Sectoral guidelines for life insurance undertakings

Sectoral guidelines for life insurance undertakings
EBA has published the final Guidelines under Articles 17 and 18(4) of Directive (EU) 2015/849 on simplified and enhanced customer due diligence. The Risk Factors guidelines give an overview on the factors credit and financial institutions should consider when assessing the money laundering and terrorist financing risk associated with individual business relationships and occasional transactions.
Sectoral guidelines for life insurance undertakings

Sectoral guidelines for life insurance undertakings

175.
Life insurance products are designed to financially protect the policy holder against the risk of an uncertain future event, such as death, illness or outliving savings in retirement (longevity risk). The protection is achieved by an insurer who pools the financial risks that many different policy holders are faced with. Life insurance products can also be bought as investment products or for pension purposes.
176.
Life insurance products are provided through different distribution channels to customers who may be natural or legal persons or legal arrangements. The beneficiary of the contract may be the policy holder or a nominated or designated third party; the beneficiary may also change during the term and the original beneficiary may never benefit.
177.
Most life insurance products are designed for the long term and some will only pay out on a verifiable event, such as death or retirement. This means that many life insurance products are not sufficiently flexible to be the first vehicle of choice for money launderers. However, as with other financial services products, there is a risk that the funds used to purchase life insurance may be the proceeds of crime.
178.
Firms in this sector should consider the following risk factors and measures alongside those set out in Title II of these guidelines. The sectoral guidelines in Title III, Chapters 5 and 9, may also be relevant in this context. Where intermediaries are used, the delivery channel risk factors set out in Title II, paragraphs 32-33, will be relevant.
179.
Intermediaries may also find these guidelines useful.
 

Sectoral guidelines for life insurance undertakings – Risk factors

Product, service and transaction risk factors
180.
The following factors may contribute to increasing risk:

  • Flexibility of payments, for example the product allows:
  1. payments from unidentified third parties;
  2. high-value or unlimited-value premium payments, overpayments or large volumes of lower value premium payments;

iii. cash payments.

  • Ease of access to accumulated funds, for example the product allows partial withdrawals or early surrender at any time, with limited charges or fees.
  • Negotiability, for example the product can be:

i. traded on a secondary market;
ii. used as collateral for a loan.
• Anonymity, for example the product facilitates or allows the anonymity of the customer.
181.
Factors that may contribute to reducing risk include: The product:
• only pays out against a pre-defined event, for example death, or on a specific date, such as in the case of credit life insurance policies covering consumer and mortgage loans and paying out only on death of the insured person;
• has no surrender value;
• has no investment element;
• has no third party payment facility;
• requires that total investment is curtailed at a low value;
• is a life insurance policy where the premium is low;
• only allows small-value regular premium payments, for example no overpayment;
• is accessible only through employers, for example a pension, superannuation or similar scheme that provides retirement benefits to employees, where contributions are made by way of deduction from wages and the scheme rules do not permit the assignment of a member’s interest under the scheme;
• cannot be redeemed in the short or medium term, as in the case of pension schemes without an early surrender option;
• cannot be used as collateral;
• does not allow cash payments;
• has conditions that must be met to benefit from tax relief.
Customer and beneficiary risk factors
182.
The following factors may contribute to increasing risk:
• The nature of the customer, for example:
i. legal persons whose structure makes it difficult to identify the beneficial owner;
ii. the customer or the beneficial owner of the customer is a PEP;
iii. the beneficiary of the policy or the beneficial owner of this beneficiary is a PEP;

iv. the customer’s age is unusual for the type of product sought (e.g. the customer is very young or very old);

v. the contract does not match the customer’s wealth situation;  

vi. the customer’s profession or activities are regarded as particularly likely to be related to money laundering, for example because they are known to be very cash intensive or exposed to a high risk of corruption;

vii. the contract is subscribed by a ‘gatekeeper’, such as a fiduciary company, acting on behalf of the customer;  

viii. the policy holder and/or the beneficiary of the contract are companies with nominee shareholders and/or shares in bearer form.  

