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Revised IRDAI Sanctions/PEP Guidelines for Indian Insurers

Revised IRDAI Sanctions/PEP Guidelines for Indian Insurers

In line with increasing regulatory scrutiny in India to combat money laundering and terrorist financing activities, the premier authority that regulates the Indian Insurance industry, IRDAI – Insurance Regulatory and Development Authority of India, has published their latest master guidelines applicable for all Life, General, and Health Insurance firms from Nov 1, 2022.

The guidelines seek to implement the provisions contained within the Prevention of Money Laundering Act, 2002 (PMLA/PML Act/Act and the Prevention of Money – Laundering (Maintenance of records) Rules, 2005 (PML Rules/Rules) in principle. The major mandate is for Insurers to establish a robust AML/CFT program and ensuring proper Customer Due Diligence checks at the time of customer onboarding.

The 3 key takeaways from the guidelines are listed below.

1. Ensuring Safeguards Against Sanctioned/Designated Individuals/Entities

Insurers need to exercise caution to not enter into a contract with a customer who is listed in the UN sanctions list, or with banned entities in India, the list of which is updated on the MHA (Ministry of Home Affairs) website and circulated to the insurers along with the UN sanctioned individuals and entities compiled and circulated by the Ministry of External Affairs (MEA).

This should not just be a one-time activity at the time of client onboarding, but an ongoing effort to ensure due protection. As such, insurers need to also implement a robust ongoing monitoring program.

2. Enhanced Due Diligence Against Individuals/Entities Connected With Countries Identified By FATF As Having Deficiencies In Their AML/CFT Regime

The FATF maintains lists of high-risk jurisdictions and jurisdictions under increased monitoring (called the “Black List” and “Grey List” respectively). Insurers need to exercise heightened caution while entering into a contract with individuals or entities related to these jurisdictions, even if the individuals or entities themselves might not have sanctions specifically against them. The guidelines also recommend leveraging publicly available information outside of the official sanctions lists (negative news/adverse media coverage pertaining to official corruption, bribery, tax evasion, etc.) to make appropriate judgement calls.

3. Heightened Scrutiny for Politically Exposed Persons (PEPs)

FATF defines a PEP as “an individual who is or has been entrusted with a prominent public function” and this definition includes heads of state or of government, senior politicians, senior government, judicial or military officials, senior executives of state-owned corporations, important political party officials. The PEP definition also covers family members related directly (consanguinity/common ancestry) or through marriage and other civil partnerships as well as professional and social partnerships.

For such people, there is inherently an increased risk of money laundering owing to their influence. The revised guidelines emphasize the need to have a robust system and processes in place to identity PEPs, in which case their contracts or proposals need stricter scrutiny by the firm’s senior management. And since the political landscape globally is ever in flux, the need for a robust ongoing monitoring regimen is even more critical to ensure that a non-PEP existing customer does not subsequently become a PEP post the commencement of the business relationship.

How Solytics Partners Can Help

Solytics Partners’ proprietary solutions, SAMSTM, has been designed keeping in mind the complex and evolving nature of global as well as India-specific guidelines pertaining to initial screening and ongoing monitoring of customers for financial institutions.

As such, SAMSTM allows financial institutions to screen customers against Sanctions, PEP, and Adverse Media in a single click. It also empowers financial institutions to automate their ongoing monitoring program at any desired frequency based on the institution’s risk management and mitigation philosophy. The Sanctions database of SAMSTM covers not only the UNSC program and the lists recommended by MEA and MHA, but also all other major global lists (OFAC, HMT, Interpol, MAS, etc.) and India-specific lists (CBI, NIA, CCI, etc.).

The PEP coverage for India is comprehensive and granular covering the definition laid down by FATF. The database is constantly updated with the latest changes in Sanctions and PEP to ensure that you are screening your customers against the right names. The Adverse Media screening module allows you a 360-degree view of your customers’ risk profile, enabling you to find relevant coverage pertaining to money laundering risks across 50+ global and Indian languages. Finally, for Indian Insurance segment, SAMSTM has been augmented with blacklisted agents list of all major insurers.

To know more, please reach out to us at  [email protected]

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