2 MONEY LAUNDERING AND TERRORISM FINANCING
2.1 Insurers should be cognisant of their exposure to ML/TF risks. Payments originating from insurers are viewed as commonplace, with the money assumed to be clean. If money launderers are able to successfully place funds into an insurance policy, they would have made significant steps in layering and integrating such funds into the financial system.
2.2 Funds for TF may be derived from criminal activities such as robbery, drug-trafficking, kidnapping, extortion, fraud or hacking of online accounts. In such cases, there may also be an element of money laundering involved to disguise the source of such funds.
2.3 Terrorist acts and organisations may also be financed from legitimate sources such as donations from charities, legitimate business operations and self-funding by individuals. In addition, considering the fact that TF does not always need to involve large sums of money, TF can be hard to detect and insurers should remain vigilant.
2.4 In the case of direct insurance business, ML/TF activity could occur within the context of, and as the motive behind, insurance fraud. For example, exaggerated or false claims could be made to recover part of invested illegitimate funds. Other examples could include the refund of premiums, by an insurer’s cheque, for overpaid or cancelled policies.
2.5 In the case of reinsurance business, ML/TF activity could occur through the establishment of fictitious fronting arrangements and captives, or by the misuse of normal reinsurance transactions. Examples include dealing with bogus insurers or receiving tainted premiums from insurers which have weak anti-money laundering (“AML”) controls that allow illicit funds or funds from unclear or dubious sources to pass through.