CUSTOMER IDENTIFICATION ISSUES FACING COMPLIANCE OFFICERS IN THE INSURANCE INDUSTRY

 Customer Identification Procedures in the insurance field definitely need to catch up to the 21st century. Home offices at insurance companies rely solely upon driver's licenses and passports, and the only face-to-face is with a local agent, who is generally unqualified to perform any compliance function. Given the ability of white-collar criminals, due to the grounds we have covered extensively in our recent article, The Effective Use of Image Search for Customer Identification Verification to present legitimate government-issued personal photographic identification, the insurance industry can easily accept aliases as true legal names.

It gets worse; in the secondary life insurance market, more commonly known as Life Settlements, investors purchase existing high face-value life insurance policies on elderly and infirm insureds, at a discount, and wait for their demise to collect. Many of these are high net worth individuals whose tax planners have named, as beneficiaries of these policies, trusts, and other anonymous entities. This means that the insurance companies, upon death, pay out to the trust alone, and never know that there was a change of beneficiary, as the purchaser simply assumes ownership of the trust or other anonymous vehicle.

It is a virtually foolproof way to launder millions of dollars, because you ultimately receive a check or draft from a major insurance company, easy to deposit anywhere, even if it is in a very large amount. Bankers assume it is a routine life insurance payout of a close relative. Colombian narcotics traffickers, using local agents, laundered large amounts of drug cash in this manner, before US law enforcement discovered their operation.

To foil this scheme, the insurance industry must verify the image of every new client, by employing a facial recognition software program to confirm his full legal name. FRS searches also often reveal additional information, which can be used to further confirm personal data, or alternatively to expose your prospective client as an insurance fraudster, or worse. His true name may be on one or more international sanctions list, such as OFAC. Unless you have accurate information, sanctions violations may occur, for which there will be consequences.

All financial service industries, and non-bank financial institutions, must now similarly upgrade their compliance programs, lest they unwittingly facilitate money laundering.