How to tackle money laundering in insurance

Financial crime is on the up – but there are ways for brokerages and insurers to fight back

How to tackle money laundering in insurance

Technology

By Bethan Moorcraft

Money laundering and financial crimes are becoming increasingly apparent within the insurance industry.

A growing number of crooks are using insurance accounts to hide money from taxation agencies – a process that could become easier with the rise of online portals and direct web-based policy sales and claims management.

Managing financial crime comes down to the effectiveness of a company’s ‘Know Your Customer’ (KYC) and ‘Anti-Money Laundering’ (AML) functions, which are just as important in the digital era as the in-person interaction age.

Search and compare product listings for insurance against Crime from specialty market providers here

“There’s an increased risk of financial crime when it comes to online portals, but the risk is going to be based on a couple of factors,” said Edmund Tribue, NTT DATA Services’ Risk & Regulatory senior practice lead. “The first factor is whether your company is capturing sufficient data from the customer to execute proper KYC checks and whether you are sending that information to different data sources to receive additional data elements about the customer for your evaluation.

“Secondly, a company needs to ensure it has the appropriate controls from a risk management perspective to allow onboarding customers to use a web portal to conduct business. Controls need to be in place to make sure risk policies and compliant policies cannot be overridden or worked around. The controls need to be preventative more than reactive.”

Online portals represent a delivery channel for clients to get into a company’s operations. They need to be “robust” enough to perform AML and KYC functions properly, according to Tribue. This includes being able to verify and authenticate identification, and checking different data sources for sanctions lists, political affiliations or crime records.

“It is essential that an online portal authenticates the identity of a customer by more than just their email address,” he added.

Technology can be very useful in the fight against money laundering and other financial crimes. Some organizations are using things like mobile onboarding apps, which collect all of the primary information needed to perform a KYC check.

Brokers can use smart phones to take a photograph of an onboarding client’s face, passport and utility bill (proof of address) and then send that to back-office operations to execute the KYC check. This opens up more time for the broker to carry out his/her job description.

But the digital era is no time for insurers and brokers to rest on their laurels when it comes to AML and KYC, especially when the insurance industry is already “lagging behind,” according to Tribue.


Related stories:
Insurers adopting smart home policies - study
Insurance broker charged with $540,000 commission fraud

Keep up with the latest news and events

Join our mailing list, it’s free!