annual report 2009-10 - IRDA

ANNUAL REPORT 2009-104.9 ANTI-MONEY LAUNDERING /COUNTER-FINANCING OF TERRORISM (AML/CFT)PROGRAMMEI.4.9.1 IRDA issued the guidelines on Anti-MoneyLaundering Programme applicable to the insuranceindustry on 31 st March, 2006. These guidelines areeffective from 1 st August, 2006.I.4.9.2 The guidelines require an insurance companyto have an AML/CFT programme in place focusingon Know Your Customer (KYC) Norms. The guidelinesstipulate the reporting and record keeping obligationsof the insurers under the Prevention of MoneyLaundering Act, 2002 and the Rules framedthereunder. Detailed guidance on the implementationof Section 51A of the Unlawful Activities (Prevention)Amendment Act (UAPA), 2008, laying down theprocedure of freezing / unfreezing mechanism ofinsurance contracts with certain terrorists and terroristorganisations has been provided to the insurancesector under these guidelines.I.4.9.3 The AML/CFT guidelines are applicable to allcontracts of life insurance companies. In case ofgeneral insurance companies, however, theapplicability is at the pay-out stage (for claims/refundsover `1 lakh).I.4.9.4 The KYC norms require insurers to documentproof of identity, residence, sources of funds etc., aspart of the due diligence process. The AML/CFTprogram of an insurer envisages maintenance ofrecords and reporting of certain transactions throughspecified reports viz., Cash Transaction Report,Suspicious Transaction Report, Receipts of Non-ProfitOrganisation and Counterfeit Currency Reports to theFinancial Intelligence Unit, India. As part of controlmeasures under the AML/CFT program, the guidelineshave prescribed the cash acceptance thresholds at`50,000/- beyond which, premium/proposal depositshave to be remitted through the banking channels.Insurance companies have been advised to apply thesaid thresholds and to not accept cash deposits wherethere is a possibility of the transactions beingintegrated through a single remitter. Further, theinsurance companies are required to make allpayments, after due verification of the bona-fidebeneficiary, through account payee cheques andelectronic payment methods such as ECS, NEFT,RTGS Systems approved by the Reserve Bank ofIndia.I.4.9.5 The guidelines provide that no contract shouldbe entered into with a customer whose identitymatches with any person with known criminalbackground; with banned entities; and/or thosereported to have links with terrorists or terroristorganisations. In case it is detected or suspected thatthe existing insurance contracts pertain to an individualand/or entities subject to UN sanction measures underUNSC Resolutions called as ‘designated individuals/entities’, insurance companies are mandated to reportdetails thereof to the Ministry of Home Affairs (MHA)and IRDA and file the Suspicious Transaction Reportwith FIU-IND. On causing investigations, if MHAidentifies that the details of the report from insurancecompanies are in fact those relating to designatedindividuals/entities, an order to freeze the insurancecontracts pertaining to those individuals/entities wouldbe issued. The mechanism to unfreeze the contractsinadvertently frozen has also been detailed under theguidelines.I.4.9.6 Insurance companies are required to payspecial attention to business relationships andtransactions with individuals/entities connected withcountries which do not or insufficiently apply the FATFrecommendations.I.4.9.7 The guidelines issued by IRDA have beensubject to a thorough evaluation in the assessmentprocess carried out by FATF (Financial Action TaskForce) while considering India’s membership. IRDAhas been an active participant in the various meetingsof Inter-Ministerial Coordination Committee on CFT/AML, Core Working Group and Financial Sector Sub-Group and has been providing inputs pertaining toinsurance sector on various FATF’s recommendationsand has been involved in the process of finalisationof Mutual Evaluation Questionnaire submitted toFATF.I.4.9.8 India is now a full-fledged member of FATF.IRDA was represented at the Amsterdam Plenarywhere the membership was declared. IRDA is nowworking towards complying with the commitmentsmade to FATF as part of Action Plan adopted duringthe Plenary at Amsterdam in June 2010.4.10 CROP INSURANCENational Agricultural Insurance Scheme (NAIS)I.4.10.1 During 2009-10, Agriculture InsuranceCompany of India (AIC) implemented NAIS in 25States and 2 Union Territories. During the year, there53