Document Detail

Title: To The CEOs/CMDs of General Insurance Companies

Reference No.: IRDA/SDD/GDL/CIR/020/02/2013

Date: 08/02/2013

Anti-Money Laundering /Counter Financing of Terrorism (AML/CFT)-Guidelines

The Guidelines on Anti-Money laundering /Counter Financing of Terrorism (AML/CFT) were issued under Section 34 of the Insurance Act, 1938 on 31^st March 2006. The Guidelines were made applicable to general insurance companies in the modified form effective from 1^st January 2007.

2. Based on various representations received from the industry in the matter, some of the stipulations, as applicable to the general insurance companies have been reviewed and revised in consultation with General Insurance Council.

3. The enclosed circular supersedes all the earlier circulars on AML/CFT guidelines, as applicable to the General Insurance Companies. The revised stipulations, wherever incorporated are effective from 1^st April 2013.

4. Insurance companies are advised to amend their AML/CFT policy suitably and ensure compliance.

(R.K. Nair)

Member (F&I)

Anti-Money Laundering/Counter Financing of Terrorism (AML/CFT)

Guidelines for the General Insurance Companies

Insurance Regulatory and Development Authority

Parishram Bhavan, 3^rd Floor,

Basheerbagh,

Hyderabad – 500 004

Phone No: +91-40-23381300

Fax No: +91-40-66823334

Anti Money Laundering/Counter Financing of Terrorism (AML/CFT) –Guidelines for General Insurers

Index

Particulars	Page No.
I. Background:	1
II. What is Money Laundering?	1
III. AML/CFT Program	2
1. Internal policies, procedures, and controls	3
1.1 Know Your Customer (KYC) Norms	3
1.1.1 What are KYC Norms?	3
1.1.2 When should KYC be done?	5
1.1.3 Risk Assessment and Exempt Products	5
1.2 Implementation of Section 51A of UAPA	6
i. Procedure for freezing of insurance policies of ‘designated individuals/entities’	6
ii. Procedure for unfreezing of insurance policies of individuals/entities inadvertently affected by the freezing mechanism, upon verification that the individual/ entity is not a designated individual/entity	8
iii. Implementation of requests received from foreign countries under U.N. Security Council Resolution 1373 of 2001	8
1.3 Reporting Obligations:	9
i. Suspicious Transactions Reports	9
ii. Monitoring and Reporting of Cash Transactions	10
iii. Reporting of receipts by Non-Profit Organisations	11
iv. Reporting of Counterfeit Currency/Forged Bank notes (CCR)	11
1.4 Record Keeping	11
2. Compliance Arrangements	13
i. AML/CFT Policy	13
ii. Responsibility on behalf of the agents and corporate agents	13
iii. Appointment of Principal Compliance Officer	13
3. Recruitment and Training of employees/agents	14
4. Internal Control/Audit	15
Annexure I Customer Identification Procedure	16
Annexure II Vulnerable Products/Features	19
Annexure III Illustrative list of Suspicious Transactions	20
Annexure IV List of Circulars	21

Anti Money Laundering/Counter Financing of Terrorism (AML/CFT) –Guidelines for General Insurers

I. Background:

1 The Prevention of Money Laundering Act (PMLA), 2002 brought into force with effect from 1^st July 2005, is applicable to all the financial institutions which include insurance institutions. The application of anti-money laundering measures to non-depository financial institutions generally, and to the insurance companies in particular, has also been emphasized by international regulatory agencies as a key element in combating money laundering. Establishment of anti money laundering programs by financial institutions is one of the central recommendations of the Financial Action Task Force (FATF) and also forms part of the Insurance Core Principles (ICPs) of the International Association of Insurance Supervisors (IAIS). Accordingly, the Authority has decided to put in place the following regulatory guidelines/instructions to the Insurers, Agents and Corporate agents as part of a Programme on Anti Money Laundering/Counter Financing of Terrorism (AML/CFT) for the insurance sector.

