Recent terrorist attacks have made the European Parliament reinforce the fourth anti-money laundering guideline. This means that the Anti-Money Laundering Act (AML) will be adjusted. The fight against money laundering is a priority on the political agenda.
On the 20th of May 2015, the European Parliament has accepted the fourth anti-money laundering guideline. Due to the ‘Action plan against financial terrorism’ of the European Commission, adjustments have been made. The implementation of this guideline results in an amendment of the Anti-Money Laundering Act (AML).
Customer Screening
The guideline includes strict measures concerning customer screening, which means that the possibilities for simple screenings will drastically drop. This also has implications for current customer portfolios of insurance companies. Furthermore, the definition of Politically Exposed Persons’ (PEPs) will be expanded. Insurers need to consider the risks of PEPs, also after one resigned from its political role.
Ultimate Beneficial Owners (UBOs)
The guidelines obligates EU Member States to set up a central registration system for Ultimate Beneficial Owners (UBOs). This concerns a separate law amendment, which will be consulted in the near future. All UBOs need to be registered in a national UBO pool. From that point decisions about ownership, maintenance and accessibility of will be made.
Insurance industry regulators
The responsibilities that industry regulators have will also undergo some changes in order to reinforce when necessary. The maximum penalty that regulators can impose will be increased from four million euros to five million euros and for very serious offenses penalties could become proportional to turnover. Moreover, regulators are obligated to publically expose all sanctions from now on.
CEO at FRISS Jeroen Morrenhof recognizes these findings, and indicates: “With an adequate risk assessment and screening it is possible to avoid an excess as well as a lack of compliance measures. Besides that, it is important to screen your entire portfolio on a regular basis. At underwriting, pay out and when specific situations occur.”
Sanction Act
New customer screening do not always take place. Recent research shows that the majority of insurers are not excessive enough in their measurer to comply with the Sanction Act. The most important bottle-necks are the following:
- Most non-life insurers have not registered Ultimate Beneficial Owners (UBOs). This means that these relations cannot be screened against a sanction list, which conflicts with the SL.
- Few or no screenings are taking place after updates of the sanction lists.
- Insurers update lists only periodically, and not when actual changes are made to the lists. This leads to periods in time where customers are accepted who are on a sanction list.
- Insurers often assume that other parties in the chain are taking the required measures, without checking and controlling if these parties are in fact doing so.
- Knowledge about the sanction legislation is insufficient in a large part of the industry.
The primary condition in complying with sanction legislation is that an organization has a clear overview of all relations, including structure, Ultimate Beneficial Owners (UBOs), directors and intermediaries. It is important that companies realize it is not only important to screen their relations to sanction lists, but to also proactively monitor all the activities of these relations and check if people are trying to get around the sanction lists.
