IRDA specifics the duration for which agents and insurers have to maintain client records.
Taking a serious note of allegation of money laundering in insurance business, IRDA has asked the insurance companies and agents to maintain the record of their clients for at least five years from the date of transaction. The insurance regulator has also asked the insurers and agents to maintain such record even after termination of business relationship with the clients.
IRDA has asked the insurance companies to revise their Anti Money Laundering /Countering Financing of Terrorism policies in line with the prescribed guidelines.The insurance regulator has also asked the insurance companies to maintain the record of nominees of the insurance products and business correspondents.
A few days back, an online news portal Cobrapost had alleged that some private as well as public sector insurance companies including LIC, Reliance Life, Tata AIA and Birla Sun Life were involved in violation of KYC and AML norms. A sting operation of Cobrapost showed employees of these insurance companies guiding Cobrapost journalists posing as customers to route their black money in the financial system through insurance products, multiple accounts, etc.
Rajesh Chheda, a Goa based financial advisor said that the move will curb money laundering to some extent. He said that these rules are already practiced by insurers and advisors in developed countries like England and Australia.
However, some insurance advisors feel that this exercise is time consuming and would not contribute much in curbing money laundering. Nilesh N Shah, an insurance advisor said “Already there are some measures which could track money laundering for instance – if a person pays a premium of Rs 50,000 in cash then he have to submit his PAN details.”
GN Agarwal, CEO Future Generali said “We are already maintaining the records of all the clients even if they discontinue our services. This is a part of our regular exercise and we have no problem in maintaining these records.” He said that the possibility of routing black money in insurance products is very less as compared to other avenues due to limited returns on investment and their long term nature.