Oman’s Financial Institutions Face Growing Concerns Over Money Laundering and Terrorist Financing Risks

Introduction

The risks of money laundering (ML) and terrorist financing (TF) are on the rise in Oman’s financial sector, particularly in the insurance industry. According to recent reports, financial institutions (FIs) are increasingly vulnerable to ML/TF risks due to their interactions with VAs and VASPs.

Life Insurance Products: A New Frontier for Money Laundering

• The use of life insurance products, such as policies with saving or investment features, has become a concern in the fight against ML.
• These products may be exploited by criminals to launder money through early surrenders or withdrawals.

General Insurance Products: Early Cancellation of Policies Used for Money Laundering

• Criminals are using early cancellation of policies with returns of premiums to launder money.
• This includes cases where multiple policies are purchased and cancelled simultaneously, or requests for return premiums in different currencies.

Overpayment of Premiums: A New Method for Money Laundering

• Another emerging trend is the overpayment of insurance premiums.
• Criminals are arranging for excessive payments or excessively high values of insurance reimbursements by cheque or wire transfer.
• This allows them to “accidentally” accumulate excess funds, which can be used for illicit purposes.

Prepaid Cards: A Tool for Money Laundering and Terrorist Financing

• The misuse of prepaid cards is also a growing concern in Oman’s financial sector.
• These cards offer anonymity and ease of cross-border transactions, making them an attractive tool for ML/TF.

Tax Evasion: A Silent Threat

• Tax evasion is another area where FIs may be exposed to ML/TF risks.
• Underreporting income or creating false deductions can generate untraceable funds that can be used for illicit purposes.

Non-Financial Businesses: A New Front in the Fight Against Money Laundering and Terrorist Financing

• Non-financial businesses, such as travel agencies, car dealerships, and cash-intensive businesses like hypermarkets, are also vulnerable to ML/TF risks.
• These businesses may be used to legitimize illicit funds through transactions or services.

The Need for a Risk-Based Approach

A Comprehensive Understanding of ML/TF Risks

• FIs must understand their exposure to ML/TF risks and take proportionate measures to mitigate them effectively.
• Conducting a business ML/TF risk assessment helps FIs identify areas that require prioritization in combating ML/TF.

Conclusion

As the financial sector continues to evolve, FIs must remain vigilant and adapt their strategies to address these emerging threats. The Oman Financial Intelligence Unit (OFIU) will continue to monitor and regulate the financial sector to ensure that it remains a safe and secure environment for transactions.