Fri, Oct 19, 2018 - Page 12 News List

Insurers improving suspicious transaction reports

Staff writer

Taiwan enacted the Money Laundering Control Act (洗錢防制法) in 1996, the first law in the Asia-Pacific region designed to prevent money laundering.

To keep up with international money laundering prevention developments and in response to the heavy fine imposed on a Taiwanese financial institution in August 2016 by an overseas financial supervisory agency, the competent authorities made substantial amendments to the act’s original provisions.

After passing the third legislative reading and promulgation by the president in late 2016, the amendment came into effect on June 18 last year.

To prevent money laundering through financial institutions and other channels, and to be able to detect signs of suspicious transactions as they are processed, money laundering regulations around the world require that financial institutions report suspicious transactions.

The same obligation is set forth in Article 10 of the Money Laundering Control Act. The authority responsible for handling and analyzing suspicious transaction reports is the Financial Intelligence Unit.

Article 5 of the act stipulates that financial institutions include insurance companies. Insurance companies must therefore report suspicious transactions to the Ministry of Justice’s Investigation Bureau (MJIB).

The nation’s life insurance industry was rated as a high-inherent risk sector in the National Risk Assessment Report (國家洗錢及資恐風險評估報告), and should therefore take a more active role in fulfilling the obligation to report suspicious transactions.

Of the 9,656 reported suspicious transactions recorded in Taiwan in 2015, a majority of the cases, or 9,163, were reported by the banking industry, while only 59 cases were reported by the insurance industry.

A change began to appear last year, as the proportion of cases reported by the banking sector decreased from 95 percent to 82 percent, whereas the number of cases reported by the insurance industry increased to 799.

This change also reflects a significant increase in the insurance sector’s awareness of reporting suspicious transactions. As of June this year, the number of cases reported by the life insurance industry alone had reached 792.

The main reason for this big increase in the number of reports by the life insurance industry is that the obligations specified by the law have increased, that the “Red Flags for Suspicious Money Laundering or Terrorism Financing Transactions” (疑似洗錢或資恐交易態樣) have increased, and that insurance companies have made great investments in manpower and resources in response to money laundering prevention requirements, for example by setting up units dedicated to money laundering prevention.

According to data compiled by the Life Insurance Association of the Republic of China (壽險公會), of the 20 patterns announced by the association in the Red Flags for Suspicious Money Laundering or Terrorism Financing Transactions, the two most common money laundering or terrorist financing transactional patterns are, first, where a customer “over a short period of time requests and repays several large policy loans, where the amounts borrowed and repaid are comparable and no reasonable explanations are provided;” and, second, where “an individual implicated in negative news reported on TV, in the newspapers or magazines or on the Internet wishes to purchase a cash value insurance contract, or is the insured person or the beneficiary of the insurance policy and wants to change the insured or beneficiary, or carry out a monetary transaction and the transaction carries the signs of money laundering.”

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