Financial Crime World

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Insurance Policies Used to Launder Criminal Funds

A growing trend in money laundering has been identified, where criminals are deliberately cancelling insurance policies to obscure the link between their criminal activities and generated funds.

How It Works

In this scheme, individuals suspected of money laundering buy insurance policies using illicit funds. They then inform the insurance company that they have changed their minds and wish to cancel the policy, agreeing to pay the penalty. The insurer reimburses the individual by cheque or transfer, effectively hiding the source of the funds.

  • Early redemption is a key indicator of money laundering in this context.
  • When an individual is more interested in the cancellation terms of a policy than the benefits it provides, it may be a sign that they are attempting to launder criminal proceeds.

Malawi’s Experience with Money Laundering

Malawi has recently seen several instances of money laundering involving insurance policies. In 2018, the Financial Intelligence Authority (FIA) identified an emerging trend in which suspected syndicates involved in wildlife crimes were receiving funds suspected to be proceeds from illegal activities.

  • A foreign national was arrested for his involvement in the illegal trade of government trophy, including ivory and rhino horn.
  • The suspect had received funds amounting to $50,000 from Hong Kong, disguised as investment capital. However, the FIA found that the funds did not make economic sense, leading them to believe that they were part of financial flows from illicit activities.

Indicators of Money Laundering

The FIA has identified several indicators of money laundering involving insurance policies, including:

  • International funds transfer receipts not tallying with declared business
  • Unverified financial capital investments from other jurisdictions
  • Concealment of illegal items or contraband in regular imports

Case Studies

  • In one case, a mining company received funds amounting to $50,000 from Hong Kong, which was described as investment capital. However, the FIA found that the funds did not make economic sense and were likely part of financial flows from illicit activities.
  • In another case, two Malawians were arrested for their involvement in the illegal trade of ivory. They had received funds from Hong Kong through Western Union, which was suspected to be proceeds from wildlife crime.

Conclusion

The use of insurance policies to launder criminal funds is a growing concern in Malawi and around the world. It is essential that financial institutions and law enforcement agencies remain vigilant for these schemes and take steps to prevent them.