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Guideline on Anti-Money Laundering and the Combating of Terrorist Financing(g) Use of cash and/or payment of large single premiums.(h) Payment/surrender by a wire transfer from/to foreign parties.(i) Payment by banking instruments, which allow anonymity of the transaction.(j) Change of address and/or place of residence of the policyholder.(k) Lump sum top-ups to an existing life insurance contract.(l) Lump sum contributions to personal pension contracts.(m) Requests for prepayment of benefits.(n) Use of the policy as collateral/security (for instance, unusual use of the policy as collateral unless it is clear thatit is required for financing of a mortgage by a reputable financial institution).(o) Change of the type of benefit (for instance, change of type of payment from an annuity to a lump sum payment).(p) Early surrender of the policy or change of the duration (including where this causes penalties).(q) Requests for multiple policies to be taken out for premiums slightly below any publicized limits for performingchecks, such as checks on the source of wealth or cash payments.Additional Red FlagsMoney laundering and the financing of terrorism can occur either by establishing fictitious (re)insurance companies orreinsurance intermediaries, and fronting arrangements, or by the misuse of normal reinsurance transactions.Examples include:(a) the deliberate placement via the insurer of the proceeds of crime or terrorist funds with reinsurers in order todisguise the source of funds;(b) the establishment of bogus reinsurers, which may be used to launder the proceeds of crime or to facilitateterrorist funding; and(c) the establishment of bogus insurers, which may be used to place the proceeds of crime or terrorist funds withlegitimate reinsurers.Even the typically lowest risk product could potentially be used for money laundering for example, workerscompensation schemes may be established for fictitious personnel or be funding mechanisms for terrorists awaitingassignment. One factor that should help to mitigate this risk is the involvement of independent third parties e.g.medical practitioners, claims adjusters and government agencies to substantiate claims. In the international marketthe scope for lines of business in insurers is unlimited. The focus should be the operators and owners of the insurer,the business rationale for the insurer, its relationships and source of funding.Page 57 of 75
Guideline on Anti-Money Laundering and the Combating of Terrorist FinancingAPPENDIX III - SECTOR SPECIFIC GUIDANCEFor Money Remittance Business““Money transmission or remittance business”” (MTB) can be considered as the business of accepting cash,cheques, other monetary instruments or other stores of value in one location and the payment of a correspondingsum in cash or other form to a beneficiary in another location by means of a communication, message, transfer orthrough a clearing network to which the money transfer business belongs. Remittances may be domestic orinternational.Vulnerability of MTBs to Money Laundering and Terrorist FinancingThe fleeting relationship with its customers makes MTBs vulnerable to money laundering and the financing ofterrorism. Whereas a person would typically have to be a customer with an account at a bank, for example, to beable to access the services of that bank, a person does not have that type of relationship with the MTB and canrepeatedly use different MTBs to transact business. The MTB is particularly vulnerable, given the high volume ofcash handled on a daily basis and the ability to transmit funds instantly to any part of the globe.While the international remittance system is typically used by expatriate workers to send a part of their earnings backhome, it can also be used to transmit the illegal proceeds of criminal activities and funds used to finance terrorism.The rapid movement of funds across multiple jurisdictions presents a challenge to investigators, particularly if theidentity of the originator is unclear.Apart from money transmission, cheque cashing is another important segment of the business for some MTBs.MTBs should be aware that endorsed third party cheques from overseas are a money laundering risk. Even where alocal cheque, endorsed by a third party, is presented to the MTB for cashing, the MTB should take appropriate stepsto ascertain the economic purpose behind the endorsement to that person presenting the cheque. Large chequesoriginating from unknown individuals present a greater money laundering risk compared to small cheques originatingfrom well-established businesses.Proper identification documentation is required for all money transmissions. The requirement for specific pieces ofpayer information that are to accompany each wire transfer applies to money transmissions.Transaction MonitoringBecause of the large number of customers involved and the relatively small amounts transacted, it is imperative forMTBs to have adequate systems in place to collate relevant information and monitor customers’ activities. In thePage 58 of 75
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