AML, Counter-Terrorist Financing and Sanctions Compliance for Insurance Intermediaries
Legal basis
Intermediaries are obliged entities under the Anti-Money-Laundering Measures Act (Закон за мерките срещу изпирането на пари, ZMIPP), which transposes the EU AML Directives. They must apply customer due diligence (CDD), enhanced due diligence (EDD) for high-risk cases and PEPs, and simplified due diligence only where risk is demonstrably low. Sanctions screening against EU and UN lists is separate from AML and must be performed before and during the relationship.
Core obligations
- Identification and verification of the customer and the beneficial owner.
- Ongoing monitoring of transactions and the business relationship.
- Reporting suspicious transactions to the Financial Intelligence Directorate (FID/ДФР) without tipping off the customer.
- Record-keeping for the statutory period (typically five years).
- Risk assessment at entity and customer level.
Life insurance specifics
Life and capital-redemption insurance are within scope; non-life is generally out of scope except certain products. The exam tests this distinction.
Traps
- Assuming all insurance products are in scope - only life/capital-redemption (and specified non-life) are.
- Confusing AML reporting (FID) with sanctions reporting (to the FSC/competent authority).
- Tipping off the customer - prohibited.
- Treating EDD as optional for PEPs - it is mandatory.
Worked example
A customer buys a large single-premium life policy and insists on paying in cash from an unexplained source. The intermediary must apply EDD, identify the beneficial owner, screen against sanctions lists, and file a suspicious-transaction report with the FID without informing the customer. Rule of thumb: identify, verify, monitor, report - and never tip off.