The AML Full Form in Insurance is Anti-Money Laundering. It’s purpose is to enforce the most effective anti-money laundering and counter terror financing (AML/CFT) measures alongside the authorities of international and national governments in the face of an ever-growing financial crime in the world. Since it is a part within the banking system, insurance industry is also subject to the regulations. This article aims to look at the mechanisms of AML/CFT rules in the insurance industry, with particular attention to the key aspects and ways to comply.
Money Laundering in the Insurance Industry:
Laundering money in the insurance industry employs a broad variety of strategies to conceal the origin of illicit money. This makes it easier for criminals in attempting to launder money by utilizing fraudulent insurance products and processes. They typically purchase insurance policies with dirty money, pay excessive premiums, or, at times, surrender prematurely policies or fabricate false claims to legitimate the illicit money. Reinsurance agreements can also be a target of abuse, as criminals set up offshore companies to conceal money through channels through reinsurers, and then the insurance companies that are the primary ones.
United States Regulations:
The Bank Secrecy Act (BSA) became effective in 1970. It is applicable across all institutions of finance, which includes insurance companies, in the form of imposing obligations for AML/CFT on these institutions. In the USA PATRIOT Act 2001, as you can see is a law that requires all institutions that are regulated by the BSA to develop AML/CFT-related programs. To address these and previously made remarks the Financial Crimes Enforcement Network (FinCEN) issued this rule requiring insurers that are eligible to set up compliance programs and submit SARs.
