The insurance regulator, Irdai, has issued master guidelines on anti-money laundering (AML) in order to consolidate and update the guidelines. The guidelines will be applicable to all classes of life, general or health insurance business.

Issuing the master guidelines on Monday, the regulator said in order to consolidate and update guidelines on AML and Counter Financing of Terrorism  (CFT), a single Master Guidelines covering provisions of PML Act, Rules and other applicable norms (as amended from time to time) was issued. And, the guidelines will come into force from November 1, 2022.

The guidelines said in terms of the provisions of Prevention of Money Laundering Act, 2002, and the Prevention of Money- Laundering (Maintenance of records) Rules, 2005, insurers are required to follow customer identification procedures while undertaking a transaction at the time of establishing an account based relationship/ client based relationship and monitor their transactions on-going basis. Insurers will also have to take steps to implement provisions of PML Act and the PML Rules, as amended from time to time, including operational instructions issued in pursuance of such amendments.

“Every insurer has to establish and implement policies, procedures, and internal controls that effectively serve to prevent and impede Money Laundering (ML) and Terrorist Financing (TF),” Irdai said, adding that to be in compliance with these obligations, the senior management of insurers will be fully committed to establishing appropriate policies and procedures for the prevention of ML and TF and ensuring their effectiveness and compliance with all relevant legal and regulatory requirements.

The guidelines has placed the responsibility of a robust AML/CFT programme on the insurers. It is necessary that the list of rules and regulations covering performance of intermediaries and representative of insurer must be put in place. A clause should be added making KYC norms mandatory and specific process document can be included as part of the contracts.

“IRDAI’s guidelines on Anti-Money Laundering/ Counter Financing of Terrorism (AML/CFT), 2022 covers the potential aspects related to the kind of exposures the insurance industry has had with relation to money laundering and related activities which will be substantially reduced. With these new guidelines, the quantum of unaccounted money will go down drastically,” said Nagalaxmi Shetty, Head – Legal and Compliance, Anand Rathi Insurance Brokers.

According to Susheel Tejuja, MD, PolicyBoss.com (Landmark Insurance Brokers), this announcement will help ensure complete KYC for all retail insurance customers across India. Earlier, KYC was mandatory only for those paying a single premium of Rs 50,000 and above. Now, in case of every new customer relationship, KYC will be required.

“This will help insurance companies in ensuring they are not subjected to any money  laundering activities and help understand the customer better, to serve them better.

This should pave way for insurtech innovations around KYC and customer on-boarding,” Tejuja added.