Insurance Companies

As an insurance company you should already have an adequate AML Program and be familiar with the minimum requirements. If not, read the industries serviced page. The Final Rule for insurance companies was issued on November 3, 2005. However, the final rule was not applicable until May 2, 2006.

Financial institutions, including insurance companies, have become major targets of money laundering operations because of the variety of services and investment vehicles offered. These services and investment vehicles can be used to conceal the source and ownership of illegal proceeds. In order to protect your company all employees, especially those who sell the policies and receive premiums, must be adequately trained and know how such schemes operate. If the employees are not adequately trained, it could financially destroy your business.

How does a person launder money through an insurance company? There are many possible ways of accomplishing this, but the most common is the entering into a single premium policy or single premium investments. Some examples are:

  • Purchase of annuities
  • Lump sum top-ups to an existing life insurance policy
  • Lump sum contributions to personal pension contracts

In order to be successful laundering money through an insurance company the policy or contract must have a cash surrender value (CSV). If CVS is not available then it is no good to the money launderer.  They need something they can put the illegal proceeds into and then withdraw shortly thereafter.  The money launderer can’t afford to have their money sit in one location for a long period of time.  They need the fast turnover, especially the illegal narcotics business, in order to buy additional drugs and keep the vicious cycle going.

Knowing your customer and employee policies are an insurance company’s most effective weapon against being unwittingly used to launder money.  You must train and know your employees, sometimes better than your customers.  As in any industry, money talks and if you have an employee with financial problems who gets approached, chances are they will go for the money.  This has been proven in case after case over the years.  I would estimate that a desperate employee will go for the money about 90% of the time, if not more.

A few activities that may indicate money laundering:

  • The use of a 3rd party check to purchase policy
  • Shows no concern for performance of investment
  • May have accounts with several insurance companies
  • Reluctant to provide normal information when opening account
  • Purchase investments that appear to be beyond customer’s means

Should you need additional information concerning what is required or if you have any questions or concerns, please feel free to contact me at any time.