GENERAL INSURANCE
IFFCO TOKIO General Insurance
Company Ltd.
Anti- Money Laundering (AML)
Policy and Guidelines
Table of Contents
S.no.Particulars Page No.
1.0Introduction 3
2.0What is Money Laundering? 3
3.0Money Laundering – Three Stage Process 3
4.0Anti Money Laundering (AML) Programme of ITGI 4
5.0ITGI AML Policy, Procedure, Controls and Implementation 5
5.1Know Your Customer (KYC) 5
5.2 KYC- When it would be done? 5
5.3KYC and Risk Profile of the Customer 6
5.4Products to be Covered 7
5.5KYC- Verification and Documents to be Obtained 8
5.6KYC- For Low and High Risk Customers 9
5.7Declaration of Source of Funds 9
6.0Suspicious Transaction- Defined 10
6.1Suspicious Transactions Monitoring 10
6.2Suspicious Transaction Reporting (STR) and Maintaining 11
7.0Monitoring and Reporting Cash Transactions 12
8.0Record Keeping12
9.0KYC Implementation – Employees and others 13
10.0Implementation of Section 51 of UAPA 15
11.0Principal Compliance Officer17
12.0Education and Training17
13.0Responsibility on behalf of Agents and Corporate Agents 18
14.0Internal Control/ Audit19
Annexures referred to in the Policy
Annexure I –Documents that may be obtained from Customers
Part A 20
Part B 21
Part C 21
Part D 22
Annexure II- Income Proof to be Obtained 23
Annexure III- Illustrative list of Suspicious Transactions 24
Annexure IV- Vulnerable Products 25
Annexure V – Suspicious Transaction Report 26-29
1.0.Introduction
1.1In compliance with the Prevention of Money Laundering legislation brought into force by the statutory enactment, viz., Prevention of Money Laundering Act, 2002 (PMLA) and the Rules/Notification under the said Act published in the Gazette of India on 1st July, 2005 and the Circular No.9a/LIFE/AML/2005-06 dated 31st March, 2006 issued by IRDA, under section 34 of the Insurance Act, IFFCO TOKIO General Insurance Company Limited , hereinafter referred to as ITGI has adopted the following Anti-Money Laundering (AMIL) compliance policy which has been approved by the Board of Directors of the Company.
1.2It is the Policy of ITGI to prohibit and prevent money laundering and any activity that facilitates money laundering or the funding of terrorist or criminal activities. ITGI believes strongly in establishing good internal control systems and to abide by the provisions of Prevention of Money Laundering Act, Rule/ Notification as they apply.
2.0.What is Money Laundering?
2.1Money laundering is generally defined as engaging in acts designed to conceal or disguise the true origins of criminally derived proceeds so that the unlawful proceeds appear to have been derived from the legitimate origins or constitute legitimate assets. It is moving illegally acquired cash through financial systems so that it appears to be legally acquired. It is a process by which criminals attempt to hide the true original and ownership of the proceeds of crime. Simply stated, money laundering is projection of the proceeds of crime as untainted property.
3.0 Money Laundering – Three stage process.
3.1The three common stages of money laundering are as detailed below:
Placement:This involves division of the proceeds into smaller lots so as to make movements thereof unless less susceptible. In this stage the cash generated by the crime is gradually attempted to be inserted into the financial system.
Layering:In this second stage funds introduced in the financial system are rotated, remixed, transferred and re-transferred repeatedly. This is a system separating illicit proceeds from their sources by creating complex layers designed to disguise the source of money, subvert the audit trail and provide anonymity. It is as if multiple layers are formed one up the other so as to conceal the original of the funds into the financial system.
Integration:This stage of money laundering concerns itself with successful merging into the legitimate finance system. It is by adopting different tools of integration that the dirty money becomes indiscernible from the clean money.
4.0.ANTI MONEY LAUNDERING (AML) PROGRAMME OF ITGI
4.1Money laundering can take place in relation to fraudulent claims and in obtaining health, commercial and vehicle insurance policies etc by organized criminal rings and even terrorists for the purpose of committing fraud to obtain clean funds. To prevent the same, ITGI wishes to comply with high standards of ethics and integrity in relation to its business, develop strong internal policies and procedures and adhere to relevant legislation pertaining to money laundering activities. The following measures would be taken to curb the practices of money laundering
1. Policy and Procedure of AML – Developing, implementing and maintaining internal policies, procedures and controls based on regulatory requirements,
2. Designating a Principal Compliance officer responsible for implementing the programme. The Principal Compliance officer and the staff assisting him in execution of AML Guidelines would have timely access to customer identification data, KYC information and any other relevant records as may be necessary for discharging their duties effectively.
