Insurance
Anti-money laundering compliance tools for insurers, insurtechs, brokers, and re-insurers giving you a granular view of your customers’ risk thoughout the client lifecycle.
Anti Money Laundering (AML) & KYC For Insurance Companies
Insurance has been one of the backbones of a stable economy for centuries, protecting people from catastrophes that could drain their financial health overnight. Unfortunately, over the years, insurance has also been a major target of money launderers. Because technology has changed the way insurance operates, it provides new doors for illegal activities, including money laundering.
When someone commits money laundering, they take dirty money and pass it through several layers in an effort to “clean” it. The clean money and dirty money intermingle, often becoming indistinguishable. While insurance fraud and other crimes might be more common in this industry, money laundering is still a serious threat.
Truth Technologies has established itself as a global risk compliance platform in the insurance space. Truth Technologies is committed to guarding businesses all over the world, including insurance companies, against money laundering activities. Learn more about how we can help you stop and prevent money laundering in the insurance space.
What is Money Laundering?
Money laundering is common in financial institutions including insurance companies. When money laundering takes place in this area, criminals are trying to hide where their funds came from under the guise of legitimate activity. There are a few ways that criminals will try to hide their activities in the world of insurance. These include:
- First, criminals will purchase insurance from a legitimate company
- Then, they will use illegally-obtained money to purchase high-stakes forms of insurance
- Finally, criminals will submit either fraudulent or real claims to insurance companies in an effort to get back the "dirty" money they used to buy their insurance policies, disguising it as a claim
In other cases, criminals may use additional insurance products, such as variable annuities and tiered investments, to move money between policies, making it harder to track. This establishes a stream of “innocent” transfers that shield their true intentions.
Why the Insurance Industry
Money laundering activities take place in insurance because the industry is vulnerable to these activities. Some of the reasons why include:
- Large Sums of Money are Normal: In the insurance business, large sums of money are handled on a daily basis. Between large claims, huge policies, and investment accounts, it is easy for someone to dismiss large financial movements as normal.
- The Diversity of the Industry: The insurance sector handles numerous types of financial protection. This includes life insurance, health insurance, property insurance, and even vacation insurance. This makes it hard for someone to detect illegal activity.
- Sudden Shifts: In the insurance industry, it is not unusual to have large, sudden financial transactions. Large claims might be paid out suddenly followed by several months of zero activity. This is the life of the insurance industry, so nobody thinks this type of activity is abnormal.
The insurance sector is a large, diverse, and wealthy place. This makes the sector prone to money laundering.
Rules and Regulations in the Insurance Sector About Money Laundering
The Department of the Treasury and Financial Crimes Enforcement Networks requires insurance companies to have an anti-money laundering program in place. Insurance companies are defined as a “financial institution” under the Bank Secrecy Act. This places several regulations on insurance companies. These include:
- First, any transaction of $10,000 or more needs to be reported by filing an IRS 8300 form.
- Insurance companies are required to fill out a currency transaction report (CTR) with the Financial Crimes Enforcement Network (FinCEN) including a bank account number, name, address, and social security numbers when required
- A suspicious activity report (SAR) must be filled out whenever a transaction takes place that appears to be in avoidance of a CTR or if the transaction appears to be abnormal for the customer
- Insurance companies must keep a monetary instrument log that includes cash purchases of monetary instruments for at least five years
Any insurance company that fails to fill out these forms when required to do so faces heavy penalties from the US government. These regulations have been put in place to reduce the frequency of money laundering.
Red Flags for Money Laundering in Insurance
In the insurance sector, there are a few red flags that might indicate money laundering is taking place. Some examples include:
- The individual tries to buy multiple insurance policies to cover the same asset
- The customer has assets that appear to be abnormal for his or her financial standing
- A customer files a claim shortly after purchasing a policy to cover an asset
- A customer appears to be shifting assets between multiple investment accounts without any apparent purpose
If money laundering is occurring, there are a few steps an insurance company can take to protect itself
Know Your Customer (KYC) Requirements for Insurance
In the insurance industry, risk management is a major source of focus. This includes Know Your Customer (KYC) policies. While this phrase may not seem like much, it still has a very important meaning in this sector. KYC allows insurance companies to know their customers. It is important for insurance companies to verify the identities of their clients before they do business with them. The financial industry as a whole, including the insurance sector, has become a major supporter of KYC policies. It is critical for insurance companies to collect detailed information from their customers and business partners to make sure they are not wrapped up in corruption, bribery, or money laundering practices. KYC policies have become an important tool used to combat illegal transactions.
What is Know Your Customer?
Know Your Customer (KYC) is the process of collecting a variety of information on potential clients, customers, and partners before entering into business with them. In some cases, this might be called an electronic identity verification program. Some of the information that might be collected include:
- The person’s name
- Their social security number
- Other identifying information such as an address or birthday
Then, this information can be compared to various lists, servers, or databases that contain information on people who might have been involved in a financial crime in the past. This also allows businesses to run background checks on people to mitigate their own risk. In the insurance industry, some other information that might be collected includes:
- Information on the client’s source of funds
- A complete overview of the client’s financial portfolio
- How the client has used those funds in the past
This information allows insurance companies to determine a level of risk that might come from doing information with that person.
Why KYC is Important in the Insurance Industry
In the insurance industry, KYC is important due to the potential risk of financial crimes. This includes insurance fraud, money laundering, and more. In the insurance industry, it is possible for someone to use illegitimate funds to purchase an expensive policy. Then, he or she might try to make various claims against that policy in an effort to clean dirty funds. Insurance companies do not want to be involved with this type of scheme. That is what makes anti-money laundering regulations (AML), such as KYC, so important. It is important for insurance companies to work with a specialist in this area to protect themselves against this type of activity.
High-Quality AML and KYC Surveillance with Truth Technologies, Inc. (TTI)
- International cross-checking with global watch lists and other important databases
- Interfaces that provide easy access to CTR and SAR reporting as well as APIs and batch screening
- Compliance with rules from multiple countries and regions including the United States, European Union, and Canada
- Advanced due diligence technology, automatic reporting, and streamlined updating
With Sentinel, we provide robust Know Your Customer (KYC) services to all of our clients, including the insurance industry. Our goal is to protect you against individuals and entities who may try to take advantage of your operations to commit financial crimes. We will diligently vet every customer, client, and business partner to reduce your risk and protect your business. Rely on advanced KYC capabilities from Sentinel to protect your interests in the insurance industry.
Increase Security with Truth Technologies Today
If you would like to learn more about how we can guard your insurance company against money laundering, please contact us today. We offer free tool demos that allow you to learn more about enhanced due diligence and AML screening. Rely on TTI to protect you against money laundering.
Banking
Payments
Lending
Insurance
Crypto
Investment
Gambling & Gaming
