The FSA has issued (January 2020) updated guidance for the life assurance sector on the Island. This has been long awaited by the sector as the previous guidance dated from 2008 and it has been produced with assistance from the Manx Insurance Association.
It is clear from the guidance that it is supplementary to the principal Handbook from the FSA in relation to compliance with AML/CFT requirements. This is helpful because it has not always been clear in the past whether life assurers could use the Handbook as a guide for compliance when this had largely been written for other sectors.
The guidance recognises that the life assurance sector has traditionally used introducers for the purposes of product distribution and customer interface. To that end, there is a focus on how an involvement of an introducer impacts on compliance with Paragraph 9 of the Anti-Money Laundering and Countering the Financing of Terrorism Code 2019 and a link is made to the separate guidance that the FSA has issued on this point.
There is also a focus on risk factors relevant to the sector but it is likely that these are generally matters which the sector would already be considering for risk assessment purposes. Life assurers are, however, also guided to consider the FATF’s guidance on risk factors for the life assurance sector.
The guidance provides some variation from the principal Handbook in respect of customer identification and verification which takes into account some of the features that are often found in the life assurance sector’s customer base. There is a clear theme that where any variation from the normal standard of customer due diligence is permitted, the expectation is that this will be subject to senior management sign off. It is interesting to note that the list of suitable certifiers is more extensive than in the principal Handbook but it is considered that this takes into account the position that would have been acceptable under previous guidance and which is tailored to the nature of the life assurance distribution channels.
In relation to ongoing monitoring, the guidance helpfully takes into account the nature of life assurance business and there is a recognition in relation to standard risk customers that customer due diligence reviews can be carried out on a trigger event basis. There is also flexibility in relation to higher risk customers with reviews being permitted on a sample basis rather than all high risk customers having to be reviewed every year.
The updated guidance should not present life assurers with the need to make significant changes to policies and procedures but it will be important to review documented procedures against the new guidance. DQ can assist with such reviews and with delivering training in relation to AML/CFT requirements.