Insurer fined over anti-money laundering controls

Insurer fined over anti-money laundering controls | Insurance Business Asia

Legal Insights

Insurer fined over anti-money laundering controls

The company is expected to pay a penalty of HK$23 million

Legal Insights

By
Grant Funtila

After the on-site inspection by the Hong Kong Insurance Authority (IA) under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) (AMLO) on the operations of AIA International Limited through its Hong Kong branch, the company has been ordered to submit a report to the IA by a specified date, prepared by an independent external advisor, to validate the ongoing effectiveness of the remediation measures implemented to comply with AMLO and pay a pecuniary penalty of HK$23 million.

The inspection related to processes and controls in effect for both new and in-force business for the period from March 2016 to October 2022. During the inspection, the IA identified technical issues with the implementation and usage of the company’s anti-money laundering system (AML system) and associated algorithm.

These led to some politically exposed persons (PEPs) not being flagged during the screening process. Although no ineligible policyholders were onboarded, the system issues caused delays in establishing customers’ source of funds/wealth and obtaining the necessary senior management approval as required by AMLO.

Additionally, “high-risk” customers assessed by the AML system were not subjected to enhanced due diligence, and improvements were needed in the monitoring of suspicious transactions. The inspection also indicated areas for enhancing AML compliance and management oversight in the Hong Kong branch.

The company implemented different measures to address the identified issues and strengthen its governance, control, and oversight. These include further investments to upgrade the AML System and associated processes, using the IA’s findings as a catalyst for reinforcing and improving AML compliance controls across its operations.

AIA also made commitments to address all issues, including substantial investments in relevant systems and a voluntary engagement by the parent group of an independent expert advisor to validate the effectiveness of anti-money laundering controls and processes across its businesses.

All authorized insurers and licensed insurance intermediaries conducting long-term business must maintain effective anti-money laundering and counter-terrorist financing controls and procedures.