These guidelines would apply to all categories of life, general or health insurance business carried on by “insurers”, with the exception of reinsurance business carried on by “Indian Insurance Company” or foreign” in India.
Why AML and CFT in insurance?
The Prevention of Money Laundering Act 2002 came into force on 1 July 2005. The Central Government, exercising power under section 73 of the PMLA, issued the PML (Records Maintenance) Rules of 2005 as amended from time to time. to execute the provisions of the PML law.
Insurers offer a variety of products aimed at transferring certain financial risks from the insured to the insurers. These products include life, casualty and health insurance policies. These products are offered to the public through trained agents and also through a number of alternative distribution channels. The obligation to establish an anti-money laundering program applies to insurers in accordance with the provisions of Rule 9(14) (ii) and (iii) of the PML Rules. They have a responsibility to guard against the use of insurance products and services to launder illicit funds or to finance terrorist acts.
Under these provisions, insurers are required to follow customer identification procedures when undertaking a transaction at the time of establishing an account/customer based relationship and to monitor their transaction. Insurers must take steps to implement the provisions of the Prevention of Money Laundering Act 2002 (“PMLA”) and the Prevention of Money Laundering (Records Maintenance) Rules 2005 (“ PML Rules”), as amended from time to time, including the Operational Rules. instructions issued pursuant to these amendments.
What insurers need to comply with the new guidelines
To comply with these obligations, the senior management of insurers will have to be fully committed to establishing appropriate policies and procedures for the prevention of ML and FT and to ensuring their effectiveness and compliance with all relevant legal and regulatory requirements. Insurers will be required to
- Develop an AML/CFT program including policies and procedures to combat money laundering (ML) and the financing of terrorism (FT) reflecting applicable legal and regulatory requirements
- Ensure that the content of these guidelines is understood by all staff/agents.
- Review the AML/CFT program at least once a year on ML and FT prevention to ensure its effectiveness. In addition, to ensure the effectiveness of policies and procedures and to avoid conflicts of interest, the person conducting such a review should be different from the person who developed those policies and procedures.
- Adopt ML and FT risk sensitive customer acceptance policies and procedures
- Undertake customer due diligence (“CDD”) measures to an extent sensitive to ML and FT risk depending on the type of customer, business relationship or transaction
- Have in place a system for identifying, tracking and reporting suspected ML or FT transactions to law enforcement authorities (if necessary); and
- Develop the awareness and vigilance of staff members/agents to guard against ML and FT