• The customer’s behaviour:

i. In relation to the contract, for example:  

a. the customer frequently transfers the contract to another insurer;

b. frequent and unexplained surrenders, especially when the refund is done to different bank accounts;  

c. the customer makes frequent or unexpected use of ‘free look’ provisions/‘cooling-off’ periods, in particular where the refund is made to an apparently unrelated third party;35  

d. the customer incurs a high cost by seeking early termination of a product;

e. the customer transfers the contract to an apparently unrelated third party;  

f. the customer’s request to change or increase the sum insured and/or the premium payment are unusual or excessive.

ii. In relation to the beneficiary, for example:  

a. the insurer is made aware of a change in beneficiary only when the claim is made;

b. the customer changes the beneficiary clause and nominates an apparently unrelated third party;

c. the insurer, the customer, the beneficial owner, the beneficiary or the beneficial owner of the beneficiary are in different jurisdictions.  

iii. In relation to payments, for example:

a. the customer uses unusual payment methods, such as cash or structured monetary instruments or other forms of payment vehicles fostering anonymity;  

b. payments from different bank accounts without explanation;  

c. payments from banks that are not established in the customer’s country of residence;  

d. the customer makes frequent or high-value overpayments where this was not expected;  

e. payments received from unrelated third parties;

f. catch-up contribution to a retirement plan close to retirement date.

183.

The following factors may contribute to reducing risk:  

In the case of corporate-owned life insurance, the customer is:

• a credit or financial institution that is subject to requirements to combat money laundering and the financing of terrorism and supervised for compliance with these requirements in a manner that is consistent with Directive (EU) 2015/849;  

• a public company listed on a stock exchange and subject to regulatory disclosure requirements (either by stock exchange rules or through law or enforceable means) that impose requirements to ensure adequate transparency of beneficial ownership, or a majority-owned subsidiary of such a company;  

• a public administration or a public enterprise from an EEA jurisdiction.  

Sectoral guidelines for life insurance undertakings – Distribution channel risk factors

184.

The following factors may contribute to increasing risk:

• non-face-to-face sales, such as online, postal or telephone sales, without adequate safeguards, such as electronic signatures or electronic identification documents that comply with Regulation (EU) No 910/2014;

• long chains of intermediaries;

• an intermediary is used in unusual circumstances (e.g. unexplained geographical distance).  

185.

The following factors may contribute to reducing risk:

• Countries are identified by credible sources, such as mutual evaluations or detailed assessment reports, as having effective AML/CFT systems.
• Countries are identified by credible sources as having a low level of corruption and other criminal activity.

Compliance & Geldwäschebeauftragter – Sectoral guidelines for life insurance undertakings

Unsere Praxisseminare Geldwäsche und Fraud – BasisseminarGeldwäsche und Fraud – AufbauseminarGeldwäsche & Fraud – Update und Geldwäsche & Fraud – Forum verschaffen Ihnen einen umfassenden Überblick zu den aktuellen gesetzlichen Neuerungen und unterstützen Sie dabei, Geldwäsche- und Betrugsstrukturen zu erkennen, zu bewerten und rechtzeitig zu verhindern. In den Compliance-Seminaren wie ComplianceCompliance für VertriebsbeauftragteNeue Compliance-Funktion gemäß MaRisk oder auch Compliance im Fokus der Bankenaufsicht werden Ihnen die Ausgestaltung der Schnittstellen zwischen Compliance, Datenschutz, IT, Zentrale Stelle und Interner Revision näher gebracht. Auch die Mindestanforderungen zum Aufbau eines Gesamt-IKS werden hier beispielsweise näher erläutert.
Zudem haben Sie die Chance, nach Teilnahme der Seminare die Zertifizierungslehrgänge zum Compliance Officer, zum AML & Fraud Officer oder zum Geldwäsche-Beauftragter zu absolvieren.

 

Sectoral guidelines for life insurance undertakings

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