Insurers to verify clients' identity

The rigmarole which has faced bank customers in recent years to prove they are not money launderers will from next Friday apply to anyone who wants an insurance policy.

The rigmarole which has faced bank customers in recent years to prove they are not money launderers will from next Friday apply to anyone who wants an insurance policy.

On 14 January the Financial Services Authority (FSA) takes responsibility for regulating general insurance and protection insurance sales and advice.

Charles Suchett-Kaye, a partner of Reynolds Porter Chamberlain, said: "Next week sees the introduction of the insurance intermediary to the regulated sector disclosure requirements of the Proceeds of Crime Act and the Money Laundering Regulations 2003. The rules extend to other businesses that sell insurance, ranging from property management companies through to dentists."

Insurance brokers and other intermediaries will have to tell the National Criminal Intelligence Service their knowledge or suspicion of any money laundering, no matter how small, that they encounter in the course of business. They will be liable to as much as 14 years' jail if they are convicted of assisting a money launderer.

Mr Suchett-Kaye said: "For insurance intermediaries the definition of what constitutes money laundering has been significantly broadened. It now includes simple possession of any criminal property, and will include tax evasion."

This means insurance brokers will have to verify the credentials and identities of new clients before accepting instructions, and undertake a risk review to satisfy themselves as to the identity of current clients. This will mirror the procedures which have been the bane of many bank customers who, even if they have been with a particular branch for decades, have had to produce a passport, utility bills and other proof of identity.

"These new obligations come in just as insurance intermediaries are struggling with all other aspects of their new regulatory regime. We hope that the FSA bears this in mind."

An FSA spokesman said: "All our regulated businesses must comply with the money laundering rules, and insurance brokers will be no exception."

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