3. Education and Training – Providing ongoing training programs for appropriate persons
4.Internal Control/Audit – Establishing independent testing to monitor and maintain the programme including internal audit controls.
5.0.0 ITGI AML Policy, Procedure, controls and Implementation
5.0.1. In order to keep an eye on suspicious transactions, which may have tone of money laundering activities or which may be inter connected with money laundering transactions, ITGI wishes to establish and implement policies, procedures and controls which would integrate its agents, brokers, contractors, outsourced personnel, intermediaries etc in its anti-money laundering programme as detailed below.
5.1.0KNOW YOUR CUSTOMER (KYC)
5.1.1.Considering the potential threat of usage of the financial services by a money launderer, ITGI makes reasonable efforts to determine the true identify of all customers requesting for it services.
5.1.2Special care has to be exercised to ensure that the contracts are not anonymous or under fictitious names.
5.1.3Customer information should be collected from all relevant sources, including from agents.
5.1.4Insurance premium paid by persons other than the person insured should be looked into to establish insurable interest.
5.2.0.KYC - WHEN IT WOULD BE DONE
- KYC shall be adopted / applied by the Company at premium refund stage, settlement stage where claim payout crosses a threshold of Rs. 1 lakh per claim. KYC will also be carried out at times when additional top up remittances are inconsistent with the customers known profile.
- In case of non face to face business which includes Tele calling, internet, marketing, logging in of business or payment of premium/lump sums at branches, collection of documentation be completed for premium exceeding Rs. 1 lakh per person per annum within 15 days of issue of policy. Degree of KYC in such cases would depend on risk profile of customers. Documentation requirement for AML in such cases would same as in face to face business.
c.In case of existing customers, the AML Process will be applied for the policies coming into force on or after 1.1.2006. KYC in case of existing customers will be carried out on all contracts entered with Individuals where the annual aggregate premium exceeds Rs. 1 lakh and above per annum.
The procedure will include, but not be limited to, methods to verify, to the extent reasonable and practicable, the customer’s details, obtain necessary documents, maintain records of information used to verify identity and check that the insured does not appear on the list provided by IRDA/FIU-IND.
5.2.1KYC process is initially to be done as per the extant guidelines. Any change in the customer’s recorded profile, that comes to the notice and which is inconsistent with the normal and expected activity of the customer should be noted and such an account should be subjected to further ongoing KYC processes and action, as considered necessary.
5.3.0. KYC AND RISK PROFILE OF THE CUSTOMER
5.3.1.In the context of the very large base of insurance customers and the significant differences in the content of risk posed by them, ITGI has classified the customers into Low Risk and High Risk based on (1) on the individual’s profile and (2) product profile to undertake due diligence.
A list of documents to be verified at the time of accepting the risk for compliance with KYC requirement for individuals and others is given in Annexure I (which may be treated as illustrative only).
5.3.2.LOW RISK CUSTOMERS
5.3.3.Low risk customers would be those individuals (other than high net worth) and entities whose identities and sources of wealth can be easily identified and transaction in whose accounts by and large conform to the known profile. Illustrative examples of low risk customers are:
(a)Salaried employees whose salaries are well defined.
(b)People belonging to lower economic strata of the society.
(c)Government department
(d)Government owned companies
(e)Regulators and statutory bodies.
In such cases, the policy may require that only the basic requirements of verifying the identity and location of the customer are to be met with.
5.3.4.HIGH RISK CUSTOMERS
5.3.5.High risk profile Customers are:
(a) Non residents
(b)High net worth individuals
(c) Trusts
(d)Charities
(e)NGOs and organizations receiving donations
(d)Companies having close family shareholding or beneficial ownership
(e)Firms with sleeping partners
(f)Politically exposed persons (PEPs)
(g)Persons having dubious reputation
(h)Non face to face customers
The above mentioned list is only illustrative. The person responsible for underwriting should exercise independent judgment to ascertain whether the customer should be classified as High Risk or not. In all High Risk customers case, higher due diligence will be carried out.
