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

IRDAI vide ref no. IRDAI/IID/GDL/MISC/160/8/2022 dated August 1, 2022 has issued Master Guidelines on Anti-Money Laundering / Counter Financing of Terrorism (AML/CFT), 2022 (‘AML Guidelines’).

The AML Guidelines have consolidated and updated the “Anti-Money Laundering /Counter Financing of Terrorism (AML/CFT) – Guidelines for General Insurers” of February 7, 2013 (2013 Guidelines) and “Master Circular on Anti Money Laundering/Counter Financing of Terrorism for (AML/CFT) – Guidelines for Life Insurers” of September 28, 2015 (2015 Guidelines). In addition, the AML Guidelines have also repealed various circulars issued by the IRDAI in this regard.

The key highlights of the AML Guidelines are as follows:

• The Guidelines shall be applicable to all classes of Life, General or Health Insurance business carried out by the Insurers except Re-insurance business carried out by the ‘Indian Insurance Company’ or ‘foreign company’ in India and the same shall come into force with effect from November 1, 2022.
• Definitions have been introduced such as Aadhaar number, Authentication, Beneficial owner, Central KYC Records Registry (CKYCR), Client, Client Due Diligence, Designated Director, Digital KYC, KYC Templates, KYC Records, Offline verification, On-going Due Diligence, Officially valid document, Politically Exposed Persons (PEPs), Principal Officer, Suspicious Transaction, Video Based Identification Process.
• The AML Guidelines entrust the Insurer’s senior management with establishing “ internal policies, procedures, controls and compliance arrangement ” for prevention of money laundering and terrorist financing (AML/CFT Policies) and ensuring their effectiveness and compliance. These policies and procedures include client due diligence program, maintenance of records, compliance with relevant statutory and regulatory requirements and role of internal audit or compliance function to ensure compliance with AML/CFT Policies.
• 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 (wherever applicable) 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
• Beneficial ownership needs to be identified
• 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
• Notwithstanding the above, Insurers are required to ensure that no vulnerable cases go undetected, especially, where there is suspicion of money- laundering or terrorist financing, or where there are factors to indicate a higher risk, necessary due diligence will have to be carried out on such assignments and STR should be filed with FIU-IND, if necessary.
• Under all kinds of group Insurance, KYC of the group master policyholder/juridical person/legal entity, and the respective Beneficial Owners (BO), is required to be collected.
• Risk Assessment/ Categorization Risk Assessment on money laundering and terrorist financing to be carried out periodically to identify, assess and take effective measures to mitigate money laundering. 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.
• Insurers are required to follow: (i) “ Simplified due diligence ” where aggregate insurance premium is not more than Rs. 10,000/-, and (ii) “ Enhanced due diligence ” where high risk categories of clients are involved.
• Sharing KYC information with CKYCR Government of India has notified the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI), to act as, and to perform the functions of the CKYCR vide Gazette Notification No. S.O. 3183(E) dated November 26, 2015. Where a customer submits a ‘KYC identifier’ for KYC, Insurers shall retrieve the KYC records from CKYCR and the customer shall not be required to submit unless there is any change in KYC information. If the KYC identifier is not submitted by the client / customer, insurers shall search (with certain credentials) for the same on CKYCR portal and record the KYC identifier of the client/ customer, if available and in case the KYC identifier is not submitted by the client/customer or not available in the CKYCR portal, Insurer shall capture the KYC information in the prescribed KYC Template meant for ‘Individuals’ or ‘Legal Entities’, as the case may be. Insurer shall not use the KYC records of the client obtained from Central KYC Records registry for purposes other than verifying the identity or address of the client and should not transfer KYC records or any information contained therein to any third party unless authorised to do so by the client or IRDAI or by the Director (FIU-IND).
• Contracts with Politically Exposed Persons (PEPs)

It is emphasized that proposals of Politically Exposed Persons (PEPs) in particular should be examined by senior management. Insurers are directed to lay down appropriate on-going risk management procedures for identifying and applying enhanced due diligence measures on an on-going basis to PEPs and customers who are close relatives of PEPs.

• The AML Guidelines update the procedure specified earlier for implementation of §51A of Unlawful Activities (Prevention) Act 1967 (UAPA), and brings it in line with the Central Government’s order “Procedure for implementation of Section 51A of the Unlawful Activities (Prevention) Act, 1967” of 2 February 2021.
• 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.
• Annual Compliance Certificate as per the format provided in the Guidelines shall be submitted within 45 days from the end of Financial Year.
• 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

Adequate screening mechanism as a part of personnel recruitment/hiring shall be put in place. Training requirements for front line staffs, compliance staff, staff dealing with new customers, and ongoing training are also specified.

Source category: IRDAI

Attachments

• /2022/70_Master_Guidelines_on_AMLCFT_2022_(1).pdf