Which event occurs most frequently in money laundering in the insurance industry?

Question

Options

• AGetting a reimbursement from an overfunded policy
• BPurchasing full-term insurance bonds
• CFailing to take advantage of the free-look period
• DRedeeming a policy at the end of its term

• A
  77% (36)
• B
  4% (2)
• C
  6% (3)
• D
  13% (6)

Explanation

One of the most common methods of money laundering in the insurance industry is to purchase a policy with illicit funds and then request a refund of the premiums, either partially or fully, before the policy matures. This way, the money launderer can receive a legitimate payment from the insurance company, effectively washing the dirty money. This technique is also known as premium fraud or early surrender. According to the Financial Crimes Enforcement Network (FinCEN), the most significant money laundering and terrorist financing risks in the insurance industry are found in life insurance and annuity products, because such products allow a customer to place large amounts of funds into the financial system and seamlessly transfer such funds to disguise their true origin. Some indicators of potential money laundering through insurance products are: The customer pays the premiums with cash, cashier's checks, money orders, or other anonymous or unusual payment The customer overpays the premiums or makes multiple payments in excess of the required amount. The customer cancels the policy during the free-look or grace period and requests a refund to a different account or a third party. The customer purchases a policy that is inconsistent with their income, age, or risk profile. The customer shows little interest in the benefits or terms of the policy, but is more concerned about the cancellation or surrender options.

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