2 Insurers offer a variety of products aimed at transferring the financial risk of a certain event from the insured to the insurer. These products include life insurance contracts, annuity contracts, non-life insurance contracts, and health insurance contracts. These products are offered to the public through trained agents of the insurance companies and also through a number of alternate distribution channels like direct marketing, bancassurance etc. The guidelines are therefore of importance to the agents and corporate agents also, to the extent indicated in the guidelines.

3 The obligation to establish an anti-money laundering program applies to an insurance company. The responsibility for guarding against insurance products being used to launder unlawfully derived funds or to finance terrorist acts, lies on the insurance company, which develops and bears the risks of its products.

II. What is Money Laundering?

1 Money Laundering is moving illegally acquired cash through financial systems so that it appears to be legally acquired.

2 There are three common stages of money laundering as detailed below which are resorted to by the launderers. The insurance institutions may unwittingly get exposed to a potential criminal activity while undertaking normal business transactions.

· Placement - the physical disposal of cash proceeds derived from illegal activity;

· Layering - separating illicit proceeds from their source by creating complex layers of financial transactions designed to disguise the source of money, subvert the audit trail and provide anonymity; and

· Integration - creating the impression of apparent legitimacy to criminally derived wealth.

3 If the layering process has succeeded, integration schemes place the laundered proceeds back into the economy in such a way that they re-enter the financial system appearing to be normal business funds. Financial institutions such as insurers are therefore placed with a statutory duty to make a disclosure to the authorized officer when knowing or suspecting that any property, in whole or in part, directly or indirectly, representing the proceeds of drug trafficking or of a predicated offence, or was/ is intended to be used in that connection, is passing through the institution. Such disclosures are protected by law, enabling the person with information to be able to disclose the same without any fear. Insurance institutions likewise need not fear breaching their duty of confidentiality owed to customers.

III. AML/CFT Program

In order to discharge the statutory responsibility to detect possible attempts of money laundering or financing of terrorism, every insurer needs to have an AML/CFT program which should, at a minimum, include:

1. Internal policies, procedures, and controls;

2. Appointment of a Principal compliance officer;

3. Recruitment and training of employees/agents;

4. Internal Control/Audit;

The above key elements of the AML/CFT programme are discussed in detail:

1. Internal policies, procedures, and controls:

Each insurance company has to establish and implement policies, procedures, and internal controls in its AML/CFT program, as detailed below:

1.1 Know Your Customer (KYC) Norms

1.1.1 What are KYC Norms?

i. Considering the potential threat of usage of the financial services by a money launderer, insurance company should make reasonable efforts to determine the true identity of customers. For the purposes of these norms, the term customer also refers to the proposer/policyholder; beneficiaries and assignee. Where a client is a juridical person, verification of identity is required to be carried out on persons purporting to act and is authorized to act on behalf of a customer. Special care has to be exercised to ensure that the contracts are not anonymous or under fictitious names.

ii. Insurers shall verify and document identity, address and recent photograph (in case of individual customers) as part of compliance with KYC norms. A list of documents to be verified under KYC norms for individuals and others is given in Annexure I (which may be treated as illustrative only). No further documentation is necessary for proof of residence where the document of identity submitted also gives the proof of residence. Any document that is accepted by the Insurer should be such that it would satisfy regulatory/enforcement authorities, if need be at a future date that due diligence was in fact observed by the insurer in compliance with the guidelines and the PML Act.

iii. Insurance premium paid by persons other than the person insured should be looked into to establish insurable interest.

iv. Care has to be exercised to avoid unwitting involvement in insuring assets bought out of illegal funds. It is imperative to ensure that the insurance being purchased is reasonable, especially in other than products like motor insurance that are mandated by law. Accordingly, customer’s source of funds, his estimated net worth etc., could be documented where considered necessary. Proposal form may also have questionnaires/declarations on sources of fund. Insurers should take appropriate measures, commensurate with the assessed risk of customer and product profile as part of their due diligence measures which may include:

