eBusiness Weekly
Tawanda Musarurwa
The insurance and pensions sector in any economy plays a vital role in financial intermediation, but that very fact exposes it to some very real dangers with respect to white collar crimes.
Because of the role and structure of insurance and pensions business, players in the sector typically operate by moving funds from parties with excess capital to parties needing funds.
All things being equal this financial intermediation works to create efficient markets and lower the cost of conducting business.
But it also makes the sector a target for money launders. Money laundering has over the years become a potent threat to economies across the globe due to the rising volumes and sophistication of white collar crimes.
According to United States-based financial crime experts Comply Advantage, the main targets of money launderers in the insurance industry are single premium policies (insofar as these enable criminals to get rid of substantial amounts of money in one go), as well as annuity policies (with the money launderer getting to receive a legitimate income after paying premiums by using ‘dirty money’).
A 2018 Global Economic Crime Survey has highlighted the growing trend of financial criminal activity in the insurance landscape. According to the report, 62 percent of global insurance companies were exposed to fraud or financial crime over the preceding 24 months, compared to 37 percent in 2016 and 35 percent in 2014.
Enhancing Anti-Money Laundering (AML) regulation within the local insurance and pensions industry, is particularly important due to the significant exposure of the sector to the financial sector and other key industries.
Common investment destinations for pensions and insurance funds are the Zimbabwe Stock Exchange (ZSE), the banking sector as money market investments, Government and quasi-Government bonds, as well as private equity.
And through its significant contribution to property and infrastructure development, and provision of capital into productive sectors, the local insurance and pensions industry has helped to facilitate trade and commerce activities that results in Zimbabwe’s economic growth and development.
Money laundering poses a risk to confidence in the financial system and all related institutions.
Insurance and Pensions Commission (IPEC) Commissioner Dr Grace Muradzikwa, recently said the regulator was widening its scope to deal with issues around the enforcement of Anti-Money Laundering (AMT) and Combating of Financing of Terrorism (CFT) laws in the insurance sector.
“AML and CFT issues we realise that we have not been giving them focus, that’s why we have them as a project within the Commission” said the IPEC boss.
Last year, IPEC carried out an AML/CFT National Risk Assessment for the industry.
The regulator participated all AML/CFT National Task Force meetings and in the AML/CFT Advisory Council; and incorporated AML/CFT milestones in its strategic plan.
Zimbabwe is a member of the Financial Action Task Force (FATF) Global Community, which is responsible for setting and continuously updating international standards on Anti-Money Laundering and Combating Financing of Terrorism.
And the fiscal and monetary authorities have increased efforts to ensure that the country is compliant.
Earlier in May, the European Commission released a list of high-risk Third World countries with ‘strategic deficiencies’ with regards to anti-money laundering and countering terrorist financing.
The European Union (EU) said under the Anti-Money Laundering Directive (AMLD) it had revised its list to take into account developments at the international level since 2018, and that the “new list is now better aligned with the lists published by the FATF”.
Countries listed included The Bahamas, Barbados, Jamaica, along with Botswana, Cambodia, Ghana, Mauritius, Mongolia, Myanmar, Nicaragua, Panama and Zimbabwe.
Reserve Bank of Zimbabwe (RBZ) governor Dr John Mangudya clarified the purpose of the listing.
“It is the practice to publish the list of countries that have been assessed and have AML/CFT gaps, and the list is updated three times a year after the FATF Plenary Meetings. It is also the practice of the European Union to adopt the FATF list and circulate it within its member countries,” he said.
“Zimbabwe is on what is referred to as a list, that is, of countries that are cooperating with the FATF and making progress. A grey list is not a blacklist.”
The local insurance and pensions industry needs to ensure that it is not found on the wrong side of any list.
