Understanding the Revised AML/CFT regulations for the insurance sector

UNDERSTANDING THE REVISED AML/CFT REGULATIONS FOR THE INSURANCE SECTOR

 

SAM CHUKWUKA ONYEKA

NATIONAL INSURANCE COMMISSION

 

Outline

Introduction

History of the AML/CFT Regulations in the Insurance Industry

Current AML/CFT Regulations:

General Requirements

Specific Requirements: Insurers and Reinsurer

 Specific Requirements: Brokers

Sanctions Regime

Conclusion

Introduction

FATF Public Statement exiting Nigeria from the ICRG process required Nigeria to work with GIABA to address the remaining observed deficiencies in the AML/CFT regime.

Among the fundamental deficiencies observed by the FATF in the regime are relative weak regulations for implementing the regime

The revised AML/CFT Regulations are therefore critical for ensuring compliance with the extant AML/CFT regime.

Effective compliance with the Regulations requires that stakeholders should be sufficiently exposed to its provisions.

The objective of this paper to help the insurers and brokers to understand the requirements of the revised AML/CFT Regulations

History of the AML/CFT Regulations

 

First introduced in 2006 as KYC Guidelines and Guidance Notes, under the provisions of the Money Laundering (Provision) Act 2004.

Revised and reintroduced in 2011 as AML/CFT Guidelines for the Insurance Industry, under the provisions of the Money Laundering (Provision) Act 2011, and Terrorism Prevention Act 2011.

Further revised and reissued in 2012 as AML/CFT Guidelines for the Insurance Industry, to meet Due Diligence requirements of the FATF 40 Recommendations (R. 5 of the 2003 version). 

Revised again in 2013 as AML/CFT Regulations, under the Provisions of the Money Laundering (Prohibition) Act 2011(as amended) and Terrorism Prevention Act 2011(as amended).

Current  AML/CFT Regulations

 

Objective

 To promote, enhance and ensure compliance with extant AML/CFT legislations by the Insurance Industry in Nigeria.

General Requirements (r.3)

The regulations apply to all insurance institutions (Insurers, Reinsurers, Brokers and Loss Adjusters) and to all insurance transactions

Obligation to establish AML/CFT program applies to all insurance institutions

Obligation to comply with request made pursuant to extant AML/CFT legislations by NFIU and law enforcement agencies. Response must follow prescribed procedures that meet minimum standards including electronic data base, prompt search of record, prompt report of the outcome, protection and security and confidentiality of request.

General Requirements Cont’d.

Direct employee in writing to comply with the laws and regulations

Assure employees of protection from victimization for making confidential report

Quarterly compliance report

Filing of training schedule on or before 31^st December of the preceding year

No arrangement that enables charging or receiving premium in excess of the actual

CCO to designate a Sanctions desk Officer to always confirm and ascertain whether the name of a person or entity that wants to buy policy is in the sanctions list

Reference to Sanctions List before going into any business relationship

General Requirements Cont’d.

Report to the Commission on any action taken to ensure compliance with UNSCRs on terrorism and financing and proliferation of weapons of mass destruction, and the provisions of the Terrorism Prevention Regulations.

Identify and report to NFIU any proceed of crime

No business relationship with anonymous and fictitious person r.6

KYC r.7

Customer due diligence measures r.8

Requirements for on-boarding PEPs r.9

Specific Requirements: Insurers 

Establish electronic driven compliance program

Conduct Risk Classification of policyholders

All staffs and agents of an insurer attend a minimum of two trainings in a year

Monthly returns on transactions with PEPs (r.9)

Ensure that foreign subsidiaries comply with AML/CFT requirements

Designate and maintain Sanctions Desk r.3(10)

Payments of benefits under a Life Insurance  policy restricted (r.27)

 Specific Requirements: Brokers
 

AML/CFT program

AML/CFT training as condition for licence renewal. All staff of Insurance Brokers and Loss Adjusters to undergo at least one  AML/CFT training facilitated by a qualified person or consultant

Appoint Money laundering Reporting Officer who must be a Senior Management staff

Relationship with underwriters. Must volunteer relevant KYC information. Refusal will warrant insurer to render STR

Sanctions

Provides new sanctions regime:

N1m and N10, 000 for each day the offence continues,

Sanction against defaulting director/ staff (r.28)

Conclusion

Business environment is getting complex and only institutions that are able to manage their risks efficiently and in particular, AML/CFT risk will survive.

AML/CFT compliance is international obligation

All acts of non compliance attract sanction

 KYC requirements absolutely compulsory

Evidence of staff training condition for licence renewal

In line with FATF requirements, NAICOM will step up AML/CFT regulatory activities for Insurance Brokers.

Ongoing training is therefore recommended.

Questions