· conducting independent enquiries on the details collected on /provided by the customer where required,

· consulting a credible database public or other etc.,

Relevant records and details must be maintained in such a way that it enables verification at a later date and support the fact of having established sources of funds involved in the insurance contract.

v. At any point in time during the contract period, where an insurance company is no longer satisfied that it knows the true identity of the customer, an STR should be filed with FIU-IND.

vi. Insurers are advised to maintain an updated list of designated individuals/entities in electronic form and run a check on the given parameters on a regular basis to verify whether designated individuals/ entities are holding any insurance policies with the company. An updated list of individual and entities which are subject to various sanction measures as approved by Security Council Committee established pursuant to UNSC 1267 can be accessed in the United Nations website at http://www.un.org/sc/committees/1267/consolist.shtml (Refer to para 1.2 below)

vii. Insurers are required to conduct detailed due diligence while taking insurance risk exposure to individuals/entities connected with countries identified by FATF as having deficiencies in their AML/CFT regime. Special attention should be paid to business relationships and transactions, especially those which do not have apparent economic or visible lawful purpose. In all such cases, the background and purpose of such transactions will as far as possible, have to be examined and written findings maintained for assisting competent authorities. Agents/ Corporate agents will have to be appropriately alerted to ensure compliance with this stipulation. While using the FATF Public Statements being circulated through the insurance councils, insurers should go beyond the FATF statements and consider publicly available information when identifying countries which do not or insufficiently apply the FATF Recommendations.

viii. Similar measures shall be applied on countries considered as high risk from terrorist financing or money laundering perspective based on prior experiences, transaction history or other factors (e.g., legal considerations, or allegations of official corruption)

1.1.2 When should KYC be done?

Considering the vulnerability of general insurance products to threats of money laundering at the claims stage, general insurance companies are required to carry out KYC norms at the settlement stage where claim payout/premium refund crosses a threshold of ` One lakh per claim/premium refund. In cases where payments are made to third party service providers such as hospitals/ garages/ repairers etc., the KYC norms shall apply on the customers on whose behalf service providers act.

The AML/CFT checks become more important in case of claims on the policies assigned by the policyholder to a third party not related to him (except where the assignment is to Banks/FIs/Capital Market intermediaries regulated by IRDA/RBI/SEBI). Notwithstanding the above, insurers are required to ensure that no vulnerable cases go undetected. Especially where there is suspicion of money laundering or terrorist financing, or where there are factors to indicate a higher risk, AML/CFT checks will have to be carried out on such assignments and STR should be filed with FIU-IND, if necessary.

1.1.3 Risk Assessment and Exempt Products:

The AML/CFT requirements focus on the vulnerability of the products offered by the insurers to any of the process of money laundering. Insurers shall carry out risk assessment of various products before deciding on the extent of due diligence measures to be applied in each case. An illustrative list of such vulnerable products/services are given in Annexure II

The hitherto, exempt standalone health/medi-claim policies shall also be brought under the purview of AML/CFT requirements based on the assessed risks associated with each of the product profile.

Based on the vulnerability criterion and after examining the product and business coverage the following products are exempt from the purview of AML/CFT requirements:

· Reinsurance and retrocession contracts where the treaties are between insurance companies for reallocation of risks within the insurance industry and do not involve transactions with customers

· Group insurance businesses which are typically issued (as per guidelines on group insurance policies) to a company,financial institution, or association and generally restrict the ability ofan individual insured / participant to manipulate

1.2 Implementation of Section 51A of UAPA:

By virtue of Section 51A of UAPA, the Central Government is empowered to freeze, seize or attach funds of and/or prevent entry into or transit through India any individual or entities that are suspected to be engaged in terrorism. To implement the said section an order reference F. No. 17015/10/2002-IS-VI dated 27^th August, 2009 has been issued by the Government of India. The salient aspects of the order with particular reference to insurance sector are detailed in the following paragraphs.

