IRDAI vide circular dated 10th October, 2023 has issued Amendment to Master Guidelines on Anti-Money Laundering/Counter Financing of Terrorism (AML/CFT) 2022. It states that in cases where there’s a variance between the Client Due Diligence or AML/CFT standards specified by IRDAI and those specified by insurers in the host country, foreign branches or majority-owned subsidiaries of regulated entities must adopt the more stringent of the two standards. This change underscores the importance of a robust, unified approach to AML/CFT measures, ensuring that there are no weak links in the system. Further, following guidelines are issued:
- Group-Wide Programs Against ML/TF
The circular introduces para 4.6, emphasizing the need for financial groups to implement group-wide programs against Money Laundering/Terrorist Financing (ML/TF). These programs must apply to all branches and majority-owned subsidiaries of the financial group and include policies and procedures for sharing information for Customer Due Diligence (CDD) and ML/TF risk management. Moreover, adequate safeguards to maintain the confidentiality of exchanged information are also mandated, ensuring that sensitive data does not fall into the wrong hands.
- Enhanced Due Diligence on Beneficiaries of Insurance Policies
Para 8.2.4.2 of the circular requires insurers to conduct necessary client due diligence, including Enhanced Due Diligence, if required, on policyholders, beneficiaries, legal heirs, and assignees. It mandates the verification of the identity of the beneficial owner, with a particular focus on high-risk clients. These measures aim to strengthen the prevention of money laundering and terrorist financing within the insurance sector.
- Suspicion Reporting
Para 8.2.6 underscores the importance of timely Suspicious Transaction Reports (STRs). If an insurer forms a suspicion of money laundering or terrorist financing and believes that conducting CDD will tip-off the customer, they are directed not to pursue the CDD process. Instead, they must promptly file an STR with the Financial Intelligence Unit – India (FIU-IND). This provision balances the need for thorough due diligence with the necessity of reporting suspicious activities.
- Ongoing Risk Management for PEPs
The circular, in para 14.2, directs insurers to establish ongoing risk management procedures for Politically Exposed Persons (PEPs) and their close associates. This measure ensures that enhanced due diligence is consistently applied to individuals with elevated risk profiles, contributing to more robust AML/CFT efforts.
- Risk Assessment for New Products and Technologies
Para 15.1 highlights the importance of risk assessment for new insurance products, practices, and technologies. Insurers must undertake ML/TF risk assessments before launching or using such products and adopt appropriate measures to manage and mitigate the associated risks. This promotes a proactive approach to risk management.
- Applying Enhanced Due Diligence to High-Risk Countries
The circular, in para 17.1, specifies that enhanced due diligence measures should be applied to business relationships and transactions with natural and legal persons from countries identified as high-risk by the Financial Action Task Force (FATF). This helps to mitigate risks associated with financial activities originating from countries with weaker AML/CFT controls.
