Procedures for the prevention of money laundering by insurance companies in Malta

Abstract

Purpose: The purpose of this study is to determine how the 4th Anti-Money Laundering (AML) Directive impacted the insurance industry, what AML controls and procedures do insurance companies implement and whether there is any variance in the procedures implemented between companies. Additionally, the study aims to determine how compliant insurance companies are in terms of AML legislation and what type of supervision do regulatory authorities conduct. Design: To achieve the objective of this research study a number of semi-structured interviews with insurance companies (both life and non-life companies), the Malta Financial Services Authority (MFSA), the Financial Intelligence Analysis Unit (FIAU) and an external auditor were conducted. Findings: The findings show that both life and non-life insurance companies are well aware of the AML legislation and the necessary importance is given. The procedures adopted by insurance companies are in line with what the law requires and in certain circumstances the procedures adopted go beyond what is required by law. Additionally, the regulatory authorities, especially the FIAU is responsible to ensure that companies within the insurance industry and other industry are compliant with AML legislation and are responsible to conduct on/off site visits. Conclusion: Even though insurance companies are well aware of the requirement emanating from the 4th AML Directive, there is still room for improvement especially with regards to the widening of the PEPs definition, the Central Register of BO and to keep client records up to date. Additionally, both the insurance companies and the regulators should work hand in hand to fight any ML crime. Value: This study aims at increasing awareness in relation to the 4th AML Directive and can be used by insurance companies to evaluate whether the necessary AML procedures are implemented correctly.