Terrorism Financing: NAICOM Beams Searchlight on KYCG of Insurers

National Insurance Commission (NAICOM) has started sending inspectors to insurance firms to ascertain whether they have been complying with the provisions of the law regarding money laundering and terrorism financing.

This is in compliance with the directive by the Nigerian Financial Intelligence Unit (NFIU) on terrorism financing; and the provisions of the Money Laundering (Prohibition) Act 2004, and the Know Your Customer Guidelines (KYCG) issued by the commission.

This measure is aimed at protecting insurance companies from reputational risks, shield them from operational and other risks and help them to establish reliable customers’ database in-house.

Sources close to NAICOM told to Daily Independent, that the commission has been sending inspectors to insurance firms to ascertain whether they have actually been complying with the provisions of the law regarding money laundering and terrorism financing.

NAICOM inspectors were trying to find out whether insurers have actually been establishing identity of customers, taking evidence of identification, carrying out certification where necessary or conducting physical inspection and creating a record of the evidence as required.

All insurance broking and loss adjusting firms are to display visibly in all their operation centers nationwide the provisions of the Money Laundering Act regarding their duty to file Cash Transaction Reports (CTRs) and Suspicious Transaction Reports (STRs) with the NFIU and forward copies to NAICOM.

Unlike in the past when insurers could just enter into a contract with anyone, the operators must now confirm the identity of their customers in compliance with the provisions of the KYCG aimed at fighting against money laundering and terrorist-financing.

KYCG “is the due diligence that financial institutions and other regulated entities must perform to identify their clients and ascertain relevant information before entering into financial relationship with them.”

The rationale for KYC requirements on insurance companies springs from the fact that it is now a legal and institutional requirement which protects institution from legal and reputational risks.

The insurance operators are also required to conduct KYCG checks before any business relationship is established, when an amendment to the original contract is being effected, and when previously lapsed policies are being revived.

The KYCG is mandatory for insurance companies in situations when they are dealing with any client for the first time and where a client insists on secrecy or refuses to provide requested information without a reasonable explanation.

Besides, it is necessary to conduct a KYCG checks on transactions where a company is worried about the honesty, integrity, identity or location of a client