Adjusters, agents, and brokers are important for distribution, underwriting and claims settlement in the insurance industry. They are often the direct link to the policyholder and therefore, as intermediaries, play an important role in anti-money laundering and combating the financing of terrorism. In essence, in the anti-money laundering war, insurance agents and brokers are on the front lines because agents practice customer due diligence.
The person who wants to launder money or finance terrorism may seek an insurance intermediary (agent or broker) who is not aware of or does not conform to, necessary procedures, such as customer due diligence. The same agent may fail to recognize or report information regarding possible cases of money laundering or the financing of terrorism. Agents like this could be easily set up to channel illegitimate funds to insurers.
To that end, here are some red flags that insurance agents need to be aware of:
- Unusual payment methods, such as cash, cash equivalents (when such a usage of cash or cash equivalents is, in fact, unusual), or structured monetary instruments;
- Early termination of a product (including during the “free look” period), especially at a cost to the customer, or where payment is made by, or the refund check is directed to, an apparently unrelated third party;
- The transfer of the benefit of an insurance product to an apparently unrelated third party