At Hyderabad
December 29, 2010
Kunnel Prem
ICP 27 on Insurance Frauds
and
ICP 28 on AML/CFT
The supervisory authority
requires that insurers and
intermediaries take the
necessary measures to
prevent, detect and
remedy insurance fraud.
ICP -27
 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
Contd…
ICP -27


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
Contd…
ICP -27
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
Contd…
ICP -27
Compliance
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
Contd…
ICP -27
Compliance
IRDA has come out with a
circular on 8th 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
Contd…
ICP -27
Compliance
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
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).
ICP -28


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
Contd…
ICP -28
Essential Criteria
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
Contd…
ICP -28
Essential Criteria
Supervisor has adequate
financial, human and technical
resources for AML/CFT
monitoring
Supervisors require insurers and
intermediaries to comply with
AML/CFT requirements
Contd…
ICP -28

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
Contd…
ICP -28
Compliance
Guidelines on AML were issued
on 31st 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
Contd…
ICP -28
Compliance
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 24th
September 2010
Contd…
ICP -28
Compliance
Off site/On site inspections of
life/non-life insurance
companies have been
conducted
Guidelines are applicable to
insurance companies,
individual agents & corp.
agents
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
ICP -28
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
Deficiencies in AML/CFT
implementation
Incorporating changes in
legislation, plugging
deficiencies through annual
review of AML Policy
Exercising higher due
diligence during
assignments
Contd…
ICP -28
Deficiencies in AML/CFT
implementation
Validity and genuineness
of KYC documents
Establishing source of
income
System to check banned
entities/individuals
Thank You