Communication under this section shall be addressed to Dr. Mamta Suri, Joint Director, Sectoral Development Department, Insurance Regulatory and Development Authority, 3rd Floor, Parishram Bhavan, Bashir Bagh, Hyderabad-500 004 E-mail: mamta at irda dot gov dot in; Telephone: 040 23381173; Fax: 040 6682 3334

A consolidated list of all the UAPA Nodal Officers of various agencies governed by the order will be circulated every year and on every change in the list, on receipt of the same from Ministry of Home Affairs.

i. Procedure for freezing of insurance policies of ‘designated individuals/entities’

In case any matching records are identified, the procedure required to be adopted is as follows:

Insurance companies shall immediately and in any case within 24 hours from the time of identifying a match, inform full particulars of the insurance policies held by such a customer on their books to the Joint Secretary (IS-I), Ministry of Home Affairs, at Fax No.011-23092569 and also convey over telephone on 011-23092736. The particulars apart from being sent by post should necessarily be conveyed on e-mail id: jsis at nic dot in.

The insurance companies shall also send a copy of the communication mentioned in 1.2(i) (a) above to the UAPA Nodal Officer of the State/UT where the account is held, IRDA and FIU-IND.

In case, the match of any of the customers with the particulars of designated individuals/entities is beyond doubt, insurance companies would prevent designated individuals/entities from conducting any transactions, under intimation to the Joint Secretary (IS-I), Ministry of Home Affairs at Fax no. 011-23092569 and also convey over telephone on 011-23092736. The particulars apart from being sent by post should necessarily be conveyed on e-mail id: jsis at nic dot in.

The insurance companies shall file a Suspicious Transaction Report (STR) with FIU-IND in respect of the insurance policies covered by paragraph 1.2(i) (a) above, carried through or attempted, in the prescribed format.

On receipt of the particulars of suspected designated individual/entities IS-I Division of MHA would cause a verification to be conducted by the State Police and/or the Central Agencies so as to ensure that the individuals/entities identified by the insurance companies are the ones listed as designated individuals/entities and the insurance policies, reported by insurance companies are held by the designated individuals/entities.

In case, the results of the verification indicate that the insurance policies are owned by or are held for the benefit of the designated individuals/entities, an order to freeze these insurance policies under section 51A of the UAPA would be issued within 24 hours of such verification and conveyed electronically to the concerned office of insurance company under intimation to IRDA and FIU-IND.

The said order shall take place without prior notice to the designated individuals/entities.

‘Freezing of insurance contracts’ would require not-permitting any transaction (financial or otherwise), against the specific contract in question.

ii. Procedure for unfreezing of insurance policies of individuals/entities inadvertently affected by the freezing mechanism, upon verification that the individual/ entity is not a designated individual/entity

Any individual or entity, if they have evidence to prove that the insurance policies, owned/held by them has been inadvertently frozen, shall move an application giving the requisite evidence, in writing, to the concerned insurance companies.

The insurance companies shall inform and forward a copy of the application together with full details of the insurance policies inadvertently frozen as given by any individual or entity, to the Nodal Officer of IS-I Division of MHA within two working days.

The Joint Secretary (IS-I), MHA, the Nodal Officer for IS-I Division of MHA shall cause such verification as may be required on the basis of the evidence furnished by the individual/entity and if he is satisfied, he shall pass an order, within 15 working days, unfreezing the insurance policies owned/held by such applicant, under intimation to the concerned insurance company. However, if it is not possible for any reason to pass an Order unfreezing the assets within 15 working days, the Nodal Officer of IS-I Division shall inform the applicant.

iii. Implementation of requests received from foreign countries under U.N. Security Council Resolution 1373 of 2001

U.N. Security Council Resolution 1373 obligates countries to freeze without delay the funds or other assets of persons who commit, or attempt to commit, terrorist acts or participate in or facilitate the commission of terrorist acts; of entities owned or controlled directly or indirectly by such persons; and of persons and entities acting on behalf of, or at the direction of such persons and entities, including funds or other assets, derived or generated from property owned or controlled, directly or indirectly, by such persons and associated persons and entities.

