At Hyderabad December 29, 2010 Kunnel Prem

ICP 27 on Insurance Frauds and ICP 28 on AML/CFT

ICP 27 - Fraud 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 Compliance ICP -27 Contd…

 IRDA has come out with a circular on 8 th 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 Compliance ICP -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 Compliance ICP -27

ICP 28 Anti-Money Laundering, Combating the Financing of Terrorism (AML/CFT) 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 Criteria ICP -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 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 31 st 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 Compliance 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 24 th September 2010 Compliance 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 Compliance 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 implementation ICP -28 Contd…

 Validity and genuineness of KYC documents  Establishing source of income  System to check banned entities/individuals Deficiencies in AML/CFT implementation ICP -28

Thank You