GFIA Letter to IAIS re: Supplemental Comments on Draft ICP 22Release Date: 09/20/2013 Staff Reference: Anthony Zobl
International Association of Insurance Supervisors
c/o Bank for International Settlements, Centralbahnplatz 2
Subject: Supplemental Comments on Draft ICP 22
Dear Mr Lee,
The Global Federation of Insurance Association (GFIA) submits these comments to the International Association of Insurance Supervisors (IAIS) that supplement prior submissions of insurance associations regarding the draft Insurance Core Principle 22 (ICP 22): Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CTF). An annex to the letter contains examples of ML/TF that IAIS may wish to consider for inclusion in the Application Paper.
GFIA, through its 35 member associations, represents insurers that account for around 87%, or more than $4.0 trillion, in total insurance premiums worldwide.
Having reviewed the Financial Crime Working Group’s comments regarding supervisory and private sector submissions on ICP 22, GFIA is generally in agreement with IAIS’ anticipated revisions to ICP 22 and the objective to reflect a more risk-based approach to AML/CTF in light of the Financial Action Task Force (FATF) revision of its International Standards on Combating Money Laundering and the Financing of Terrorism. If adopted as anticipated, ICP 22 will provide insurance-specific guidance for supervisors and regulators in FATF member countries and will be particularly instructive for those jurisdictions that are not FATF members.
Although ICP 22 provides useful guidance on many of the issues attendant to AML/CTF, GFIA believes that certain aspects require further clarification or modification.
Insurance industry operations and products have proven largely resistant to misuse through ML/TF, particularly when compared to those of other financial services sectors. Experience has shown that, among insurance products, only life products with significant cash value or cash accumulation features and with a high likelihood of pay-out pose AML/CTF risks.
As a result, GFIA believes that the focus of IAIS AML/CTF guidance should be on addressing only problems or gaps which have been objectively identified, in line with the risk-based approach. According to the FATF, countries should determine whether there are sectors – other than those that fall under the definition of financial institutions or designated non-financial business and professions- at risk of abuse from money laundering and terrorist financing, based on risk assessments and should only then consider including them in the scope of the requirements1. We note, for example, that the FATF - after releasing its 2003 Recommendations, conducting detailed mutual evaluations assessing ML/TF, and releasing revised Recommendations after publication in 2009 of its Risk-Based Approach: Guidance for the Life Insurance Sector and after extensive public and private sector consultation -chose not to include the non-life sector within its guidance. GFIA therefore urges the IAIS to not include the non-life insurance sector ‘per se’ in its ICP 22 and application paper.
A regulatory gap that has been addressed is an express commitment by FATF to the risk-based approach (RBA). However, commitment to RBA does not by itself translate into meaningful guidance for either supervisors or the private sector. GFIA is currently working with FATF regarding the updating of its 2009 guidance for the life insurance sector, an extensive compilation of guidance for both insurance supervisors and the life sector that in many ways tracks guidance anticipated in ICP 22 and the Application Paper.
GFIA believes that it is important for both ICP 22 and for the Application Paper to include information based on the most up-to-date direction being provided by FATF. Given that FATF will be issuing additional guidance for life insurers, we would like to encourage IAIS to provide an opportunity for a public consultation on ICP 22 and the Application Paper to ensure alignment with any additional guidance emanating from FATF.
An annex to this letter contains examples of ML/TF that the IAIS may wish to consider for inclusion in the Application Paper. We note that some of the examples may not occur in every country as some aspects may not be allowed within an insurance context (for example, the acceptance of checks.) Also, certain of the scenarios may be capable of detection only if relevant data is accessible for verification.
GFIA again expresses its appreciation for the opportunity to participate in the IAIS public consultations regarding ICP 22 and the Application Paper. ICP 22 and the Application Paper will provide important guidance to the public and private sectors of the life insurance industry that will assist in our mutual goals of combating money laundering and terrorist financing.
We look forward to the opportunity to meet with you to discuss these comments.
cc: Richard Walker