Irda cautions insurers against politically exposed persons

The Insurance Regulatory and Development Authority (Irda) has asked insurance companies to be more cautious while concluding contracts with “high risk customers”, particularly the “proposals of Politically Exposed Persons (PEPs)”.

“Insurers should devise procedure to ensure that proposals for contracts with high risk customers are concluded after approval of senior management officials. It is, however, emphasised that proposals of Politically Exposed Persons (PEPs) in particular, require approval of senior management, not below head (underwriting)/chief risk officer level,” the regulator stated in a circular issued on Tuesday.

Elaborating the anti-money laundering (AML) guidelines to be followed by the insurers, Irda stated that while carrying out the know-your-customer (KYC) norms, special care has to be exercised to ensure that the contracts were not anonymous or under fictitious names.

According to Irda stipulations, which come into effect immediately, any change in the customers’ recorded profile that comes to the notice of the insurer and which is inconsistent with normal and expected activity of the customers, should attract the attention of the insurer for further KYC processes and action to be considered necessary.

Irda also advised that special attention be paid to all complex, unusually large transactions and all unusual patterns, which have no apparent or visible lawful purpose. The background of such transactions including all documents should, as far as possible, be examined by the principal compliance officer for recording his findings. These records should be preserved for 10 years.

The principal compliance officer for AML guidelines should be at a senior level and preferably not below the designation of the head of audit/compliance or chief risk officer. He should be able to act independently and report to senior management. Also, he and the staff assisting him should have timely access to customer identification data, records and other KYC information.

Irda has asked the insurance companies to prohibit directors, officers and employees from disclosing that a suspicious transactions report or related information of policyholder was being reported to the Financial Intelligence Unit - India (FIU-IND).

Irda wants the insurance companies to submit to it, the revised AML policy incorporating the latest stipulations by October 31, 2009.