ANTI-MONEY LAUNDERING

Clean, clear and transparent

GFIA expresses views on scope, consistency and transparency in anti-money laundering actions

By Fabrice Perrier, chair of the GFIA anti-money laundering/countering terrorism financing working group

The insurance industry is fully committed to fighting money laundering and terrorist financing, despite the sector's relatively low risk exposure. In 2021, GFIA promoted its positions on three key topics: the scope of anti-money laundering and countering the financing of terrorism (AML/CFT) legislation, the consistency of standards and registers of business ownership.

GFIA adopted a position paper on the application of AML to general insurance and submitted comments to two international consultations: that of the International Association of Insurance Supervisors (IAIS) on its Application Paper on Insurance Core Principle (ICP) 22 on AML/CFT and that of the intergovernmental Financial Action Taskforce (FATF) on a draft revision of its Recommendation 24 on transparency and the beneficial ownership of legal persons.

Non-life must remain outside scope of AML/CFT legislation

Since money laundering and terrorist financing are critical risks for our society, the global insurance industry fully supports effective and proportionate regulatory action in this area. Indeed, insurers implement extensive measures to ensure AML/CFT compliance.

GFIA is convinced that the risk-based approach — promoted by the FATF — is the best one for any AML/CFT standards, as it is more effective and focused on the actual risk. Non-life insurance was rightly excluded from the FATF recommendations.

It is, therefore, crucial to ensure proportionate enforcement and to exclude non-life insurance from the scope of AML/CFT requirements, as the nature of non-life insurance products does not make them attractive vehicles for money laundering. Non-life insurance is governed by the principles that premiums are not refunded and that payments are only due in the event of covered claims, so the primary risk exposure is fraud, which is tackled by anti-fraud measures.

GFIA is of the view that applying AML/CTF rules to non-life insurance would divert supervisory and corporate resources and attention away from other, higher risk areas and place a significant compliance burden on insurers for low or no-risk products. In its position paper, released in May 2021, GFIA makes clear that, under the risk-based approach, any measures to fight ML/TF should be restricted to life insurance business, which is the only business line with some — albeit low — exposure to ML/TF risks.

“Non-life products are not attractive vehicles for money laundering.”
“The multiplicity of existing standards, which are both very similar and slightly different, create a highly complex international environment.”

Consistency of international standards essential

GFIA strongly believes that international guidance is important to properly address ML/TF issues, which are often international. However, many sets of guidelines already exist at international, regional or national level (FATF, IAIS, regional/national authorities). Such a multiplicity of standards, which are both very similar and slightly different, create a highly complex international environment.

It is crucial to carefully articulate the work of the different international bodies to avoid overcomplicating the international regulatory environment and creating redundant or even contradictory standards.

Tackling the issue of beneficial owner registers

In August 2021, GFIA brought its position on registers of beneficial owner to the fore by contributing to the FATF public consultation on its amendments to Recommendation 24.

GFIA believes that official and centralised registers of beneficial owners are the best way to achieve the transparency of legal persons and better knowledge of beneficial owners. They allow for a structured, comprehensive approach (ie, the centralisation of all legal persons’ data) and quality information (ie, beneficial ownership information is adequate, accurate and up-to-date).

However, to ensure that the official register is effective, it must meet certain conditions such as free access to persons subject to AML/CFT rules, who should be able to consult the register by automated means (suitable for mass consultation) and by means of homogenised/standardised technical solutions (ie, it must be a single IT solution). To address the issue of foreign-created legal persons, existing national registers could be linked.

GFIA will continue to monitor the conditions of implementation of beneficial ownership registers, which will be decisive in achieving the objective of transparency of legal persons and better knowledge of beneficial owners.

“Existing national registers could be linked.”

Fabrice Perrier

French Insurance Federation