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9/12 W01/March 2017 Award in General Insurance

D2A The FATF Forty Recommendations

The original FATF Forty Recommendations were drawn up in 1990 as an initiative to combat the misuse of
financial systems by persons laundering drug money. In 1996 the Recommendations were revised for the
first time to reflect evolving money laundering trends and techniques, and to broaden their scope well
beyond drug-money laundering. In October 2001 the FATF expanded its mandate to deal with the issue of
the funding of terrorist acts and terrorist organisations, and took the important step of creating the Eight
(later expanded to Nine) Special Recommendations on Terrorist Financing. The FATF Recommendations
were revised a second time in 2003, and these, together with the Special Recommendations, have been
endorsed by over 180 countries, and are universally recognised as the international standard for anti-
money laundering and countering the financing of terrorism (AML/CFT).
D2B Nine Special Recommendations on Terrorist Financing

Recognising the vital importance of taking action to combat the financing of terrorism, the FATF has
agreed these Recommendations, which, when combined with the FATF 40 Recommendations on money
laundering, set out the basic framework to detect, prevent and suppress the financing of terrorism and
terrorist acts:
a. Ratification and implementation of UN instruments.
b. Criminalising the financing of terrorism and associated money laundering.
c. Freezing and confiscating terrorist assets.
d. Reporting suspicious transactions related to terrorism.
e. International cooperation.
f. Alternative remittance.
g. Wire transfers.
h. Non-profit organisations.
i. Cash couriers.

D3 Customer due diligence (CDD) Reference copy for CII Face to Face Training

By understanding the risks of money laundering and the financing of terrorism, insurers are in a position
Insurers should be
constantly vigilant to determine what can be done to control these risks, and which procedures and measures can be
implemented effectively and efficiently.
For reasons of sound business practice and proper risk management insurers should already have
controls in place to assess the risk of each business relationships. As customer due diligence (CDD) is a
business practice suitable not just for commercial risk assessment and fraud prevention but also to
prevent money laundering and the financing of terrorism, control measures should be linked to these
existing controls. The concept of customer due diligence goes beyond the identification and verification
of only the policyholder – it extends to identification of the potential risks of the whole business
relationship.
The duty of vigilance consists mainly of:

• customer due diligence, including underwriting checks and verification of identity;
• recognition and reporting of suspicious customers/transactions; and
• provisions affecting the organisation and the staff, such as a compliance and audit environment,
9 keeping of records, recruitment of staff and training.
Chapter D3A Performing due diligence on customers, beneficial owners and beneficiaries

Customer due diligence measures that should be taken by insurers include:
• identifying the customer and verifying that customer’s identity using reliable, independent source
documents, data or information;
• determining whether the customer is acting on behalf of another person, and then taking reasonable
steps to obtain sufficient identification data to verify the identity of that other person;
• identifying the (ultimate) beneficial owner, and taking reasonable measures to verify the identity of the
beneficial owner – for legal persons (companies and partnerships) and other legal arrangements
insurers should take reasonable measures to understand the ownership and control structure of the
customer;
• obtaining information on the purpose and intended nature of the business relationship and other
relevant factors; and