Page 33 - Insurance Times March 2023

Unlawful Activities (Prevention) Act, must provide personalized, trusted customer experiences and
innovative risk solutions while managing costs and meeting
1967 (UAPA)
compliance requirements.
Section 51A of the Unlawful Activities (Prevention) Act,
1967(UAPA), relating to the purpose of prevention of, and for Digital transformation has created opportunities for criminal
coping with terrorist activities was brought into effect organizations, drug dealers and terror group operatives to
through UAPA Amendment Act, 2008. Then the Central run complex money laundering and financing schemes. At
Government issued an Order dated 2nd February 2021 the same time, anti-money laundering (AML) investigators'
detailing the procedure for the implementation of Section capacities are stretched to the limit. Effectively battling
51A of the UAPA. The insurers should not enter into a contract dynamic financial crime threats requires new capabilities for
with a customer whose identity matches with any person in AML defense - such as artificial intelligence, machine learning,
the UN sanction list or with banned entities and those intelligent automation and advanced visualization. Based on
reported to have links with terrorists or terrorist decades of analytics expertise and proven AML techniques,
organizations. Insurers needs to periodically check MHA SAS can dramatically change your game plan for fighting
website for updated list of banned entities. financial crimes. IRDAI has issued master guidelines on anti-
money laundering (AML) in order to consolidate and update
A list of individuals and entities subject to UN sanction the guidelines.
measures under UNSC Resolutions (hereinafter referred to
as "designated individuals/ entities?) would be circulated to The guidelines will be applicable to all classes of life, general
the insurers through Life/ General Insurance Council, on or health insurance business. The guidelines said in terms of
receipt of the same from the Ministry of External Affairs (MEA). the provisions of Prevention of Money Laundering Act, 2002,
This is in addition to the list of banned entities compiled by and the Prevention of Money- Laundering (Maintenance of
Ministry of Home Affairs (MHA) that have been circulated to records) Rules, 2005, insurers are required to follow customer
the insurers till date. Insurers have to maintain an updated identification procedures while undertaking a transaction at
list of designated individuals/entities in electronic form and the time of establishing an account based relationship/ client
run a check on the given parameters on a regular basis to based relationship and monitor their transactions on-going
verify whether designated individuals/entities are holding any basis. Insurers will also have to take steps to implement
insurance policies with the insurers. provisions of PML Act and the PML Rules, as amended from
time to time, including operational instructions issued in
An updated list of individuals and entities which are subject pursuance of such amendments.
to various sanction measures as approved by Security Council
Committee established pursuant to UNSC 1267 can be
Types of Money Laundering
accessed regularly from the United Nations website. By virtue
IRDAI's guidelines on Anti-Money Laundering/ Counter
of Section 51A of the Unlawful Activities (Prevention) Act,
Financing of Terrorism (AML/CFT), 2022 covers the potential
1967 (UAPA), the Central Government is empowered to
aspects related to the kind of exposures the insurance industry
freeze, seize or attach funds of and/or prevent entry into or
has had with relation to money laundering and related
transit through India any individual or entities that are
activities which will be substantially reduced. With these new
suspected to be engaged in terrorism.
guidelines, the quantum of unaccounted money will go down
drastically. There could be four types of money laundering
Regulatory guidelines:
cases:
Money launderers often buy insurance then submit claims to 1. Trade-based money laundering - Moving criminal funds
retrieve funds. Sometimes they use products structured as through trade transactions (import/export of goods) to
investments, such as variable annuities and life insurance disguise their origins is known as trade-based money
policies. By overfunding and moving money in and out of laundering (TBML). Some criminals carry out TBML by
policies, they establish a stream of "innocent" wire transfers over- or under-invoicing for shipments. Other methods
or checks - all for the low cost of early withdrawal penalties. involve multiple invoicing (for the same shipment),
The insurance sector is undergoing radical change, driven by misrepresenting the quality of the shipped goods, or
ever-higher customer service expectations and opportunities shipping more - or fewer - goods than agreed.
presented by digital innovation. To stay relevant, insurers
2. Crypto/virtual currency and money laundering -
must become hyper intelligent, AI-driven organizations. They
Crypto and virtual currencies have opened the door to
28 March 2023 The Insurance Times