A long-term client of an insurance company makes changes to a policy that require payment of an additional lump sum. The amount payable is high, though within the client's means based on the KYC information collected. The payment is made via a company in another jurisdiction that is known to have lax AML controls. Which indicator of suspicious activity is present?
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A. B. C. D.A
The correct answer to this question is C. The payment was made via a company in a jurisdiction known to have lax AML controls.
Explanation:
Money laundering is the process of concealing the true origin of illicit funds by passing them through a legitimate financial system. To prevent money laundering, financial institutions and insurance companies must implement robust Anti-Money Laundering (AML) policies and procedures, which include Know Your Customer (KYC) processes to verify the identity of customers and assess their risk.
In this scenario, the client of an insurance company is making changes to a policy that require payment of an additional lump sum, which is high but within the client's means based on the KYC information collected. However, the payment is made via a company in another jurisdiction that is known to have lax AML controls.
This is a red flag that suggests suspicious activity, as it indicates that the payment may be an attempt to conceal the true origin of the funds. The fact that the payment was made through a company in a jurisdiction with lax AML controls raises the risk that the payment may be linked to criminal activity.
Option A is not correct because the payment was not made directly by the insured client, but rather via a company in another jurisdiction.
Option B is not correct because the fact that the payment is within the client's means based on the KYC information collected does not necessarily mean that it is not suspicious.
Option D is not correct because the fact that a long-term client wants a change to a policy that is already in force is not, by itself, an indicator of suspicious activity.