	Elements to Consider	21
	A Known Criminal or Criminal Associate or Relative	22
	Erratic or Abnormal Use of Policies	22
	High Premiums Compared to Verifiable Income	23
	Lack of Concern Over Charges or Costs	23
	Undue Interest in Payout Options	23
	Change of Beneficiary	24
	Insurance on Assets That Appear Inconsistent with Income	24
	Early or Suspicious Claims	24
	When Opening a New Account, Consider	24
	Suspicious Activity	24
Product Characteristics and Maintenance		26
	1. Policy Payments from Third Parties	26
	2. Multiple Sources of Funds to Pay Premiums	26
	3. Significant Premium Top-Ups to a policy	26
	4. Overpayment of Premium	26
	5. Using an Insurer Like a Bank	26
	6. Early Redemption	27
	7. Unusually High Commission Charges	27
Customer Due Diligence (CDD)		27
In Conclusion		30
Acronyms		31
Glossary of Terms		32

United Insurance Educators, Inc.

PO Box 1030

Eatonville, WA 98328

Telephone: (253) 846-1155

FAX: (253) 846-7536

Email:  mail@uiece.com