Money laundering in the insurance industry


May 3, 2016

Money laundering converts illicit money into assets which appear legitimate. These assets may appear as insurance policies, bank deposits and even real estate. Money-laundering activities are not limited to financial institutions, as nonfinancial institutions, such as travel agencies, real-estate industries, casinos and gambling, are now used for money laundering. The nature of money laundering, though, in the insurance industry is different from the nature in other industries.

The Financial Action Task Force (FATF) has identified certain insurance products as being exposed to the threat of money laundering. The seriousness of this threat is underlined in a FATF Report: “The experts viewed the insurance sector as potentially vulnerable to money laundering because of the size of the industry, the easy availability and diversity of its products and the structure of its business. In regard to this last point, it is important to note that insurance is, in some jurisdictions, often a cross-border business and more frequently than not involves the distribution of its products through brokers or other intermediaries, who are not necessarily affiliated with or under the control or supervision of the company that issues the product. Moreover, because the beneficiary of an insurance product is often different from the policyholder, it is sometimes difficult to determine when and for whom it is necessary to perform customer due diligence [for the policyholder only, or also for the beneficiary?].”