FIA warns insurance industry on money laundering
Isaac Pinielo | Friday October 27, 2017 13:07
Koongalele Chube, the senior assistant director for compliance in the Financial Intelligence Agency (FIA) said the insurance sector is a critical player in the fight against money laundering and other economically motivated crimes.
Giving a presentation at the recent Insurance Institute of Botswana (IIB) annual conference in Gaborone, she said the industry is potentially at risk of being used for money laundering purposes.
“The products and transactions of the industry can provide an opportunity to laundering money,” Chube said.
As a result, she added, an insurance company or intermediary can be involved, knowingly or unknowingly, in money laundering activities thus exposing it to legal, operational and reputational risks.
She also noted that life policies have been found to be more vulnerable than other products especially in instances where changing of beneficiaries is permitted.
“Risk analysis must be performed to determine where the money laundering and terrorist financing risks are the greatest,” she said.
Chube went on to urge life insurance companies and intermediaries to identify higher risk customers, products and services, including delivery channels, and geographical locations.
“These are not static assessments. They will change over time, depending on how circumstances develop, and how threats evolve,” she said.
According to Chube, the laws are meant to enable insurance companies to combat crimes related to money laundering and other financial frauds.
She said the strategies to manage and mitigate the identified money laundering and terrorist financing risks in life insurance companies and intermediaries are typically aimed at preventing the activity from occurring through a mixture of deterrence.
These, she noted, include appropriate customer due diligence measures, detection through monitoring and suspicious transaction reporting and record keeping so as to facilitate investigations.
Chube further implored insurers to know the customers with whom they are dealing, noting that a first step in setting up a system of customer due diligence is to develop clear, written and risk-based client acceptance policies and procedures, which amongst other things include the types of products offered in combination with different client profiles.
“These policies and procedures should be built on the strategic policies of the board of directors of the insurer, including policies on products, markets and clients,” she said.
She said customer due diligence measures that should be taken by insurers include identifying the customer and verifying that customer’s identity using reliable, independent source documents, data or information.
“If so then the reasonable steps should be taken to obtain sufficient identification data to verify the identity of the person behind,” Chube said.
Other measures include identifying the ultimate beneficial owner, and taking reasonable measures to verify the identity of the beneficial owner such that the insurer is satisfied that it knows whom the beneficial owner is.