Context
The Global Federation of Insurance Associations (GFIA) is an international body set up to increase industry effectiveness in providing input to international regulatory bodies. In the UK its members include the ABI, Lloyd’s and the International Underwriting Association of London (IUA). The organisation has recently released a position paper which sets out its view that any new rules to fight money laundering/terrorism financing (ML/TF) should cover life insurance only and not general insurance.
Key points to note
- GFIA believes that anti-money laundering rules should not be applied to general insurance.
- In its position paper, GFIA sets out its belief that the risk-based approach promoted by the Financial Action Task Force (FATF) is the correct one to take in any standards regarding anti-money laundering and counter terrorism financing (AML/CTF).
- This would mean restricting any measures put in place to fight ML/TF to the life insurance business which GFIA views as the only one with exposure to ML/TF risks.
- GFIA key considerations about the risk of general insurance in relation to AML/CFT included:
- General insurance is governed by the principle that premiums are not refunded, except in circumstances of adjustment, and payments are only due in the event of covered claims, so the primary risk exposure is fraud.
- FATF guidance recognises that there is very little risk that general insurance will be used for nefarious purposes and general insurance has been consciously excluded from the FATF recommendations. Supervisory and corporate resources should not be directed towards a sector where the risk of money laundering or terrorist financing is, low.
- The national risk assessments (NRAs) across member states do not provide sufficient evidence that the current approach has been ineffective.
- The EU’s own risk assessment concludes that “non-life insurance is not used for money laundering purposes, as it requires a degree of planning and expertise that make it relatively unattractive.”
- GFIA concludes its position paper by saying that there is no evidence to justify extending AML/CFT rules to general insurance, but a compelling case for not extending them to general insurance.
Next actions
None – for information only