Reporting Suspicious and Unusual Transactions

The South African government has joined in with international efforts to combat money laundering.

Money laundering has been a criminal offence since Section 4 of the Prevention of Organised Crime Act, 1998, was promulgated. A money laundering offence may be described as an activity which has or is likely to have the effect of concealing or disguising the nature, source, location, disposition or movement of the proceeds of unlawful activities or any interest which anyone has in such proceeds and includes any activity which constitutes an offence in terms of Section 64 of FICA and Sections 4, 5 and 6 of the Prevention of organised Crime Act.

Apart from criminalising money laundering, South African law also contains a number of control measures aimed at facilitating the detection and investigation of money laundering. The control measures introduced by FICA include requirements for institutions to establish and verify the identities of their customers, to keep certain records, to report certain information and to implement measures that will assist them in complying with the Act.[1]

The act creates an entity called an accountable institution. These accountable institutions (in total there is 19 types of accountable institutions and includes banks, insurance companies, casino’s, etc) are businesses that are likely to be used by would-be money launderers to disguise proceeds obtained from unlawful activities.

Your report should include as much detail as possible in respect of the particulars of the transaction and the grounds for suspicion/knowledge of the transaction.

The following examples of suspicious and unusual transactions have been taken from the IAIS – Insurance Fraud Subcommittee Anti-Money Laundering Guidance Notes:

• Application for a policy from a potential customer in a distant place where comparable policy could be provided ‘closer to home’.
• Application for business outside the policyholder’s normal pattern of business.
• Introduction by an agent/intermediary in an unregulated or loosely regulated jurisdiction or where organised criminal activities (e.g. drug trafficking or terrorist activity) are prevalent.
• Any want of information or delay in the provision of information to enable verification to be completed.
• Any transaction involving an undisclosed party.
• Early termination of a product, especially at a loss caused by front-end loading, or where cash was tendered and/or the refund cheque is to a third party.
• A transfer of the benefit of a product to an apparently unrelated third party.
• Requests for a large purchase of a lump sum contract where the policyholder’s experience is small, regular payments contracts.
• Attempts to use a third party cheque to make a proposed purchase of a policy.
• Applicant for insurance business shows no concern for the performance of the policy but much concern for the early cancellation of the contract.
• Applicant for insurance business attempts to use cash to complete a proposed transaction when this type of business transaction would normally be handled by cheques or other payment instruments.
• Applicant for insurance business requests to make a lump sum payment by a wire transfer or with foreign currency.
• Applicant for insurance business is reluctant to provide normal information when applying for a policy, providing minimal or fictitious information or, provides information that is difficult or expensive for the institution to verify.
• Applicant for insurance business appears to have policies with several institutions.
• Applicant for insurance business purchases policies in amounts considered beyond the customer’s apparent means.
• Applicant for insurance business establishes a large insurance policy and within a short time period cancels the policy, requests the cash value returned, payable to a third party.
• Applicant for insurance business wants to borrow the maximum cash value of a single premium policy, soon after paying for the policy.
• Applicant for insurance business uses a mailing address outside the insurance supervisor’s jurisdiction and where the home telephone has been disconnected, upon verification attempt.
• New business or existing business transactions, where the proper identification of client/s cannot be established or information related to the identification and verification process is suspicious
• Where a Metropolitan staff member dealing with a transaction actually knows, or believes that there is a reasonable possibility that the client’s/clients’ name/s is/are false. (NB: In this instance, employees should not process the transaction but immediately refer it to the MLCO.);
• Where a policyholder has a single policy or a variety of policies but Metropolitan receives premiums from more than three different bank accounts during the existence of the policy;

You may not disclose:

• The fact that you made the report to the AMLCO.
• Or any information regarding the report.

to any person, including the customer and/or the intermediary, other than to the compliance officer and for the purpose of legal proceedings or in terms of a court order. and

• The fact that you know or suspect that a report has been made or is to be made to the FIC about a customer, or
• any information or suspected information of such report to any person, including the customer and the intermediary concerned, other than to the compliance officer and for the purpose of legal proceedings or in terms of a court order.

For more information about FICA, please contact the compliance officer in your area.

Click here to report suspicious or unusual transactions