The following contains an excerpt from Kaplan’s Anti-Money Laundering Rules for Insurance Companies course for Insurance Continuing Education.
Updated: October 30, 2018
Today, money laundering is becoming an increasingly international and complex crime because of the rapid advances in technology and the globalization of financial services. Financial systems allow criminals to transfer millions of dollars instantly through computers and satellites. In addition to banks, money is now laundered through currency exchanges, stock brokerages, gold dealers, casinos, automobile dealerships, as well as insurance companies.
The insurance industry is attractive to money launderers because insurance products are often sold by independent agents or brokers who do not work directly for insurance companies. The agents and brokers are often unaware of the need to screen clients or to question payment methods. In some cases, such agents and brokers have even joined criminals against insurers to facilitate money laundering.
Most financial transactions leave a trail that connects a person to the funds. In an illegal financial transaction, money laundering is used to hide the trail.
So, what is money laundering? Money laundering is a process that criminals use to make dirty money—that is, money derived from illegal drug, terrorist, or other criminal activities—clean money, that is, legitimate money.
The term money laundering conveys a perfect visual picture of what actually takes place. Illegal money is put through a cycle of transactions designed to hide the source of the funds and make them clean or legitimate. Money laundering is similar to washing clothes—you put in dirty clothes and after being washed, the clothes are clean. Laundered funds can then be used without restriction.
For example, a life insurance policy that can be cashed in is an attractive money laundering vehicle because it allows criminals to put dirty money in and take clean money out in the form of an insurance company check.
This illegal money is derived from criminal activities such as the following:
Let’s look at some examples of potentially suspicious activities insurance professionals may encounter that could be an indication of money laundering or terrorist financing activities.
Among all the things an insurance agent does, reporting such suspicious activities is a the top of the list. However, there is no need to determine whether the transactions are, in fact, linked to money laundering, terrorist financing, or some other crime. That is a matter better left to those with experience in such matters.
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