A veiled threat stares at insurers
Insurance companies find it sensitive in asking a woman behind a veil to be photographed.
By Sugata Ghosh, TNN |
MUMBAI: Till the other day, a woman behind a veil was just another woman for the insurance salesman. Today, she may be a suspect - a faceless customer who refuses to lift her veil to be photographed, and someone who could well be buying an insurance policy just to launder money.
For insurance firms busy chasing business, dealing with such customers could be tricky. But for insurance regulator Irda, furnishing a photo along with the proof of residence of the policyholder, is part of anti-money laundering rules. And, not without reason. There are fears that crafty traders and HNIs with idle cash are using a handful of insurance companies as money laundering machines. Such transactions, which inevitably escape the taxman’s radar, not only convert money from ‘black’ to ‘white’, but also make it tax-free.
Insurance firms know the truth. But today, they find themselves on a tricky terrain, caught between new rules and business the way it was done. Interestingly, one of the biggest life insurance companies is learnt to have told the regulator that there are sensitivities in asking a woman behind a veil, particularly from a minority community, to be photographed.
There are other issues. A large life player has also said that it makes little sense to take a one-year-old child’s photograph in an endowment policy. Reason: When the money matures after 18-21 years, the person would look dramatically different. While some of these arguments are genuine and the latest norms may be difficult to implement in rural regions, sections in the industry think these may be excuses to side step the stringent norms.
The practices followed by some of the insurance companies continue to be a regulatory concern. First, a few them still accept cash well above the cut-off level of Rs 50,000. This is the window through which laundering happens. The policy holder gives cash to pay the first premium on the policy she has just bought, and then takes refuge in the existing rule that allows any customer, not satisfied with the cover, to return the policy and ask the premium money back. The insurance company pays her in cheque, enabling the person to turn the unaccounted for cash into a perfectly official receipt of money.
There may be more to it. The money that the insurance company returns is shown as an income or bonus, which is tax-free.
At times, there may be cases where the policy holder deliberately gives wrong information in the policy application, forcing the company to return the money.
Some of the issues on money laundering were discussed on Wednesday in Hyderabad at a meeting between leading insurance firms, Irda and Financial Intelligence Unit - the central agency that disseminates information regarding suspect financial transactions to enforcement agencies.
Till recently, one of the favourite avenues to hide unaccounted for cash was parking a large sum in a single-premium policy. When the money matured after 8-10 years, it was official income for the policy holder. The catch was that when the money matured, it could not be questioned since I-T rules provide that an individual’s books cannot be re-opened after 7 years.
For insurance firms busy chasing business, dealing with such customers could be tricky. But for insurance regulator Irda, furnishing a photo along with the proof of residence of the policyholder, is part of anti-money laundering rules. And, not without reason. There are fears that crafty traders and HNIs with idle cash are using a handful of insurance companies as money laundering machines. Such transactions, which inevitably escape the taxman’s radar, not only convert money from ‘black’ to ‘white’, but also make it tax-free.
Insurance firms know the truth. But today, they find themselves on a tricky terrain, caught between new rules and business the way it was done. Interestingly, one of the biggest life insurance companies is learnt to have told the regulator that there are sensitivities in asking a woman behind a veil, particularly from a minority community, to be photographed.
There are other issues. A large life player has also said that it makes little sense to take a one-year-old child’s photograph in an endowment policy. Reason: When the money matures after 18-21 years, the person would look dramatically different. While some of these arguments are genuine and the latest norms may be difficult to implement in rural regions, sections in the industry think these may be excuses to side step the stringent norms.
The practices followed by some of the insurance companies continue to be a regulatory concern. First, a few them still accept cash well above the cut-off level of Rs 50,000. This is the window through which laundering happens. The policy holder gives cash to pay the first premium on the policy she has just bought, and then takes refuge in the existing rule that allows any customer, not satisfied with the cover, to return the policy and ask the premium money back. The insurance company pays her in cheque, enabling the person to turn the unaccounted for cash into a perfectly official receipt of money.
There may be more to it. The money that the insurance company returns is shown as an income or bonus, which is tax-free.
At times, there may be cases where the policy holder deliberately gives wrong information in the policy application, forcing the company to return the money.
Some of the issues on money laundering were discussed on Wednesday in Hyderabad at a meeting between leading insurance firms, Irda and Financial Intelligence Unit - the central agency that disseminates information regarding suspect financial transactions to enforcement agencies.
Till recently, one of the favourite avenues to hide unaccounted for cash was parking a large sum in a single-premium policy. When the money matured after 8-10 years, it was official income for the policy holder. The catch was that when the money matured, it could not be questioned since I-T rules provide that an individual’s books cannot be re-opened after 7 years.
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