Financial Crime World

Oman Financial Institutions Warned of Money Laundering Risks in Life Insurance and General Insurance Products

Muscat, Oman - Financial Intelligence Unit Issues Warning

The Financial Intelligence Unit (FIU) has issued a warning to financial institutions (FIs) in Oman to be vigilant against money laundering (ML) and terrorist financing (TF) risks associated with life insurance and general insurance products.

Life Insurance Products Pose Risk of Money Laundering

  • The FIU cautioned that life insurance products, which offer saving or investment features such as full or partial withdrawals or early surrenders, may be used for ML.
  • These products have been misused in several cases where the early cancellation of policies with return of premium has been used to launder money.

Suspicious Activities Identified

  • Policies entered into by the same insurer/intermediary for small amounts and then cancelled at the same time
  • Return premiums credited to an account different from the original account
  • Requests for return premiums in currencies different from the original premium
  • Regular purchase and cancellation of policies
  • Insurance policy closed with request for payment to be made to a third-party account

Risks Associated with Overpayment of Premiums

  • Launderers may arrange for excessive numbers or excessively high values of insurance reimbursements by cheque or wire transfer.

Prepaid Cards, Tax Evasion, and Non-Financial Businesses Identified as Risk Factors

  • The use of prepaid cards has been identified as a potential risk factor, due to their potential anonymity and ease of cross-border transactions.
  • Tax evasion was also highlighted as a significant risk, which can be committed through underreporting income or creating false deductions.
  • Non-financial businesses, such as travel agencies, car dealerships, and cash- intensive businesses like large hypermarkets, have also been identified as potential conduits for ML/TF activities.
  • The FIU emphasized the importance of applying a RBA in identifying and assessing ML/TF risks.
  • FIs are required to conduct a business ML/TF risk assessment to understand their risk exposure and identify areas that require prioritization in combating ML/TF.
  • The use of a RBA requires FIs to allocate resources on a risk-sensitive basis, with the objective of using these resources in a more efficient and effective manner.

Compliance Requirements

  • FIs must establish a good Anti-Money Laundering (AML) / Combating the Financing of Terrorism (CFT) compliance program and implement controls commensurate with their assessed ML/TF risks.
  • Failure to comply with AML/CFT regulations may result in severe penalties and reputational damage.

Conclusion

The FIU urges all FIs to remain vigilant and take necessary measures to mitigate ML/TF risks associated with life insurance and general insurance products, as well as other financial transactions.