5.3.6The proposals for contracts with High risk customers shall be concluded only after the approval of senior management officials. It is however emphasized that proposals of Politically Exposed Persons (PEPs) in particular requires approval of senior management, not below designated Underwriters operating at SBUs/ CSCs who shall directly report to Head (Underwriting), Corporate Office.
5.4.0PRODUCTS TO BE COVERED
5.4.1.The AML requirements focus on the vulnerability of the products offered as suggested by IRDA from time to time. Some vulnerable products are illustrated in Annexure V. Based on the vulnerability criterion and after examining the product and business coverage it has been decided that the following categories of products/ business lines are exempted from the purview of the AML requirements:
i. Standalone medical / health insurance products
ii. Reinsurance and retrocession contracts where the treaties are between insurance companies for reallocation of risk with in the insurance industry and do not involve transactions with customers.
iii. Group insurance business which are typically issued to a company, financial institution or association and generally restrict the ability of an individual insured or participant to manipulate its investment.
5.5.0.KYC- VERIFICATION AND DOCUMENTS TO BE OBTAINED.
5.5.1.A list of documents to be verified at the time of accepting the risk (exceeding Rs. 1 lakh) in case of individuals, for compliance with KYC requirement is given in Part A of Annexure1.The documents that are to be obtained for insurance contracts with Companies will be as per part B of Annexure 1. The documents to be obtained for insurance contracts with Partnership firms will be as per Part C and with the Trust and foundations as per Part D of Annexure A.
5.5.2.While establishing the identity of the customers, it is mandatory to:
(a)Identify the beneficial owner and take all reasonable measures to verify his/her identity to ensure that the identity of such beneficial owner is well established and known to the Company
(‘Beneficial owner’ for this purpose means the natural person(s) who ultimately owns or controls a customer and/or the person on whose behalf a transaction is being conducted. It also incorporates those persons who exercise ultimate effective control over a legal person or arrangement.)
(b)Document the identity and address of the customer after certification of the same by the authorized person i.e. concerned marketing executive / official dealing with such customer / client.
(c)Where a Client is a juridical person, verification of identity is required to be carried out on persons purporting to act on behalf of a Client.
5.5.3.Detailed Customer Due Diligence is mandatory for individual policies where premium is Rs.1 lakh or more per annum or where the aggregate of premium of all policies taken by an individual is Rs. 1 lakh or more. Cash transactions will be given more due diligence and care. Customer’s information will be collected from all relevant sources, including from agents, brokers, etc to know sources of funds, genuineness of transaction, possibility of unaccounted money. Also, insurance premium paid by persons other than the person insured would be looked into to establish insurable interest.
5.5.4.ITGI will take steps to ensure that it does not enter into a contract with a customer whose identity matches with any person with known criminal background or with banned entities and those reported to have links with terrorist or terrorist organizations. KYC will also be carried out at the claim payout stage and at times when additional top up remittances are consistent with the customers known profile
5.6.0 KYC-FOR LOW AND HIGH RISK CUSTOMERS.
5.6.1. The following KYC criteria will be followed for the low risk and High Risk customers.
(a)If the customers falls in high risk category, detailed KYC must be performed irrespective of verification of amount of annual premium,
(b)Premium of Rs.1 lakh per annum in case of individual polices should be considered as a threshold for exercising detailed due diligence, irrespective of risk category and payment mode.
(c)Cash transaction must be given more diligence irrespective of risk category.
5.7.0.DECLARATIONS FOR SOURCE OF FUNDS
5.7.1Proposal form of ITGI has questionnaires/declarations on details pertaining to sources of funds, estimated net worth, history of past convictions on predicted offences, if any, which should be taken as declaration from customers. Large single premiums i.e Rs. 1 lakh or more should be backed by documentation, to establish source of funds.
6.0. SUSPICIOUS TRANSACTION-DEFINED
6.0.1Suspicious transaction does not include cash transactions only. Suspicious transaction means a transaction whether or not made in cash which to a person acting in good faith gives rise to a reasonable ground of suspicion that-
(a)it may involve the proceeds of crime; or
(b)appears to be made in circumstances of unusual or unjustified complexity; or
(c)appears to have no economic rationale or bonafide purpose.