To give effect to the requests of foreign countries under U.N. Security Council Resolution 1373, the Ministry of External Affairs shall examine the requests made by the foreign countries and forward it electronically, with their comments, to the UAPA Nodal Officer for IS-I Division for freezing of funds or other assets.

The UAPA Nodal Officer of IS-I Division of MHA, shall cause the request to be examined, within 5 working days, so as to satisfy itself that on the basis of applicable legal principles, the requested designation is supported by reasonable grounds, or a reasonable basis, to suspect or believe that the proposed designee is a terrorist, one who finances terrorism or a terrorist organization, and upon his satisfaction, request would be electronically forwarded to the Nodal Officer in IRDA. The proposed designee, as mentioned above would be treated as designated individuals/entities.

Upon receipt of the requests by these Nodal Officers from the UAPA Nodal Officer of IS-I Division, the list would be forwarded to insurance companies and the procedure as enumerated at paragraphs 1.2 (i) on freezing of insurance policies shall be followed.

The freezing orders shall take place without prior notice to the designated persons involved.

IRDA would communicate all Orders under section 51A of UAPA relating to insurance policies, to all the insurance companies after receipt of the same from IS-I Division of MHA.

A list of individuals and entities subject to UN sanction measures under UNSC Resolutions (hereinafter referred to as ‘designated individuals/entities’) received from the Ministry of External Affairs (MEA) would be circulated to the insurance companies through the Councils.

1.3 Reporting Obligations:

The AML/CFT program envisages submission of Reports on certain transactions to a Financial Intelligence Unit-India (FIU-IND) set up by the Government of India to track possible money laundering attempts and for further investigation and action.

i. Suspicious Transactions Reports:

a. Suspicious activity monitoring program should be appropriate to the company and the products it sells. Special attention should be paid to all complex, unusually large transactions and all unusual patterns which have no apparent economic or visible lawful purpose. Background of such transactions, including all documents /office records /memorandums pertaining to such transactions, as far as possible, should be examined by the Principal Compliance Officer (refer para 2 (iii) ) for recording his findings. These records are required to be preserved for ten years as indicated in clause 1.4.

An illustrative list of suspicious transactions is provided in AnnexureIII.

Insurance companies should report the suspicious transactions immediately on identification. Such reports should include attempted transactions, whether or not made in cash, irrespective of the monetary value involved. When such transactions are identified post facto the contract, a statement may be submitted to FIU-IND within 7 working days of identification in the prescribed formats.

Directors, officers and employees (permanent and temporary) shall be prohibited from disclosing the fact that a Suspicious Transactions Report or related information of a policyholder/prospect is being reported or provided to the FIU-IND.

ii. Monitoring and Reporting of Cash Transactions:

a. With a view to ensuring that premiums are paid out of clearly identifiable sources of funds, premium/proposal deposits remittances in cash beyond ` 50000/- per transaction shall be accepted subject to the customer quoting PAN. Insurers shall verify the authenticity of the details of PAN so obtained. In case of customers not required to have PAN or with only agricultural income, Form 60/61 prescribed under the provisions of Income Tax Rules shall be obtained.

b. From the perspective of AML/CFT guidelines, it becomes imperative to obtain the details of PAN of the person/entity funding the premium/proposal deposit on an insurance policy.

c. Any cash transaction above ` 10 lakh and integrally connected cash transactions above ` 10 lakh per month shall be reported to FIU-IND by 15th of the succeeding month

d. Premium collected from various customers and remitted by intermediaries is however, excluded from these reporting requirements.

e. Insurers shall lay down proper mechanisms to check any kind of attempts to avoid disclosure of PAN details. In case of possible attempts to circumvent the requirements, the same shall be reviewed from the angle of suspicious activities and shall be reported to FIU-IND, if required.

