Insurance companies from now on will have to keep a hawk-eye vigil on large insurance policy holders according to the new anti-money laundering directive issued by the Insurance Board (IB).
They have to keep a detailed report of non-life insurance policy holders who pay an annual premium exceeding Rs 300,000, and also of life insurance policy holders paying an annual premium more than Rs 100,000.
The Anti-Money Laundering and Combating Terrorist Financing Directive 2069 for insurance companies has asked insurance companies to keep customer due diligence to prevent the use of insurance policies for money laundering activities.
Earlier in July 2010, central bank’s Financial Information Unit (FIU) had asked insurance companies, agents and surveyors to inform FIU regarding transactions exceeding Rs one million under the Anti-Money Laundering Act-2008.
The insurance regulator has asked the companies to perform the necessary customer due diligence (CDD) on customers, beneficial owners and beneficiaries. The companies have been asked to take enhanced measures with respect to higher risk customers and monitor and report complex, unusual large transactions, or unusual patterns of transactions. Likewise, insurance companies have to maintain full business and transaction records, including CDD data for at least five years.
The company has to categorise customers based on their profile and product profile. The highly risky customers include already known criminals among others. Risky customers include those residing in places infamous for money laundering and corruption, customers with ambiguous source of income, and those involved in an industry linked to possible money laundering.
Insurance companies have to identify the owner and majority stakeholders of the companies that they issue insurance policies to, in order to keep tabs on their clients.
Money laundering refers to the act of legitimising the income earned from illegal activities such as arms and drugs trafficking or through terrorist activities. Money launderers use valid financial channels all over the world to place and layer their ill-earned money and then integrate the money into legal channels. To avoid such activities, the Financial Action Task Force —an inter-governmental global anti-money laundering body — has made the enactment of anti-money laundering laws mandatory.Since Nepal has committed to abide by the FATF regulation, the country has been enacting the related laws and regulations to stop the flow of black money into the country through various channels.