Staff Writer
Insurance industry regulator, Ipec says life assurers should take appropriate measures to safeguard their products from possible abuse in high-risk jurisdictions where they are offering services.
In its life assurance report for the March 2024 quarter, Ipec said six life assurances indicated the existence of branches in areas considered to be domestic high-risk areas, such as artisanal gold mining areas.
The regulator said illegal dealing in precious metals and minerals generates the highest proceeds of crime in the country.
“Therefore, life assurers should take appropriate measures to safeguard their products from possible abuse,” reads the report.
Ipec also urged the sector players to be alert to source funds. It said some life insurers have a significant amount of business from informal sector clients, which is a high-risk sector.
“The informal sector is a high-risk sector that can be abused by possible money launderers and terrorist financiers to generate funds, as it is a predominantly cash economy.
“Though the majority of the premiums from the informal sector are low, ranging between US$1 and US$55, industry players should be aware that money launderers can structure their payments to levels that are far below the cash transaction threshold of US$1,000 or ZWL500,000 to avoid detection and raise suspicion,” Ipec said.
Terrorist financing (TF) is also an inherent risk. According to Ipec, terrorist financing can come from both legal and illegal sources of funds.
The regulator said entities must also conduct CDD at the claims processing stage to avoid using funds generated from policy payouts to finance terrorism.
“The National Terrorist Financing Risk Assessment of 2022 rated the country’s terrorist financing risk as medium, driven by transit TF risk.
“Life insurers conducting cross-border transactions should exercise enhanced due diligence when dealing with clients or service providers from countries in the region with known terrorism activities, such as Mozambique, Kenya, the DRC, and those currently under Financial Action Taskforce enhanced monitoring,” Ipec said.
Ipec added that life insurers, reinsurance brokers, and companies must continue to establish beneficial owners of the entities they are doing business with.
The regulator said life assurers must guard against the possible use of electronic transactions to facilitate money laundering through premium payments from unrelated third parties and different bank accounts.
Cash is a preferred mode of payment for money launderers.
Ipec said there is acceptance of cash premiums for life assurance products, and for the quarter under review, only four entities indicated 100 percent electronic transactions.
The Commission also underscored that control measures must be continuously improved; it’s not a once-off exercise.
It said life insurers must provide information on a quarterly basis detailing programmes to be undertaken to improve general AML controls, such as: a) board and senior management oversight.
“AML knowledge and awareness trainings or programmes to be conducted in the year, any scheduled reviews for AML/CFT policies and procedures, updating of institutional risk assessments, and record-keeping, among others.”
On the suspicious transaction reports (STRs) and cash transaction reports (CTRs), Ipec said from the Q1-2024 returns submitted, a total of 7 STRs were filed with the Financial Intelligence Unit by two life entities.
The Commission said it continues to check consistency between the number of STRs reported in the quarterly returns and those acknowledged as received by the FIU.
“This will help pick up possible mismatches due to misfiling by AML/CFT Compliance Officers, whereby they attach the old Excel template to the GoAML email instead of completing the STR template built within the GoAML system,” reads the Ipec report.
Meanwhile, Ipec said the life insurance industry has remained resilient, safe, and sound despite challenges relating to the operating environment, particularly inflation and exchange rate distortions.
“More needs to be done on product reforms and the introduction of new products that meet customer expectations as a way of reviving the long-term savings industry.
“The Commission remains committed to working with industry players and the government to ensure an inclusive, stable, sustainable, and growing industry,” reads the report.
