Insurance houses across South Africa are pouring money into anti-financial crime tools, yet heavy spending alone is not solving the problem. Effectiveness, particularly at the underwriting stage where risk should first be caught, is what matters.
Despite active efforts by life insurers and investment firms to prevent financial crime, some R131.6m is still lost to criminals each year, raising the question of why defences are falling short, said RelyComply.
The core issue lies in fragmentation. Anti-money laundering (AML) and fraud teams typically operate on separate systems, follow different workflows, and report to different managers. AML and transaction monitoring usually sit with compliance, while fraud is handled by underwriting and claims.
This divide widens as a firm’s digital maturity and data volumes grow, a pattern also seen across banks and other financial institutions. Where data maturity is achieved and AML processes are properly integrated, red flags can be identified immediately, often hiding in plain sight within existing underwriting files and payment histories.
Insurance also presents a distinct risk profile compared with banking. Both sectors are accountable institutions under Schedule 1 of the Financial Intelligence Centre Act (FICA), but insurance’s web of intermediaries and cross-border financial groups creates openings that banks’ transaction monitoring systems may miss, including single-premium life policies, oversized lump-sum claims, high-net-worth products, and switched beneficiaries. This underlines the need for a bespoke, risk-based approach tailored to underwriting.
Five red flags stand out. First, beneficiary changes at key moments such as a policy’s maturity date, particularly where new beneficiaries have no clear link to the policy. Second, uncharacteristic premium payments, including large overpayments or unexpected third-party funding, which can signal staggered laundering.
Third, easily-accepted surrenders, where clients absorb steep penalties without justification. Fourth, inconsistent claim patterns, such as claims filed shortly after a policy begins or round-number payouts matching policy limits. Fifth, anomalies within intermediaries, including a single broker driving high-value flows or premiums routed through risky jurisdictions.
Firms with stronger digital maturity are best placed to catch these signals early rather than after the fact. Closing the gap also requires a cultural shift, with compliance, underwriting, legal, and executive teams aligning under one framework and one language, with particular attention to the Insurance Act’s prudential standards.
Partnering with RegTech providers can help insurers unify governance, entity resolution, and transactional data into a single real-time AML solution, making the sector a far harder target for criminals seeking to launder illicit funds.
Read the full RelyComply post here.
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