The sector in brief
An insurance company takes premiums and promises to pay if something happens. For motor, health or property cover, there is little to launder: the premiums are modest and payouts are tied to real losses. Life insurance with a savings or investment element is different, because money paid in can be accessed again by surrendering the policy, and that looks like a legitimate source of funds.
Reinsurers sit behind insurers. They deal with other firms, not individuals, but they can still be used to move funds between countries, particularly if reinsurance contracts are not at arm's length or are used to cover claims that are not real.
Because the risks vary across the product range, supervisors do not expect identical controls for every policy. They expect the firm to understand which products carry real risk and to put its effort there.
Where the risk sits
Large single premiums
Paying a large sum in one go into a savings or investment-linked policy is a quick way to place funds, particularly if the source is unclear.
Early surrender and cancellation
A policyholder who cancels soon after buying, accepting a penalty, may be using the policy as a way to convert money into a refund from a respected insurer.
Third-party payers and beneficiaries
Premiums paid by someone other than the policyholder, or benefits directed to people with no obvious connection, break the link between the money and its owner.
Fraudulent or inflated claims
Claims that are staged or exaggerated may be a way to turn illicit funds into insurer payouts, sometimes with help from the intermediary.
Reinsurance and intermediary chains
Money can move through several firms and countries before it reaches the final party. Each step needs to be understood.
Politically exposed persons
High-value life and wealth products can attract wealthy customers, including public officials and their families.
Who supervises you
Insurance and reinsurance companies licensed in the UAE are supervised by the Central Bank. Firms in a financial free zone answer to that zone's regulator. A group may include both, in which case you should work out which entity falls under which regime.
The supervisor decides the detailed rules for your licence category, so always read its current guidance alongside this page.
What supervisors expect
- A named Compliance Officer or MLRO, with board-level ownership of the AML programme.
- A business risk assessment that distinguishes products, distribution channels, customers and countries, so that effort goes where the risk is.
- Due diligence on policyholders, and where relevant beneficiaries and payers, at a depth that matches the product and the customer's risk.
- Understanding of the source of funds for larger premiums and of the reason for a payment from or to a third party.
- Screening of customers, beneficiaries and payers against sanctions lists, with a record of match review.
- Monitoring of surrenders, cancellations, claims and unusual premiums, with alerts handled and recorded.
- Oversight of agents and brokers who sell on the insurer's behalf, reporting through goAML, training, record keeping and independent testing.
Red flags to watch
- A customer who pays a large single premium and asks early about surrender terms.
- Premiums paid from accounts that do not belong to the policyholder.
- A policy that is cancelled shortly after it starts, with the refund sent to a third party.
- A change of beneficiary to someone with no clear relationship to the policyholder.
- Claims that appear inflated or inconsistent with the policy.
- A customer who is more interested in how to access the money than in the cover itself.
A worked example
A single premium policy surrendered in the first year
A customer pays a large single premium into a savings policy by transfer from a company account, and nine months later asks to surrender it, asking for the proceeds to be paid to a different company. The insurer can see the transaction as a perfectly legitimate use of a contract right. An alert insurer sees an unusual combination: a large premium from one company, a quick surrender and a refund to another. It asks for an explanation, reviews the file, speaks to the intermediary and, if the answers are poor, escalates to the Compliance Officer, who decides on a report.
How Adventant helps
Questions answered
Do all insurance products carry the same AML risk?
No. General insurance such as motor or health generally carries lower risk than life policies with a savings or investment element. Supervisors expect you to assess risk by product and to put more controls where the risk is greater.
Do we have to do due diligence on beneficiaries?
Often yes, at the latest when a payout is made, and sooner for higher-risk products. The depth depends on the risk, but paying a benefit to a person you know nothing about is a gap that supervisors look for.
How should we deal with brokers and agents?
Choose them carefully, train them and monitor their business. The insurer remains responsible for customer checks even when intermediaries collect the documents.
Do reinsurers need to do customer due diligence?
Reinsurers deal with other firms, so the checks are focused on the counterparty, its owners, its regulatory status and the reason for the contract. The principle is the same: know who you deal with and why.
When should an insurer report an early surrender?
When you suspect that the surrender is linked to wrongdoing. An early surrender on its own does not require a report, but one that is unexplained, unusual for the customer or combined with other warning signs deserves escalation.