Wrapper Insurance Investment Linked Policies Unit Linked Policies Investment Linked Assurance Schemes full or partial underlying investments under control of the customer may have a high limit for funds held Products designed for High Net Worth (HNW) persons or products for individual generally with guaranteed returns Example of product names: HNW Individual Life Insurance Traditional Whole Life offers the ability to hold funds only with high for funds held underlying investments managed by the insurer higher/moderately high risk compared with other life insurance products Product that pays a periodic income benefit for the life of a person Example of product name: Fixed and Variable Annuities offers the ability to hold funds may have a high limit for funds held accumulation period followed by a liquidation period underlying investments managed by the insurer moderate risk compared with other life insurance products Product designed to provide endowments for an individual or an institution Example of product name: Endowments may offer the ability to hold funds underlying investments managed by the insurer moderate risk compared with other life insurance products Product subscribed by a company to pay a periodic income benefit for the life of employees Example of product name: typically used for retirement savings generally subscribed by a company in lower risk compared with other life insurance products
Difficulty to trace ownership of funds Preprinted cheques, bill payments, EFT payments with verified banking records Cash, bank drafts in bearer form, travellers cheques, and counter cheques (where the ownership information is handwritten or typed in a different font than the rest of the cheque) Potentially: Some Digital Currencies Customer is not the payer or recipient of the funds The funds are moved from or to another financial institution The party paying or receiving funds has not previously been disclosed Payment source or recipient is based outside of country The recipient or payer is the owner and is in a low risk country The recipient or payer is the owner and is in a higher risk country The recipient or
product, distribution channel risk is mitigated using distributors who are also subject to AML/CTF legislation, which requires a compliance programme to be in place. The following table describes attributes used to assess the vulnerability of a distribution channel and provides lower and higher risk examples. Lower risk example Higher risk example Distributor has AML/CTF obligations Distributor is overseen by a regulatory authority and subject to AML/CTF laws equivalent to life insurer or stronger Distributors not subject to AML/CTF requirements Payment to life insurer Customer pays Life Insurer directly from their account at a bank or securities dealer Customer pays a distributor, who then pays the Life Insurer. Risk: The intermediary obscures the source of payment. Direct of customer to Life Insurer Contracted agents and banking No relationship with Life Insurer employee or
Customer’s legal form Customer is a living person Customer is a large, publicly traded legal entity with clear ownership and control Customer is a legal entity with a complex structure difficult to ascertain those who own or control the entity. Policy holder and/or the beneficiary of the contract are companies with nominee shareholders and/or shares in bearer form Source of funds and wealth; including occupation or business type Customer’s business type or occupation is in a lower risk industry Customer’s business or occupation is in a higher risk industry (such as involved in one or more of cash intensive business, international exposure or associated with crime typologies) Customer’s business or occupation is associated with a lower
Higher crime regions Customer does not reside in a region with higher frequency and severity of crimes with money laundering risk Customer resides in a region with high frequency and severity of crimes with money laundering risk History of high risk activity or fraud Customer does not reside in a region that a higher incidence of high risk activity or fraud Customer resides in a region that a higher incidence of high risk activity or International geographic risk factors Customer risk is higher among customers with connections outside country, especially connections to higher risk countries (see para 107) . Attribute Lower risk example Higher risk example Foreign tax or physical residency of customer Countries risk ranked as low by the Life Insurer Countries risk ranked as high by the Life Insurer Foreign ties or Customer does not have any indicators of foreign residency or outside of country Customer has requested or performed with ties to high risk countries Geographic Risk Red Flags