20 September 2013

GFIA: Supplemental comments on Draft ICP 22

GFIA submitted comments to the IAIS which supplement prior submissions of insurance associations regarding the draft Insurance Core Principle 22: Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CTF).

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 requirements.

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, GFIA 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.

Full letter

© GFIA - Global Federation of Insurance Associations