Draft Master Guidelines on Anti Money Laundering_Counter Financing of Terrorism (AML_CFT)

IRDAI has comprehensively reviewed the Master Guidelines on Anti Money Laundering/Counter Financing of Terrorism (AML/CFT), taking into consideration of extant PML Act and Rules and the dynamics of the insurance industry and has issued ‘Draft Master Guidelines on AML / CFT’ on June 01, 2022, inviting comments thereon latest by June 17, 2022.

Key highlights of the Draft Master Guidelines are as follows:

• Guidelines are applicable to all classes of Life, General or Health insurance businesses carried out by insurers except Re-insurance business carried out by the ‘Indian Insurance company’ or ‘foreign company’ in India.
• Definitions have been introduced such as Aadhaar number, Beneficial owner, Client, Client Due Diligence, Designated Director, Digital KYC, Offline verification, officially valid document, Video Based Identification Process, Specified Transaction, Politically Exposed Persons, etc,
• Insurers to establish and implement policies and procedures, and controls that effectively serve to prevent and impede Money Laundering (ML) and Terrorist Financing (TF) and shall carry out the following:
• Develop an AML/CFT program comprising of policies and procedures and ensure content of these guidelines are understood by all staff members/agents
• Review the AML/CFT program at least once in a year and the person doing such a review shall be different from one who has framed such policies and procedures
• Have in place a system for identifying, monitoring and reporting suspected ML or TF transactions to the law enforcement authorities
• Communication of policies, client due diligence measures, maintenance of records, compliance with statutory and regulatory requirements, role of internal audit or compliance function to ensure compliance, review of program etc.
• Appointment of a Designated Director and a Principal Officer
• A “Designated Director” and Principal Officer (PO) at a senior level and preferably not below the level of Head (Audit/Compliance)/Chief Risk Officer to be appointed to ensure overall compliance with the obligations imposed.
• Contact details and email id of the Designated Director and the Principal Officer or any changes thereon shall be communicated to IRDAI and FIU-IND within 7 days of its effect.
• Recruitment and Training
• Periodic risk management reviews to be conducted at least once in a year and the concept of AML/CFT to be part of in-house training curriculum for employees/ agents.
• Training requirements for new employees, Front-line staff/Agents, Processing staff Administration/Operations Supervisors and Managers and Ongoing training are also specified.
• Internal audit / inspection department shall verify compliance with the extant policies, procedures and controls related to ML activities atleast on an annual basis and reports should specifically comment on the robustness of the internal policies and processes in this regard and make constructive suggestions where necessary, to strengthen the policy and implementation aspects.
• KYC norms
• KYC process may be performed by following methods Aadhaar based KYC through offline verification OR Online Authentication OR Digital KYC OR Video Based Identification Process (VBIP) OR KYC identifier allotted to the client by the CKYCR OR By using officially valid document AND PAN/ Form 60 (if the premium amount aggregating to more than fifty thousand rupees in a financial year) and any other documents as may be required by the insurer
• It shall be ensured that the insurance being purchased should not be disproportionate to income/ asset of the customer
• In case of every new contract, necessary Client due diligence (CDD) with valid KYC of the customer/ client shall be done at the time of commencement of account-based relationship
• AML/ CFT requirements shall be applicable for even the existing customers/ clients, necessary CDD with valid KYC shall be done for the existing customers from time to time
• Provisions pertaining to verification at the time of payout/claim stage (redemption/ surrender/ partial withdrawal/ maturity/ death etc.) are specified
• Simplified Client Due Diligence to be applied in case of individual policies, where the aggregate insurance premium is not more than Rs. 10,000/ – per annum
• Guidelines/conditions with respect to Enhanced due diligence, sharing KYC information with Central KYC Registry(CKYCR), Periodic updations, Details to be uploaded on CKYCR if Verification/Authentication is being done using Aadhaar, Reliance on third party for KYC are also specified.
• Risk Assessment/ Categorization
• Risk Assessment on ML and TF to be carried out periodically at least once in a year to identify, assess and take effective measures to mitigate ML.
• Risk shall be classified into high risk and low risk, based on the individual’s profile and product profile and such risk assessment shall be documented and updated from time to time considering all relevant factors in determining level and type of mitigation to be applied. Individuals (other than High Net Worth) and entities whose identities and source of wealth can be easily identified and transactions in whose accounts by and large conform to the known profile may be categorized as low risk. Customers who are non-residents, high net worth individuals, trusts, charities, NGO’s and organizations receiving donations, companies having close family shareholding or beneficial ownership, firms with sleeping partners, politically exposed persons (PEPs) shall be categorized as High risk.
• It is emphasized that proposals of Politically Exposed Persons (PEPs) in particular should be examined by senior management, not below the level of Head (underwriting) /Chief Risk Officer.
• Enhanced due diligence measures should to be adopted on an on-going basis to PEPs, customers who are close relatives of PEPs and contracts in which PEP is the ultimate beneficial owner.
• Insurers shall have in place procedures to manage specific increased risks associated with non face-to-face business relationships brought through development of new product, practices and technologies etc.
• Guidelines captures the silent aspect of the Order issued by the Central government dated August 27, 2009 detailing the procedure for implementation of Section 51A of Unlawful Activities (Prevention) Act, 1967 (UAPA) with respect to insurance sector.
• Obligations applicable to the insurers with respect to contracts emanating from countries identified as deficient in AML/CFT regime are listed specifically.
• Reporting of Suspicious Transactions Report (STR), Cash Transactions Report (CTR), to FIU-IND within prescribed timelines shall be ensured and higher authorities of the insurers shall monitor the reporting
• Information such as nature of the transactions, amount and currency denomination, date and parties to the transaction are required to be maintained and preserved as per PML rules.
• It is advised to specify internal threshold limits for each class of client accounts and to pay special attention to transactions which exceeds these limits.
• The insurers may excerisize exemptions/ relaxations from the stipulated KYC norms in certain conditions as specified in the Guidelines.:

Source category: IRDAI

Attachments

• /2022/48_Circular.pdf
• /2022/48_DRAFTM~1.PDF