Which methods are typically used to launder money using insurance companies? (Choose two.)
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A. B. C. D. E.AD
Money laundering through insurance companies typically involves the use of insurance products and services to obscure the origin, ownership, or control of illicitly gained funds. The following are two common methods used to launder money through insurance companies:
A. The policy holder overpays the policy and moves the funds out of the policy despite paying early withdrawal penalties: This method involves the policy holder paying more than the required premiums for an insurance policy, thus creating an excess balance. The policy holder then withdraws the excess balance, despite having to pay early withdrawal penalties. The excess payment acts as a way to launder money, as the source of the funds is not questioned, and the early withdrawal penalties can be considered a cost of doing business.
B. The policy holder enters a sibling as a beneficiary of the insurance policy rather than themselves: This method involves the policy holder purchasing an insurance policy and naming a sibling or other third party as the beneficiary instead of themselves. The policy holder then pays the premiums using illicitly obtained funds. When the policy matures, the beneficiary receives the payout, effectively laundering the illicit funds. This method is also known as the "straw man" technique.
C. The policy holder purchases a bond and redeems it at a discount prior to its full term: This method involves the policy holder purchasing a bond with illicit funds and redeeming it before its full term for a discount. The discount received represents the laundered funds.
D. The policy holder uses an offshore company to pay the insurance installments: This method involves the policy holder using an offshore company to pay the premiums for the insurance policy. This creates a layer of anonymity, making it difficult to trace the source of the funds used to purchase the policy.
E. The policy holder is strongly interested in how many costs are incurred when taking out an insurance policy: While this option is not a typical method used to launder money, it could be an indicator of suspicious activity. A policy holder who is more interested in the costs incurred when taking out an insurance policy than the benefits of the policy may be attempting to create a paper trail to legitimize the illicit funds used to purchase the policy.