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The offence under Proceeds of Crime Act (POCA) relates to any activity involving criminal or terrorist property. This is a much broader definition than the commonly understood definition of money laundering. A business can commit an offence under POCA by unwittingly facilitating an act of fraud.

General Insurance is regarded as being a greater risk of fraudulent claims, rather than the conduit for the proceeds of crime or money laundering. The implementation of risk management can be a simple process depending on the range of products on offer and should be linked to the profile of the customer.

Insurers who offer life products will need to undertake Customer Due Diligence and the nature of each type of category of products gives rise to different levels of risk (Protection, Pensions and Investments). Some will only pay out on death or illness, whilst others are accessible only after many years of contribution.   The following are features which may tend to increase the risk profile of a product:  

  • Accept cash payments
  • Accept overpayments
  • Be traded on a secondary market
  • Accept payments or receipts from third parties
  • Accept frequent payments (outside of a normal regular premium policy)
  • Be used as collateral for a loan and/or written in a discretionary or other increased risk trust
  • Accept very high value or unlimited value payments or large volumes of lower value payments
  • Provide significant flexibility as to how investments are managed to be liquidated quickly (via surrender or partial withdrawal) and without prohibitive financial loss

The following are features that may tend to reduce the risk profile of a product:

  • Restricted capacity to accept third party receipts or make third party payments;
  • Have total investment curtailed at a low value due to either the law or a firm’s policy;
  • Be relatively small value regular premium policies that can only be paid via direct debit;
  • Require the launderer to establish more than one relationship with a firm or another official
  • Body (e.g., certain types of pension products where the customer has to set up the product with the provider and to get HMRC approval and possibly appoint a Pensioner Trustee);
  • Have no investment value and only pay out against a certain event (death, illness etc) that can be checked by the Product Provider; and/or be linked to known legitimate employment.

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Investment Management includes both discretionary and advisory management of segregated portfolios of assets (securities, derivatives, cash, property etc) for the firm's customers. In terms of money laundering risk, there is very little difference between discretionary and advisory Investment Management. In both cases, the firm may itself physically handle incoming and outgoing funds, or IT may be done entirely by the client’s Custodian.

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The recommended industry standard for Pension Products is to apply simplified Due Diligence. Therefore apart from on-going monitoring for Sanction and PEPs, initial Customer Due Diligence does not apply to either the Customer or the Scheme.

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