f. The above clauses should not be selectively interpreted on individual transaction basis. Splitting of the insurance policies/issue of number of policies to one or more entities facilitating individuals to defeat the spirit of the AML/CFT guidelines should be avoided. Where there is possibility of transactions being integrated through a single remitter, the insurer should refuse to accede to the requests for cash deposits.

iii. Reporting of receipts by Non-Profit Organisations :

All transactions, involving receipts by non-profit organizations of value more than ` 10 lakh, or its equivalent in foreign currency, should be reported to FIU-IND by 15^th day of next succeeding month.

iv. Reporting of Counterfeit Currency/Forged Bank notes (CCR):

All cash transactions, where forged or counterfeit currency notes or bank notes have been used as genuine and where any forgery of a valuable security or a document has taken place facilitating the transaction should be reported within 7 days of identification to FIU-IND.

1.4 Record Keeping

i. The insurer/agents/corporate agents are required to maintain the records of types of transactions mentioned under Rule 3 of PMLA Rules 2005 as well as those relating to the verification of identity of clients for a period of 10 years. The records referred to in the said Rule 3 shall be maintained for a period of ten years from the date of transaction. Records pertaining to all other transactions, (for which insurance companies are obliged to maintain records under other applicable Legislations/ Regulations/ Rules) insurance companies are directed to retain records as provided in the said Legislation/Regulations/Rules but not less than a period of ten years from the date of end of the business relationship with the customer. Records can also be in electronic form.

ii. Sharing of information on customers may be permitted between different organisations such as banks, insurance companies, Income tax authorities, local government authorities on request.

iii. Insurance institutions should implement specific procedures for retaining internal records of transactions both domestic or international, to enable them to comply swiftly with information requests from the competent authorities. Such records must be sufficient to permit reconstruction of individual transactions (including the amounts and types of currency involved (if any) so as to provide, if necessary, evidence for prosecution of criminal activity. In the case of long term insurance, full documentary evidence is usually retained based on material completed at the initiation of the proposal of the contract, together with evidence of processing of the contract up to the point of maturity.

iv. Companies should retain the records of those contracts, which have been settled by claim (maturity or death), surrender or cancellation, for a period of at least 10 years after that settlement.

v. In situation where the records relate to ongoing investigations, or transactions which have been the subject of a disclosure, they should be retained until it is confirmed that the case has been closed where practicable, insurance institutions are requested to seek and retain relevant identification documents for all such transactions and to report the offer of suspicious funds.

vi. In case of customer identification data obtained through the customer due diligence process, account files and business correspondence should be retained for at least 10 years after the business relationship is ended.

2. Compliance Arrangements:

i. A detailed AML/CFT Policy should be drawn up encompassing aspects of Customer acceptance policy, Customer Identification procedure, Monitoring of transactions, Risk management framework as evolved by the insurer. The policy should have the approval of the board. The policy should be reviewed annually and changes effected based on experience.

ii. Responsibility on behalf of the agents and corporate agents:

The guidelines place the responsibility of a robust AML/CFT program on the insurers. Nonetheless, it is necessary that steps are taken to strengthen the level of control on the agents and corporate agents engaged by the insurers.

a. A list of rules and regulations covering performance of agents and corporate agents must be put in place. A clause should be added making KYC norms mandatory and specific process document can be included as part of the contracts.

b. Services of defaulting agents who expose the insurers to AML/CFT related risks on multiple occasions should be terminated.

c. Insurance company when faced with a non-compliant agent or corporate agent should take necessary action to secure compliance, including when appropriate, terminating its business relationship with such an agent/corporate agent.

iii. Appointment of Principal Compliance Officer:

a. Appointment:

The companies should designate a Principal Compliance Officer (PCO) under AML/CFT guidelines, at senior level and preferably not below the Head (Audit/Compliance)/Chief Risk Officer.

