What are the “Red flags” Insurance companies should be aware of to avoid Anti-Money Laundering Risks?

04 January 2023

Ajmal Khan

CBUAE guidance for licensed financial institutions in the Insurance Sector.

This Guidance applies to all insurance and re-insurance companies, agents, and brokers that are licensed and supervised by the CBUAE. The guidance also provides them a timeline of one month to comply with the new requirements.

What are the various risk factors insurance companies should keep in mind?

The Guidance has provided various Low Risk and High-Risk examples for each of these factors

• Product Related Risk Factors

• Service and Transaction Related

• Distribution Channel and Intermediary Risk Factors

• Customer Related Risk Factors

• Geographic Risk Factors

1. The choice of an insurance product does not reflect a customer’s known needs

2. Early surrender of an insurance product is taken at a cost to the customer.

3. Surrender of an insurance product is initiated with the refund directed to a third party.

4. Customer exhibits no concern for the investment performance and exhibits significant concern for its early surrender terms.

5. Customer purchases insurance products using unusual payment methods, such as cash or cash equivalents and requests to purchase a large-sum policy by paying off premium all at once.

6. Customer demonstrates reluctance to provide identifying information when purchasing an insurance product.

7. Customer borrows the maximum amount available from their insurance product shortly after purchase.

8. The customer purchases an insurance product without concern for the coverage or benefits, or the customer only cares about the procedures for the policy loan, cancellation of insurance policy, or changing beneficiary when purchasing an insurance policy that has a high cash value or requires a high lump-sum premium payment.

9. The customer purchases insurance products with high cash value successively over a short period of time, and the insurance products purchased do not appear to be commensurate with the customer’s status and income or are unrelated to the nature of the customer’s business.

10. The customer cannot reasonably explain the source of payment of funds. In addition, the transactions do not appear to be commensurate with the customer’s status and income or are unrelated to the nature of the customer’s business.

1. Adopt a Risk Based approach and conduct Enterprise Risk Assessment

2. Perform Customer Due Diligence

3. Conduct and regular risk assessments to cover all transactions, reporting any suspicious transaction to the UAE’s Financial Intelligence Unit using the “goAML” portal.

4. All LFIs in the UAE should understand their Anti-Money Laundering (“AML”) responsibilities and have a sanctions compliance program as well as employ Risk Management Officers that will screen the transactions and assist with mitigating the related risks