By Dennise Williams, Staff ReporterMR. D. Gorgon is a property owner in the parish of Clarendon. His listed occupation is businessman. He travels frequently between Jamaica and the United States. He has amassed 100 properties in less than two years. Additionally, he owns a transatlantic yacht. Fifteen months ago, Mr. Gorgon had assets worth $20 million. His assets are now worth $200 million.
Mr. Gorgon has several substantial bank accounts, brokerage accounts and insurance policies on his 100 properties. He also carries a variety of health and life insurance polices. How should you, the insurance agent handle this type of customer?
While he may bring you a lot of business, this type of client can also bring a lot of trouble as his activities with your company can be construed as money laundering, which is the term used to describe the process by which property that has an unlawful origin is made to appear to have a legitimate source. This is achieved by engaging the illicit wealth in a series of financial transactions that are designed to confuse the investigator.
TRAINING SEMINAR
To address this issue, the Financial Services Commission (FSC) held an Anti-money Laundering Training Seminar on June 28 at the Knutsford Court Hotel. FSC licensees in the insurance and securities industries were invited to the training seminar to build a better understanding of the importance of the anti-money laundering issues.
Janet Johnson Haughton, FSC director of examination, spoke to Financial Gleaner about the seminar. "The FSC is now a competent authority under the Money Laundering Act. The FSC has the authority to go into a firm and look at its books and accounts for signs of money laundering, and so we are sensitising the industry for what to look for."
And while laundering activities are more commonly associated with financial brokerages and banks, the insurance industry has not been spared.
Dr. Shazaeedi Ali, one of the seminar's presenters, spoke on the vulnerabilities of the insurance industry to money laundering. "With an extensive range of products the insurance industry will become increasingly appealing to those seeking to secrete their wealth. According to U.S. experts, the most significant money laundering 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 origins."
Dr. Ali continues, "An example refers to situations where criminals use illicitly obtained wealth to purchase a large, single premium policy. Typically, soon after purchase the criminal would redeem the policy in order to obtain a clean cheque from the insurer." Insurance claims are also a hot spot for money launderers. Explained Dr. Ali, "Money laundering can take place in relation to fraudulent claims. Health, commercial and vehicle insurance policies may be acquired by organised criminal rings, and even terrorists, for the purpose of committing fraud to obtain 'clean' funds. For instance, illicit funds may be used to purchase property and property insurance. The property is then deliberately destroyed by the purchaser/ insured. Once the property is written off, the insured will submit a bogus claim to recover part of the investment and will receive a legitimate cheque from the insurer as settlement of the claim."
RED FLAGS
While ways to clean up money is limited by one's imagination, here are scenarios that may be considered unusual or even suspicious.
A potential customer's difficulty in describing the source of his funds.
Applicant is from a foreign jurisdiction where a comparable insurance policy could have been obtained at home.
Introduction of customer by someone from a jurisdiction where organised criminal activities or terrorist activities are prevalent.
Applicant for insurance business wants to borrow the maximum cash value of a single premium policy, soon after paying for the policy.
Payment of premiums are made in cash.
Assignment of policy to third party for cash, especially if policy was recently taken out.
Early termination of policy, particularly by customer with a history of policy terminations.
