Page 35 - Insurance Times March 2023

market insurers are required to ensure that no vulnerable
Monitoring of Transactions
cases go undetected, especially, where there is suspicion of
Regular monitoring of transactions is vital for ensuring
money- laundering or terrorist financing, or where there are
effectiveness of the AML/CFT procedures. This is possible only
factors to indicate a higher risk, necessary due diligence will
if the insurers have an understanding of the normal activity
have to be carried out on such assignments and STR should
of the client so that it can identify deviations in transactions/
be filed with FIU-IND, if necessary.
activities. Insurers need to pay special attention to all complex
large transactions/ patterns which appear to have no
Insurers have to carry out ML and TF Risk Assessment exercise
economic purpose. The insurers may specify internal threshold
as provided in sub rule (13) of Rule 9 of PML Rules periodically
limits for each class of client accounts and pay special attention
based on risk exposure to identify, assess, document and take
to transactions which exceeds these limits. The background
effective measures to mitigate its ML and TF risk for clients/ including all documents/ office records/ memorandums/
customers or geographic areas, products, services, nature clarifications sought Master Guidelines on AML/CFT
and volume of transactions or delivery channels etc. While pertaining to such transactions and purpose thereof will also
assessing the ML/TF risk, the insurers are required to take be examined carefully and findings will be recorded in writing.
cognizance of the overall sector specific and country specific
vulnerabilities, if any, that the Government of India / IRDAI Further such findings, records and related documents will be
may share with them from time to time. Further, the internal made available to auditors and also to IRDAI/ FIU-IND/ other
risk assessment carried out by insurer should be relevant Authorities, during audit, inspection or as and when
commensurate to its size, geographical presence, complexity required. These records are required to be maintained and
or activities/ structure etc. preserved for a period of five years from the date of
transaction between the client and insurers. The Principal
Simplified Due Diligence (SDD) Officer of the insurers has to monitor and ensure that
suspicious transactions are regularly reported to the Director,
Simplified measures as provided under sub clause (d) of clause
FIU- IND. Further, the compliance cell of insurers will randomly
(1) of Rule 2 of PML Rules are to be applied by the insurer in
examine a sample of transactions undertaken by clients to
case of individual policies, where the aggregate insurance
comment on their nature i.e. whether they are in nature of
premium is not more than Rs 10000/ - per annum. However,
suspicious transactions or not.
Simplified Client Due Diligence measures are not acceptable
whenever there is a suspicion of money laundering or terrorist
The Financial Action Task Force
financing or where specific high risk scenarios apply, based
The Financial Action Task Force (FATF) is an inter-
on the Risk Assessment/ categorization policy of the insurers.
governmental body established in 1989 by the Ministers of
Based on the robust risk assessment, insurers may apply
its Member jurisdictions. The objectives of the FATF are to set
Simplified Due Diligence measures only in respect of
standards and promote effective implementation of legal,
customers that are classified as 'low risk'.
regulatory and operational measures for combating money
laundering, terrorist financing and other related threats to
Enhanced Due Diligence (EDD)
the integrity of the international financial system. The FATF
Enhanced Due Diligence as mentioned in Section 12AA of monitors the progress of its members in implementing
PML Act, will be conducted for high risk categories of clients. necessary measures, reviews money laundering / terrorist
Insurers should examine, as far as reasonably possible, the financing techniques and counter-measures, as well as
background and purpose of all complex, unusual patterns of promotes the adoption and implementation of appropriate
transactions, which have no apparent economic or lawful measures globally.
purpose. Where the risks of money laundering or terrorist
financing are higher, insurers are required to conduct The FATF's decision making body, the FATF Plenary, meets
enhanced due diligence measures, consistent with the risks three times a year and updates these statements. FATF had
identified. Insurers have to verify the identity of the clients earlier identified the following jurisdictions as having strategic
preferably using Aadhaar subject to the consent of customer deficiencies which have developed an action plan with the
or; verify the client through other modes/ methods of KYC as FATF to deal with them. These jurisdictions are: Albania,
specified in these guidelines. Insurers have to examine the Barbados, Burkina Faso, Cambodia, Cayman Islands, Haiti,
ownership and financial position, including client's source of Jamaica, Jordan, Mali, Malta, Morocco, Myanmar,
funds commensurate with the assessed risk of customer and Nicaragua, Pakistan, Panama, Philippines, Senegal, South
product profile. Sudan, Syria, Turkey, Uganda, United Arab Emirates and
30 March 2023 The Insurance Times