DOI: 10.14457/tu.the.2014.154
title: Money laundering in insurance business: preventive and suppressive measures

description: Although the insurance has been considered by authority, insurer and public opinion that it is far away from money laundering risk, insurance business is a target of money laundering like another financial intuition such as bank and security firm in reality owing to several factors for instance distribution channel, nature of insurance contract. In general, a money launderer pays the insurance company premium which relived from crime, while the insurance company has duty to perform customer due diligence and should know that customer might be a money launderer.Money laundering is relatively different from mere money spending or money acceptance. Without specific intention to “conceal and disguise”, it cannot be “money laundering offense even spending a proceeds of crime. Money laundering in insurance business has been generally proceeded by spending proceeds of crime in a form of  making premium payment. The commission can be “money laundering” offense depending on proving such specific intention. The prosecutor can forfeit the asset that “involves in” money laundering in accordance with section 49 and section5 of Anti-Money Laundering Act when they can proof that the use of asset meets all of money laundering criminal offence, especially the specific intention “to conceal and disguise”. Premium is a consideration of insurance contract for insurer. It  belongs to the insurer when customer transfers to insurer. If the insurer accepts them without specific intention or in good faith, the acceptance of premium is not considered as money laundering, and the prosecutor cannot forfeit the premium while right in insurance policy is an “asset involving in money laundering“ if the insurer gets insurance policy to “conceal and disguise” source of income and persecutor can proof so.There is a situation so called “dual purpose transaction”, a situation that the criminal enters to a transaction aiming either for personal use or laundering money that is quite hard to proof because a money launderer generally uses financial institutions to launder proceeds of crime. Since money laundering is a process to “conceal and disguise” and intention to launder money and simply spend money is relatively different, the persecutor needs to prove beyond reasonable doubt about specific intention to “conceal or disguise” of the customers. However, “possession, acquiring and usage proceeds of crime” of both criminal (customeras a spender) and insurer (financial institution as a transferee)with a knowledge that premium has been derived from predicate offense is a criminal offense in many jurisdiction such as the U.S, the U.K and the United Nations Convention Against Illicit Traffic in Narcotic and  Psychotic Substance 1988 which Thailand is a member state. Then the state can forfeit the asset as the asset “involves in” money laundering offense.   The criminalization of “possession, acquiring and usage” of proceeds of crime can makes a wide range of application against both criminal and insurer in the situation of “dual –purpose transaction”. If the prosecutor fails to prove specific intention “to conceal and disguise”, he can still prove about the possession, acquiring and usage of proceeds of crime and then can forfeit insurance premium as an asset “involving in” such offense. Moreover, the criminalization of such offense  makes Thailand implying with the United Nations Convention against Illicit Traffic in Narcotic and Psychotic Substance 1988 entirely.Insurance as financial institution has two main duties according to anti-money laundering regime. The first duty is “assistance” of authority to detect money launderer and provide information to state in which is a preventive measure. Insurer has duty to impose Customer Due Diligence and Reporting. The second duty is that insurance could be liable for money laundering offense when it accepts premium with intention to conceal and disguise source of premium and such premium can be forfeited, which is a suppressive measure. However, criminalization of “possession, acquiring and usage” can induce insurance to aware more about money laundering by imposing customer due diligence (CDD) properly in order to prove that they do not know that premium derived from crime and state can forfeit a premium, even prosecutor is unable to prove about specific intention. The criminalization of “possession, acquiring and usage” of proceeds of crime is truly loopholes of the Anti-Money Laundering Act.              Moreover, the Anti-Money Laundering Act should impose duty to report, make customer due diligence and keep a report to insurance intermediary in the same way that insurance does because the insurance intermediary has actual contract to customer as distribution channel.Furthermore, the insurance company shall be supervised about anti-money laundering compliance by the Anti-Money Laundering Organization effectively by risk-based approach. The AMLO also can allocate resource more wisely