While many in the insurance sector assume that money launderers are mainly focused on financial institutions such as banks, the facts tell a very different story.
The problem for the insurance sector is one of perception. As businesses that sell policies, rather than managing a continuous flow of financial transactions, they don’t appear at first sight to be an obvious target for money launderers.
But the reality is that huge sums flow into and out of insurance contracts, which are often complex and can involve significant financial investment. Not surprisingly, the sector is increasingly being targeted by financial criminals, with PwC’s Global Economic Crime Survey 2022 reporting that around two-thirds of insurance companies were subject to fraud or some form of financial crime in the past year.
The fact is that criminals will use any institution as a vehicle to cover the tracks of their dirty money by any means, and through any means. This places all sub-sectors under the financial services umbrella in the firing line, including insurance.
The regulatory authorities are scrutinising insurers’ AML practices and handing out stiff penalties
Large amounts of money continually flow in and out of insurance contracts, providing money launderers with the opportunity to clean illicit funds.
High-value items purchased with fraudulent money can be wrongfully claimed and reimbursed by insurance companies to clean the funds. Cooling periods, enforced by regulators, dictate insurers must refund paid premiums when cancellations are committed in a set time, providing another clean source. While policy loans do not need the same due diligence as traditional lending processes.
These are just some ways in which money launderers exploit insurance offerings for nefarious means.
The regulatory authorities understand this all too well. As a result, they are increasingly examining insurers’ AML processes and practices and handing out stiff penalties where they find failings. Just last year, Cardif, the life and casual insurance subsidiary of French bank BNP Paribas, was hit with a €2.5m fine over AML failings. While in the UK, the global insurance services firm Crawford & Company, also faced enforcement action for AML compliance missteps.”
In order to spot money laundering, it is crucial that you recognise your AML vulnerabilities
Clearly insurers are increasingly coming under pressure to demonstrate they are taking all the steps necessary to ensure they don’t provide criminals with the means to launder their illicit money.
Download this valuable compliance analysis today
To help you in your endeavours we have compiled an in-depth report on AML Vulnerabilities in .
To help you identify any weaknesses in your overall compliance framework, we have published an in-depth report on the AML vulnerabilities specifically faced by the Insurance Sector.
In this spotlight report, we cover:
- Where insurers may be vulnerable to AML risk
- The regulatory environment
- How to ensure compliance with AML regulation
- How automation can help
For your free copy click here.
RiskScreen can help you overcome your AML challenges
Recognising the AML vulnerabilities your organisation faces, is just the first step to protecting you from any potential risk.
The mounting pressures mean that it is now crucial that insurers take a far more proactive, risk-based approach to combatting money laundering. Yet many insurers are still under-resourced and still relying on outdated manual money-laundering processes that are no longer fit for purpose.
This is even though evolving technologies now exist that offer flexible, scalable, and auditable solutions that deliver a truly effective and efficient AML process in the face of an ever-changing regulatory environment.
The RiskScreen AML platform is one of the world’s leading solutions and has been designed specifically to provide a complete end-to-end solution to meet both existing and future challenges.
It offers a range of modules that cover key areas such as onboarding, screening, and adverse media. With flexibility in mind, you can choose individual modules to cover specific areas as your business requires or install the complete package for a fully integrated solution.
With RiskScreen by your side, you can rest assured that your anti-money laundering (AML) and know your customer (KYC) processes will be fundamentally transformed, with full scalability to future-proof your compliance functions.
Discover how RiskScreen can help you to overcome your compliance challenges, request a discovery call today.
