Top executives at life insurers in Taiwan still have shortcomings including a lack of dedication to combating money laundering, according to Cathay Life Insurance chief compliance officer Gong Du-zhi.
There are also discrepancies in the definition of a product’s beneficiary and the conditions that warrant suspicious transaction reporting (STR) filing between local life insurers and the Asia/Pacific Group on Money Laundering (APG), reports The Taipei Times.
As a result, the number of STRs being submitted from Taiwan is far lower than what is considered normal for an insurance market of this size, Mr Gong said.
Most notably, Taiwan still lacks a sound real-time transaction monitoring system, while many companies have not subscribed to international databases on politically exposed persons (PEP), which has led to an over-reliance on client declarations.
The APG is an inter-governmental organisation focused on ensuring that its members effectively implement the international standards against money laundering, terrorist financing and proliferation financing related to weapons of mass destruction.
The comments were made at a conference last week staged by the Insurance Anti-Fraud Institute (IAFI) at which the chief compliance officers from Taiwan’s leading life insurers shared their insights on managing high-risk investment-linked products and establishing sound record-keeping practices, as well as improving STR practices.
Life insurers are regarded as being highly vulnerable to money laundering, because the products they sell are payable in the local and foreign currencies, Mr Gong said.
In particular, investment-linked products often require substantial premium payments upfront, creating a vulnerability when the policies are cancelled by bad actors looking to receive laundered money, he said.
Offshore insurance units (OIUs) set up by life insurers are especially vulnerable, as they receive payments in a foreign currency, he said, adding that risks increase when sales are processed online or by contract-sales agencies, which creates an opportunity to conduct anonymous transactions.
To bolster compliance, OIUs must enhance due diligence for higher-risk clients, such as PEPs, for example by recording clients’ statements on the purpose and source of funding on each purchase, Mr Gong said.
Potential clients should also be checked against international business and money laundering databases, he said.
Companies checking for suspicious beneficiaries should keep in mind that the adult children of PEPs over the age of 40 might not always show up in international databases.
Some companies have turned away and reported clients who were purchasing insurance products that exceeded their income and refused to provide an explanation, he added.
Records
Mr Lin Shang-chen, chief compliance officer at Taiwan Life Insurance, advised companies to make sure that their computer systems meet compliance.
Financial institutions are required to keep records of all domestic and international transactions, as well as client due diligence, for at least five years, Mr Lin said, citing Financial Action Task Force on Money Laundering guidelines.
The records must be sufficient for a reconstruction of individual transactions, as they could be called upon as evidence in the prosecution of criminal activity, he said, adding that all transactions must be recorded no matter their level of risk. The records must also be readily accessible, he said.