Annex II - Sector-Specific Guidance Notes for Long-Term Insurance Business

Summary

This is Annex II of the BMA's AML/ATF Guidance Notes, providing sector-specific guidance for long-term insurance business. It supplements (but does not replace) the main AML/ATF guidance notes and explains how the Proceeds of Crime Regulations 2008, POCA 1997, ATFA 2004 and the SEA Act 2008 apply to insurers, insurance managers and brokers writing long-term (non-reinsurance) business.

• Who is covered: Insurers (not reinsurers) registered under Section 4 of the Insurance Act 1978, and insurance managers or brokers registered under Section 10, that carry on long-term business falling within section 1(1)(a) or (c) of the Insurance Act 1978 (excluding reinsurance business).
• Senior management duties: Senior management must ensure compliance with the Acts and Regulations, identify and mitigate ML/TF risks, appoint a Compliance Officer and a Reporting Officer, ensure suspicious activity reporting procedures exist, screen employees, resource AML/ATF controls adequately, and audit/test those controls at least once per calendar year.
• Risk-based approach: RFIs must use a risk-based approach to set CDD levels, mitigation measures, reliance on intermediaries, monitoring scope and detection/reporting of suspicious activity, and must assess ML/TF risk when designing new products.
• Intermediaries and third parties: Insurers must apply appropriate reliance and outsourcing measures where intermediaries or third-party service providers are used, and must screen owners, directors, managers, employees and equivalent persons at intermediaries.
• High-risk customers: Decisions to accept high-risk customers, such as foreign PEPs, must be taken exclusively at senior management level.
• Group policies: Where a Bermuda RFI has overseas branches, subsidiaries or representative offices, it must communicate its AML/ATF policies to them and ensure they apply measures at least equivalent to Bermuda's.
• Reporting and records: Knowledge, suspicion or reasonable grounds to suspect proceeds of crime or ML/TF involvement must be reported to the Financial Intelligence Agency, and records of the basis for accepting applicants must be kept.
• Penalties: Breach of specified Regulations is a criminal offence (fines up to $50,000 summarily or up to $750,000 and/or two years' imprisonment on indictment), and the BMA may impose civil penalties of up to $500,000 per failure under the SEA Act 2008.

The annex also sets out ML/TF risk indicators specific to insurance business (customer, product, delivery channel, third-party and geographic risk factors) to help RFIs apply the required risk-based CDD and monitoring measures.

Key obligations

• Senior management must ensure compliance with the Acts and Regulations and identify, assess and mitigate ML/TF risks across customers, products, services, transactions, delivery channels, outsourcing and geographic connections.
• Senior management must appoint a Compliance Officer at managerial level and a Reporting Officer.
• Senior management must audit and periodically test the RFI's AML/ATF policies, procedures and controls for effectiveness at least once per calendar year.
• RFIs must establish and maintain detailed AML/ATF policies, procedures and controls adequate to forestall and prevent ML/TF.
• RFIs with overseas branches, subsidiaries or representative offices must communicate AML/ATF policies to them and ensure equivalent measures are applied.
• RFIs must apply a risk-based approach to determine CDD levels, mitigation measures, reliance on intermediaries, monitoring scope, and detection/reporting of suspicious activity.
• When designing a new product, an RFI must assess the risk of the product being used for ML/TF.
• Decisions to enter into business relationships with high-risk customers such as foreign PEPs must be taken exclusively at senior management level.
• Insurers must apply appropriate reliance and outsourcing measures when using intermediaries or third-party service providers for CDD.
• RFIs must screen owners, directors, managers and employees (and equivalent persons at intermediaries/third parties) against high standards.
• Knowledge, suspicion or reasonable grounds to suspect proceeds of crime or ML/TF must be reported to the Financial Intelligence Agency.

Applies to

insurers registered under Section 4 of the Insurance Act 1978 conducting long-term business, insurance managers registered under Section 10 of the Insurance Act 1978, insurance brokers registered under Section 10 of the Insurance Act 1978

Deadlines

• at least once per calendar year: Senior management must audit and periodically test the RFI's AML/ATF policies, procedures and controls for effectiveness.

Related documents

• This document is made under Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Financing Supervision and Enforcement) Act 2008