A foreign politically exposed person (PEP) requests to add a beneficiary to a file insurance policy. How should the request be processed to mitigate risk?

Question

Options

• APerform due diligence on the beneficiary
• BDetermine the source of wealth and source of funds
• CDecline the request if the beneficiary is a foreign PEP
• DDecline the request to add a beneficiary due to increased risk

• A
  82% (18)
• B
  9% (2)
• C
  5% (1)
• D
  5% (1)

Explanation

According to the FATF Recommendation, financial institutions should take reasonable measures to determine whether the beneficiaries of a life insurance policy and/or, where required, the beneficial owner of the beneficiary are politically exposed persons. This should occur at the latest at the time of the payout. The purpose of this requirement is to prevent the abuse of life insurance products for money laundering or terrorist financing by PEPs or their associates. Therefore, the best way to mitigate the risk of adding a beneficiary to a life insurance policy for a foreign PEP is to perform due diligence on the beneficiary, such as verifying their identity, relationship with the PEP, and source of funds.

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