AML/CFT Guidelines – Cash Acceptance Threshold

Insurance sector has entered into sixth year of effective AML/CFT regime. In this context, extant AML/CFT guidelines to the insurance sector are being reviewed to assess the need for changes to facilitate Risk Based Approach. Due consideration is placed on the threats posed by the money laundering/terrorist financing vulnerabilities in the insurance sector.

The following modifications are therefore being advised to AML/CFT guidelines (References of Master Circular 2010 dated 24^th September 2010):

Clause 3.2 (ii) on Monitoring and Reporting of Cash Transactions shall be replaced with the following stipulations:

a)      With a view to ensuring that premiums are paid out of clearly identifiable sources of funds, it has been decided to permit premium/proposal deposits remittances in cash beyond `50000/- per transaction subject to the customer quoting PAN.  Insurers shall verify the authenticity of the details of PAN so obtained.In case of customers not required to have PAN orwith only agricultural income, Form 60/61 prescribed under the provisions of Income Tax Rulesshall be obtained.

b)     From the perspective of AML/CFT guidelines, it becomes imperative to obtain the details of PAN of the person/entity funding the premium/proposal deposit on an insurance policy.

c)      Any cash transaction above `10 lakh and integrally connected cash transactions above `10 lakh per month shall be reported to FIU-IND by 15^thof the succeeding month

d)     Insurers shall lay down proper mechanisms to check any kind of attempts to avoid disclosure of PAN details. In case of possible attempts to circumvent the requirements, the same shall be reviewed from the angle of suspicious activities and shall be reportedto FIU-IND, if required.

Clause 3.1.6 (i) shall read as under:

In life insurance business, no payments should be allowed to third parties except in cases like superannuation/gratuity accumulations and payments to legal heirs in case of death benefits. Payments in all cases shall be made after due verification of the bona fide beneficiary. Payments exceeding`10000/- per claim should be made through account payee cheques, electronic payment methods such as ECS, NEFT systems approved by the Reserve Bank of India.

The above stipulations are effective from 1^stNovember 2011. Insurers are advised to note the same for compliance.