At HyderabadDecember 29, 2010

Kunnel Prem

ICP 27 on Insurance Fraudsand

ICP 28 on AML/CFT

The supervisory authority requires that insurers and intermediaries take the necessary measures to prevent, detect and remedy insurance fraud.

Supervisor to be equipped with powers of enforcement to detect, deter, record, report and remedy frauds

Existence of legislation to address frauds

Claims fraud is a punishable offence

ICP -27

Contd…

Supervisor requires insurers/ intermediaries to ensure high standards of integrity and effective procedures to control frauds

Supervisor requires that insurers/ intermediaries allocate appropriate resources and effectively implement procedures and controls to deter, detect, record, and report fraud to the appropriate authorities

ICP -27

Contd…

Supervisor ensures that effective measures to prevent frauds are taken by insurers including training to staff, sharing of information etc

Supervisor cooperates with counterparts including those in other jurisdictions in countering fraud

ICP -27

Section 14 of IRDA Act,1999 & Sections 33,34,114A of the Insurance Act,1938 vest the authority with powers to establish and enforce regulations

Section 42 empowers the Authority to cancel the licence of an agent on grounds of fraud

ICP -27

Contd…

Section 44 of the Act prohibits payment of renewal commission to agents who are found guilty of frauds.

Section 45 allows the insurer to reject a claim on grounds of fraud with proper evidence

ComplianceComplianceICP -27

Contd…

IRDA has come out with a circular on 8th December 2010 that lays out the framework with regard to sharing of information

IRDA is working on specific guidelines to be issued with regard to frauds

ComplianceComplianceICP -27

Contd…

Insurance companies may however examine this aspect from the perspective of having appropriate resources and effective procedures to combat frauds

Creation of a data base on frauds with cause/source, financial/non financial to be initiated

ComplianceComplianceICP -27

The supervisory authority requires insurers and intermediaries, at a minimum those insurers and intermediaries to take effective measures to deter, detect and report money laundering and the financing of terrorism consistent with the Recommendations of the Financial Action Task Force on Money Laundering (FATF).

AML/CFT Legislation and supervisory activities should be in alignment with FATF Standards

Supervisor has adequate powers to supervise and enforce compliance with the AML/CFT requirements

ICP -28

Contd…

Supervisor is empowered to take measures to prevent criminals from holding a beneficial ownership in a insurance company/intermediation

Supervisor has appropriate authority to co-operate with the Financial Intelligence Unit (FIU),domestic enforcement authorities and domestic/foreign supervisors for AML/CFT purposes

Essential CriteriaEssential CriteriaICP -28

Contd…

Supervisor has adequate financial, human and technical resources for AML/CFT monitoring

Supervisors require insurers and intermediaries to comply with AML/CFT requirements

Essential CriteriaEssential Criteria

ICP -28

Contd…

Compliance with AML/CFT Requirements like Performing customer due diligence Enhanced measures for high risk profiles Maintaining business records and CDD data Monitoring for complex,large,unusual

transactions without economic or lawful purpose

Reporting suspicious transactions to FIU Developing internal procedures/controls to

combat money laundering and terrorist financing Ensuring that foreign offices observe AML/CFT

measures consistent with home jurisdiction requirements

ICP -28

Evaluation of the country on compliance to AML/CFT standards was conducted by the FATF/APG team in December 2009

India was granted membership of the FATF in June 2010

Action plan on the deficiencies with a specific timeframe has been submitted to the FATF

ICP -28

Contd…

Guidelines on AML were issued on 31st March 2006

All insurance companies are required to have a AML program which lays out procedures, controls, internal audit functions, etc. in conformity with the legislation

CompliancCompliancee

ICP -28

Contd…

Clarifications and additional guidelines were issued subsequently based on deficiencies in implementation as well as legislation

Two Master circulars have been issued – the latest on 24th September 2010

CompliancCompliancee

ICP -28

Contd…

Off site/On site inspections of life/non-life insurance companies have been conducted

Guidelines are applicable to insurance companies, individual agents & corp. agents

CompliancCompliancee

ICP -28

Contd…

ICP -28

Insurers are advised to classify risk as high/low based on customer/ product profile

Reporting of suspicious transactions to FIU has been mandated

Acceptance of cash beyond thresholds

Controls to be strengthened to ensure that thresholds are maintained on remitter basis

Reporting to FIU within stipulated time frame

Contd…

ICP -28

Incorporating changes in legislation, plugging deficiencies through annual review of AML Policy

Exercising higher due diligence during assignments

Deficiencies in AML/CFT Deficiencies in AML/CFT implementationimplementation

ICP -28

Contd…

Validity and genuineness of KYC documents

Establishing source of income

System to check banned entities/individuals

Deficiencies in AML/CFT Deficiencies in AML/CFT implementationimplementation

ICP -28

Thank You