Non-compliance of AML laws could damage an institution that is based on trust. For example, several banks charged with anti-money laundering deficiencies and/or the enabling of terrorism have been stripped of their charters (for example, Riggs Bank). At a minimum, significant (HSBC was fined $1.9B) fines and criminal charges could be levied.
Insurers that invest heavily in an AML Program (see Best Practice #5) without a comprehensive understanding of their risk and obligations could be misallocating capital and resources.
State departments of insurance and FinCEN often present moving targets related to the initial examination of an AML Program. Every insurer should have a solid AML Program in place before a state insurance examiner schedules the Financial Condition Examination, and should know the scope and objectives of the insurance examiner.
The U.S. government increasingly requires insurers’ and other institutions’ support in the fight against terrorists and financial criminals. Insurers face the risk that AML regulations will become more and more pointed and non-compliance more costly.
Creating a Culture of Compliance (see Best Practice #3) reduces insurance fraud and increases employee commitment. When implemented correctly and based on a sound risk assessment, investments in compliance can positively impact corporate image, employee loyalty, and customer trust. A Culture of Compliance also strongly influences regulators to act more as partners than as inquisitors.
Detecting, reporting, and limiting money laundering directly impact fraud – and that goes directly to the company’s bottom line. Many insurers have found that the regulatory burden of AML regulations opens formerly closed doors between business operating units to cooperate on anti-fraud measures. Sharing data, technology, and analysts among units and between AML and anti-fraud teams has helped companies significantly reduce fraud while reducing the risk of being found to be out of compliance.
The technologies used to monitor transactions for money laundering and terrorist financing are also well-suited to help with unclaimed property, suitability, market conduct, and fraud. Some companies have leveraged their regulatory obligations to create a bulwark that significantly reduces their risk of fines, lawsuits, and loss to various forms of fraud.