Corporate Governance, Anti-Money Laundering and Fraud Risk Management
Governance architecture
IRDAI's Corporate Governance Regulations, 2016 require a board with independent directors, "fit and proper" certification, and mandatory committees: Audit, Risk Management, Investment, Policyholder Protection, and Nomination & Remuneration. Every insurer must appoint an Appointed Actuary and a Chief Risk Officer, maintain a compliance function, and adopt board-approved related-party transaction, whistleblower and internal-controls policies. Listed insurers also follow SEBI LODR norms.
AML/CFT
The Prevention of Money-Laundering Act, 2002 and the PML Rules apply to insurers, supported by IRDAI's AML/CFT guidelines. Core duties: customer due diligence and KYC, identification of beneficial owners, a risk-based approach with enhanced due diligence for politically exposed persons and high-risk customers, appointment of a Designated Director and a Principal Officer, reporting cash transactions of ₹10 lakh or more and suspicious transactions of any amount to FIU-IND, five-year record retention, staff training, and a prohibition on tipping off.
Fraud risk management
IRDAI's fraud monitoring framework requires a board-approved fraud risk management policy, a Fraud Monitoring Committee, red-flag indicators at underwriting and claims, a fraud register, prompt reporting of material fraud to IRDAI, and data sharing through the Insurance Information Bureau.
Worked example
A customer pays a single premium of ₹12 lakh in cash. This crosses the ₹10 lakh threshold, so a cash transaction report goes to FIU-IND and the insurer must satisfy itself the funds are legitimate. If the same customer instead makes three payments of ₹9.9 lakh, the pattern is structuring and a suspicious transaction report is due regardless of amount.
Traps
- Reporting only suspicious transactions and ignoring the cash threshold.
- Confusing the Designated Director with the Principal Officer.
- Treating AML as a life-insurance-only issue.