On 2nd February 2021, the Financial Intelligence Analysis Unit (FIAU) issued an Interpretative Note in relation to the interpretation of Article 2(1)(d) of the Prevention of Money Laundering and Funding of Terrorism Regulations (the “Regulations”), the interpretation of which was causing difficulty to certain entities and individuals operating within the insurance sector.

Regulation 2(1)(d) provides that any insurance intermediary activities carried out by an insurance intermediary or by a tied insurance intermediary with respect to long-term insurance business and which intermediary or tied insurance intermediary is enrolled or is required to be enrolled under the provisions of the Insurance Distribution Act would constitute relevant financial business for the purposes of the Regulation.

While the position of insurance agents and managers was clear from the outset (i.e. that they are subject persons if they have been enrolled to provide long-term business of insurance in terms of the Insurance Distribution Act), the position with respect to insurance brokers and tied insurance intermediaries (TIIs) was not as clear. The Interpretative Note is therefore addressed to the latter two classes of insurance intermediaries and is intended to assist the same in identifying whether they are to be considered as subject persons in terms of AML/CFT legislation or otherwise.

INSURANCE BROKERS

The FIAU has outlined in the Interpretative Note that insurance brokers who have enrolled under Article 13 of the Insurance Distribution Act (allowing them to carry out insurance distribution activities in both general business as well as long-term business), shall not be considered to be carrying out relevant financial business if they limit their insurance distribution activities to general business of insurance and have never carried on any insurance distribution activities relating to long-term business of insurance. Thus, with respect to the activity of insurance brokerage, it is only with respect to long-term insurance business that the said activity will be considered by the FIAU as relevant financial business.

Where an insurance broker which previously did not carry out long-term insurance business intends to begin carrying out such activities, the Interpretative Note provides that the insurance broker is to ensure that it meets the AML/CFT obligations arising from the Regulations prior to actually engaging in such business, which shall include the appointment of a Money Laundering Reporting Officer (MLRO) and the requirement of the broker to register with the FIAU’S CASPAR risk assessment system.

The Interpretative Note further provides that an insurance broker which decides to no longer carry on any new long-term insurance business may still be a subject person in terms of the Regulations if that broker continues to service any existing long-term business of insurance. Furthermore, insurance brokers which decide to no longer carry-on long-term business of insurance are to retain any records of past business for a period of five (5) years in terms of Regulation 13 of the Regulations.

The FIAU have further confirmed that insurance managers who only accept appointments from insurance brokers which have limited their insurance distribution activities to general business would not be a subject person in terms of the Regulations.

TIED INSURANCE INTERMEDIARIES

As in the case of insurance brokers, tied insurance intermediaries (TIIs) which carry out tied insurance intermediary activities in the class of long-term business shall be considered to be carrying out relevant financial business.

However, the Interpretative Note provides two exceptions, where TIIs engaged in long-term business will not be considered to be carrying out relevant financial business. These are as follows:

1. Where the person in question is a natural person and has been enrolled in order to carry out activities on behalf of the TII; or
2. Where the TII does not collect premiums or other amounts intended for the policyholder or the beneficiary (i.e. where the TII does not maintain a TII account)

With regards to the second exception above, TIIs shall not be considered as collecting and holding monies when the monies are transmitted directly from the client to the insurance undertaking, and it is therefore only where a TII maintains a TII account that the TII will be considered as subject person in terms of the Regulations.

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