Under the new AML guidelines (“New Guidelines”), licensed financial institutions in the insurance sector are now required to be vigilant in matters of life insurance and other related insurance products and are further required to monitor and report suspected incidences of money laundering. The New Guidelines are not exhaustive; as the insurance operators may perform their own assessment in a manner which they think may be effective in accordance with their statutory obligations. These New Guidelines shall be applicable to all insurance, re-insurance companies, agents and brokers that are licensed and supervised by the Central Bank of UAE (“CBUAE”).
The New Guidelines have already come into effect as per the CBUAE regulations. Our team provides below a synopsis of what’s required under the New Guidelines and what to expect in the days to come in this sector.
The insurance sector typically offers a range of products and services coupled with various investment wrappers based on the type of product. In a typical insurance transaction, there will usually be a number of stakeholders interested in the underwritten risk. Such type of dynamic products and services are amongst a number of reasons criminal actors would seek to utilise the insurance process to place illicit proceeds into the financial system. The New Guidelines issued by CBUAE are designed to improve efforts to implement preventive measures that will identify, assess, manage and mitigate the risks of AML and CFT in the UAE.
Key developments under the New Guidelines:
Risk-based approach and enterprise risk assessment: The insurance operator is required to perform, document and keep up to date an enterprise risk assessment to identify, assess and understand the potential risks.
New products, practices and technologies: Before the launching of a new product or using a new practice and technology, the insurance operator must undertake risk assessment, and take appropriate measures to mitigate the identified risks.
Customer Due Diligence: The insurance operator must conduct customer identification and verification of all its customers before establishing a business relationship. As an alternative, if there is no suspicion and the risk is low, the insurance operator may complete the verification soon after establishing business relationship as the onus is on the licensed entity to conduct due diligence on an ongoing basis.
Transaction Monitoring: Under the New Guidelines, the insurance operator must monitor activity by all customers to identify behaviour that is potentially suspicious and that may need to be subject of Suspicious Transaction Report (STR) or Suspicious Activity Report (SAR). If the insurance operator has reasonable grounds to suspect a transaction, they must file a STR or SAR without any delay with the UAE Financial Intelligence Unit (FIU).
In addition to the above key points, the New Guidelines also require the insurance operators to keep all the records, data, information, risk assessments, including STRs and SARs, for at least five (5) years from the date of completion of the transaction or termination of the business relationship with the customer.
The New Guidelines from the UAECB are a welcome step in the jurisdiction in terms of tightening the access that criminal networks may have in terms of money laundering while also improving UAE’s status as a transparent jurisdiction.