AntiMoney Laundering Awareness

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Anti-Money Laundering Awareness

• Insurance Industry
• David M Parody
• Chief Operations OfficerFinancial Services
  Commission

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Agenda

• Vulnerabilities of the sector
• Risks
• Typologies
• Requirements of the AMLGNS

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Why worry about money laundering?

• Money Laundering is a by-product of other types
  of criminal activity.
• The fight against money laundering is designed to
  
• Enable the confiscation of the proceeds of those
  crimes
• Obtain evidence against the top criminals from
  the paper trail left by money laundering
• Stem the prejudicial flows of dirty money in an
  economy.

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Vulnerabilities of the insurance sector to money
laundering

• USD2.4 to 2.6 Trillion in worldwide premiums
• FATF considers that the sector is potentially
  vulnerable because of its size, availability and
  structure
• Other financial institutions view insurance
  companies in a favourable light.
• Insurance intermediation is largely unregulated.

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Risks facing the insurance industry in money
laundering

• Distance
• Sales
• Culture
• Confidentiality
• Claims Settling
• Staff Turnover
• Conscious Thought
• Responsibility
• FIU
• Fiduciary
• Branch

• Reputational
• Cancellation
• Premium Sourcing
• Cash
• Multiple Payment
• Proceeds of corruption
• Identity Theft
• E-Commerce

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Typologies

• Stolen Cars Claims Settlement Risk
• Early Cancellations Sales Risk
• Senior officials Corruption Risk
• Organised Crime Distance Risk

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How are these risks mitigated?
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Why is KYC important?

• If you can separate the individual from the
  illegal activity, the criminal can continue to
  use those funds. Therefore, criminals will
  attempt to disguise their identity when placing
  funds.

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Requirements of the AMLGNs

• Revised AMLGNs will be given effect on Monday.
• New activities that were caught by the CJO
  amendments include
• Insurance Intermediaries
• It should be noted that general insurance
  companies remain excluded from the provisions of
  the CJO but that general insurance intermediation
  is not!
• Insurance Managers

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Who is your applicant for business?

• Insurance Managers
• The company for whom you are going to provide
  services.
• Does this mean that I have to perform Due
  Diligence on the Company, its shareholders and
  determine the source of funds?
• Insurance Intermediaries
• No different to the position facing a bank when
  opening a bank account.
• There are, however, exemptions which apply to
  insurance contracts which you should be aware of.

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Exemptions for insurance products

• Small Insurance Contracts
• Identification procedures can be waived for
  insurance business in respect of which
• a premium is payable in one instalment of an
  amount not exceeding 2,500 or,
• a regular premium is payable and where the total
  payable in respect of any one calendar year does
  not exceed 1,000.
• Policies of insurance in connection with a
  pension scheme
• No steps are necessary to obtain evidence of a
  person's identity in respect of a policy of
  insurance in connection with a pension scheme
  taken out by virtue of a person's contract of
  employment, or occupation where the policy
• contains no surrender clause and
• may not be used as collateral for a loan.

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Occupational Pension Schemes

• The exemption extends to personal pension
  arrangements, both for self-employed and
  employees (whether or not both the employee and
  the employer contribute).
• No source of funds verification is required when
  AVCs are deducted from the employees payroll.
• Source of funds verification is required where
  the employee funds AVCs through direct
  contributions through the employer/intermediary.

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KYC on an individual
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KYC on corporates
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Trusts
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Transitional Provisions
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KYC Review Form
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KYC Review Declaration
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Cascading KYC Review Forms
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What is expected.

• By 1st June 2005 the FSC would expect to find
• All accounts reviewed and KYC Review Forms
  completed for each current business relationship
• An action plan for obtaining the missing
  documentation which
• Identifies the different types of risks in the
  client portfolio.
• Sets key milestones and targets which addresses
  the deficiencies in the higher risk clients first
• Quantifiable criteria and target end date.

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The revised AMLGN web-site