The name of the PCO should be communicated to IRDA and FIU immediately.

b. Rights and Responsibilities:

i. The PCO should ensure that the Board approved AML/CFT program is being implemented effectively, including monitoring compliance by the company’s insurance agents with their obligations under the program;

ii. He /She should ensure that employees and agents of the insurance company have appropriate resources and are well trained to address questions regarding the application of the program in light of specific facts.

iii. He /She should be able to act independently and report to senior management.

iv. He /She and staff assisting him in execution of AML/CFT guidelines should have timely access to customer identification data, other KYC information and records.

3. Recruitment and Training of employees/agents:

i. As most part of the insurance business is through agents/corporate agents which brings in non face to face business relationships with the policyholders, the selection process of agents/corporate agents should be monitored carefully. The committee monitoring the agents should monitor sales practices followed by agents and ensure that if any unfair practice is being reported then action is taken after due investigation; Periodic risk management reviews should be conducted to ensure company~s strict adherence to laid down process and strong ethical and control environment.

ii. Insurance companies should have adequate screening procedures when hiring employees.

iii. Instruction Manuals on the procedures for selling insurance products, customer identification, record-keeping, acceptance and processing of insurance proposals, issue of insurance policies should be set out.

iv. The concept of AML/CFT should be part of in-house training curriculum for agents.

v. The following training requirements are considered essential based on the class of employees.

a. New employees: A general appreciation of the background to money laundering, and the subsequent need for identifying and reporting of any suspicious transactions to the appropriate designated point should be provided to all new employees who will be dealing with customers or their transactions, irrespective of the level of seniority.

b. Sales/Advisory staff: Members of staff who are dealing directly with the public (whether as members of staff or agents) are the first point of contact with potential money launderers and their efforts are therefore vital to the strategy in the fight against money laundering. It is vital that “front-line” staff is made aware of the insurance institution’s policy for dealing with non-regular customers particularly where large transactions are involved, and the need for extra vigilance in these cases.

c. Processing staff: Those members of staff who receive completed proposals and cheques for payment of premium must receive appropriate training in the processing and verification procedures.

d. Administration/Operations supervisors and managers: A higher level of instruction covering all aspects of money laundering procedures should be provided to those with the responsibility for supervising or managing staff.

vi. Ongoing training: It will also be necessary to make arrangements for refresher training at regular intervals to ensure that staff does not forget their responsibilities. This might be best achieved by a twelve or six-monthly review of training. Timing and content of training packages for staff will need to be adapted by individual insurance institutions for their own needs.

vii. Records of training imparted to staff in the various categories detailed above should be maintained.

4. Internal Control/Audit:

Insurance companies’ internal audit/inspection departments should verify on a regular basis, compliance with policies, procedures and controls required to be in place under this guidelines. The reports should specifically comment on the robustness of the internal policies and processes in this regard and make constructive suggestions where necessary, to strengthen the policy and implementation aspects. Exception reporting under AML/CFT policy should be done to Audit Committee of the Board.

R.K. Nair

Member (F&I)

