Risk-based Approach Guidance for the Life Insurance Sector
25 October 2018
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. There is also a risk, even limited, that funds withdrawn from life insurance contracts could be used to fund terrorism. Generally the ML/TF risks associated to the life insurance sector is lower than that associated with other financial products or other business sectors.
The risk-based approach (RBA) is central to the effectively implement the FATF Recommendations to fight money laundering and terrorist financing. The RBA means that supervisors, financial institutions and intermediaries identify, assess and understand the money laundering and terrorist financing (ML/TF) risks to which they are exposed, so that they can focus their resources where the risks are highest.
The risk-based guidance for the life insurance sector highlights the nature and level of money laundering and terrorist financing risks of the life insurance sector. It provides indications and examples of ML/TF risks for a range of life insurance products. The guidance highlights that the ML/TF risk assessment should reflect the nature, size and complexity of the business: from a simple risk assessment for less complex life insurers and intermediaries, to a more complex risk assessment that takes into account group-wide risk appetite and framework. The guidance stresses the importance of the involvement of senior management.
The Guidance aims to support the design and implementation of the RBA for the life insurance sector, taking into account national ML/TF risk assessments and legal and regulatory frameworks to combat money laundering and terrorist financing.
This non-binding guidance was developed with input from the private sector, including through a public consultation in July 2018.