Today's Economic Times had a nice article by Sarabjeet Singh (a partner at BMR Advisors) about how AML guidelines can be and need to be implemented in the Life Insurance business.  IRDA in its recent guidelines has already announced the need to put in systems and policies to check money laundering through the Insurance set-up. The new guidelines focus on "high risk customers" with a special focus on Politically Exposed Persons (PEPs). PEP has been included in the PMLAct 2002 with a modification this year.

This refers to those instances where the person in question is in a position of power in a domestic or foreign scenario. The PEP will infact not only cover these individuals but their close relatives and associates also, since past incidents have revealed that its rarely the individual who launders the money himself/herself- but mostly through their own associates. Mr Singh also outlined some solid suggestions on how to implement these guidelines: - Early termination of policy esp at a cost to the customer or where benefits are directed to a seemingly unrelated 3rd party  - Customer's reluctance to provide identifying information or instance(s) of minimal information being provided  - Transfer of benefit to unrelated 3rd party  - Seeking an inappropriate transaction, vis-a-vis standard market activities  - Borrowing of max amount available soon after buying the product  - A payment or transaction request is received from a 3rd party whose identity or relationship (or both) are unclear.  The above can easily be used as the first cut triggers in the AML system to flag-off as possible threat that needs investigation.