6.1.0SUSPICIOUS TRANSACTIONS MONITORING
6.1.1. All Suspicious transaction for AML must be monitored. Broad categories of reason for suspicion and examples of suspicious transactions as suggested by Financial Intelligence Unit-India FIU-IND are indicated as under.
(a)Identity of Client
- False identification documents
- Identification documents which could not be verified within reasonable time.
(b)Back ground of client:
- Suspicious back ground or links with known criminals
(c) Multiple Policies
- Large number of policies having a common policyholder with no rationale
(d)Nature of Transactions
- Unusual or unjustified complexity
- No economic rationale or bonafide purpose
- Nature of transaction inconsistent with what would be expected from declared business.
(e) Value of transaction.
- Value just under the reporting threshold amount in an apparent attempt to avoid reporting.
- Value inconsistent with the client’s apparent financial standing.
- A change in beneficiaries i.e. to include non-family members or request for payment to person other than the beneficiaries.
- Use of cash for payment of large single premium.
An illustrative list of such transaction as suggested by IRDA is given in Annexure III to these Guidelines.
6.1.2In addition to the above, the list of individuals and entities subject to UN sanction measures under UNSC Resolutions (hereinafter referred to as ‘designated individuals/entities’) as circulated to the life and general insurance companies through the respective Councils (on receipt of the same from the Ministry of External Affairs) from time to time will have to be considered for monitoring suspicious transactions.
6.1.3Special attention must be paid to all complex, unusually large transactions and all unusual patterns which have no apparent economic or visible lawful purpose.
6.1.4All records of such transactions including all documents, office records, memorandums etc. shall be examined by the Head (underwriting). The Head (underwriting) shall place such observations in the notice of Principal Compliance Officer for recording the findings. These records shall be preserved for a minimum period of 10 (ten) years.
6.2.0SUSPICIOUS TRANSACTION REPORTING (STR) AND MAINTAINING
6.2.1PROCEDURE TO BE FOLLOWED BY SBU/CSC/UNDERWRITING HEAD(S) ON IDENTIFICATION OF ANY SUSPICIOUS TRANSACTION OR ACTIVITY
On identification of any suspicious transaction, such SBU/CSC / Underwriting Head must immediately intimate the Principal Compliance Officer, Corporate Office. Such intimation must in all cases be done within 24 hours of identification of suspicious activity / transaction in the format given at Annexure VI. To expedite the complete process, the concerned official must send in the scanned copy of the Suspicious transaction report after affixing his initials to the corporate office on any of the following e-mail ids:
The original copies of the documents may be sent separately to the Corporate office.
6.2.2All the Directors, officers and employees (permanent and temporary) are prohibited from disclosing the fact that a Suspicious Transactions Report or related information of a policyholder/prospect is being reported or provided to the FIU-IND.
7.0.MONITORING AND REPORTING CASH TRANSACTIONS.
7.1. ITGI should not accept remittances of premium by cash an amount exceeding Rs.50,000. Premium/proposal deposits beyond Rs.50,000 should be remitted only through cheques, demand drafts, credit card or any other banking channels. For integrally related transactions, premium amount greater than Rs. 50,000 in a calendar month should be examined more closely for possible angles of money laundering. This limit will apply at an aggregate level considering all the roles of a single person-as a proposer or assignee.
7.1.2 The above guidelines should not be selectively interpreted on individual transaction basis. Splitting of the insurance policies/issue of number of policies to one or more entities facilitating individuals to defeat the spirit of the AML/CFT guidelines should be avoided. Where there is possibility of transactions being integrated through a single remitter, ITGI should refuse to accede to the requests for cash deposits.
8.0. RECORD KEEPING
8.1.ITGI/AGENTS/Corporate Agents shall maintain a record of:
1.All cash transaction of the value of more than Rupees 10 lakhs or its equivalent in foreign currency.
2.All cash transactions where forged or counterfeit currency notes or bank notes have been used as genuine and where any forgery of voluble security has taken place.
3.All series of cash transactions integrally connected to each other which have been value below rupees ten lakhs or its equivalent in foreign currency where such series of transactions have taken place within a month.