Government investigation agencies have begun to advice insurance companies, both life and non-life about their responsibilities to block money laundering.
In the meetings held in Mumbai and Delhi by the Financial Intelligence Unit, India’s lead agency to prevent money laundering, officers have advised the firms that their CEOs could land in trouble in this score. FIU has found cases where clients have approached the firms to take out single premium life policies with huge sum insured.
The companies have not bothered to check out if the person had a declared source of income to back such payments. Data from a global fraud survey by PricewaterhouseCoopers show that insurance is the second-most affected sector by money laundering and terrorist financing. The diversity of products launched by insurers, a heavy reliance on intermediaries, and the difficulty in detecting sources of funds contribute to make the industry attractive for dubious finance. The size of the domestic insurance sector in FY13 was Rs 4,35,000 crore as per Irda figures.
However, so far, the FIU has found no evidence of money laundering in the sector. In a follow up to the FIU developments, the insurance regulator has asked Birla Sun Life Insurance Company to strengthen procedures for complying with the anti-money laundering norms.
A report by PTI quotes a recent Irda order which says, “authority advises Birla Sun Life to lay adequate emphasis on effective procedures for strengthening the compliance norms of the anti-money laundering master circular…”. In another order, the Irda has directed Future Generali India Life Insurance to put in place fair compliance system while submitting information.