Annexure I

Customer Identification Procedure

Documents that may be obtained from customers

Features	Documents
Insurance Contracts with individuals · Legal name and any other names used · Proof of Residence · Proofs of both Identify and Residence	i. Passport ii. PAN Card iii. Voter’s Identity Card iv. Driving License v. Letter from a recognized Public Authority (as defined under Section 2 (h) of the Right to Information Act, 2005) or Public Servant (as defined in Section 2(c) of the ‘The Prevention of Corruption Act, 1988’) verifying the identity and residence of the customer vi. Personal identification and certification of the employees of the insurer for identity of the prospective policyholder. vii. Letter issued by Unique Identification Authority of India containing details of name, address and Aadhar number viii. Job card issued by NREGA duly signed by an officer of the State Government i. Telephone bill pertaining to any kind of telephone connection like, mobile, landline, wireless, etc. provided it is not older than six months from the date of insurance contract ii. Current Passbook with details of permanent/present residence address (updated upto the previous month) iii. Current statement of bank account with details of permanent/present residence address (as downloaded) iv. Letter from any recognized public authority v. Electricity bill vi. Ration card vii. Valid lease agreement along with rent receipt, which is not more than three months old as a residence proof viii. Employer’s certificate as a proof of residence (Certificates of employers who have in place systematic procedures forrecruitment along with maintenance of mandatory records of its employees are generally reliable) Written confirmation from the banks where the prospect is a customer, regarding identification and proof of residence. The above need not be insisted upon in case of micro insurance products. Instead the following documents are sufficient proofs of identity and address: · Current Passbook with details of permanent/present residence address (updated upto the previous month) · Current statement of bank account with details of permanent/present residence address (as downloaded
Insurance Contracts with companies · Name of the company · Principal place of business · Mailing address of the company · Telephone/Fax Number	i. Certificate of incorporation and Memorandum & Articles of Association ii. Resolution of the Board of Directors to open an account and identification of those who have authority to operate the account iii. Power of Attorney granted to its managers, officers or employees to transact business on its behalf iv. Copy of PAN allotment letter
Insurance Contracts with partnership firms · Legal name · Address · Names of all partners and their addresses · Telephone numbers of the firm and partners	i. Registration certificate, if registered ii. Partnership deed iii. Power of Attorney granted to a partner or an employee of the firm to transact business on its behalf iv. Any officially valid document identifying the partners and the persons holding the Power of Attorney and their addresses
Insurance Contracts with trusts & foundations · Names of trustees, settlers beneficiaries and signatories · Names and addresses of the founder, the managers/directors and the beneficiaries · Telephone/fax numbers	i. Certificate of registration, if registered ii. Power of Attorney granted to transact business on its behalf iii. Any officially valid document to identify the trustees, settlers, beneficiaries and those holding Power of Attorney, founders/managers/directors and their addresses iv. Resolution of the managing body of the foundation/association

Annexure II

Vulnerable Products/Features :

1. Personal Accident Policies

2. Assignment of Policies

Note: The list is only illustrative and not exhaustive

Annexure III

Illustrative list of Suspicious Transactions:

1. Customer insisting on anonymity, reluctance to provide identifying information, or providing minimal, seemingly fictitious information

2. Cash based suspicious transactions for payment of premium over and above ` 5 lakh per person per month. It should also consider multiple DDs each denominated for less than ` 50,000/-

3. Frequent free look surrenders by customers;

4. Assignments to unrelated parties without valid consideration;

5. Policy from a place where he does not reside or is employed;

6. Frequent request for change in addresses

7. Inflated or totally fraudulent claims e.g. by arson or other means causing a fraudulent claim to be made to recover part of the invested illegitimate funds

8. An established trend or pattern or frequent overpayment of premium with a request for refund of the overpaid amount

9. Frequent cancellation of policies for the return of premium by an insurer’s cheque

Note: The list is only illustrative and not exhaustive. For more examples on Suspicious Transactions please visit http://www.iaisweb.org

ANNEXURE IV

List of Circulars

Sl. No.	Circular Ref	Date	Contents
1	IRDA/F&A/CIR/AML-CFT/158/09/2010	24^th September 2010	Master Circular on AML /CFT guidelines -2010
2	IRDA/F&I/CIR/AML/151/07/2011	5^th July 2011	Third Amendments to PML Rules, 2010
3	IRDA/F&I/CIR/AML/231/10/2011	5^th October 2011	AML/CFT guidelines-Cash Acceptance Threshold
4	IRDA/F&I/CIR/AML/028/01/2012	27^th January 2012	AML/CFT guidelines
5	IRDA/ F&I /CIR/AML/ 233 /10/2012	5^th October 2012	UAPA Nodal Officer of IRDA
6	IRDA/SDD/MISC/CIR/261/12/2012	27^th December 2012	Revisions to Annexure I of Master Circular 2010

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