Kathmandu. The Nepal Insurance Authority (INSURANCE) has directed each insurer to form a separate Anti-Money Laundering (AML/CFT) Department.
NeA has directed the insurers to set up a separate AML/CFT department or unit through the Directive on Prevention of Money Laundering, Terrorist Activities and Investment in The Manufacture and Expansion of Weapons of Mass Destruction, 2082 BS. It has been placed on the international financial action task force’s (FATF) grey list due to poor performance in curbing money laundering. Nepal has been accused of playing with the prevention of money laundering through the financial sector. Even in such a situation, insurance companies have not taken the compliance related to prevention of money laundering seriously.
Insurers have not shown interest in using AML/CFT units except to provide information sought by the Insurance Authority, Nepal Rastra Bank or the Commission for the Investigation of Abuse of Authority.
There are numerous responsibilities to be fulfilled by the insurer in accordance with the Act, Rules and Directives. Most of the insurers are running this unit with one or two employees as they have to establish a unit with competent manpower as well as adequate staff to fulfill these responsibilities.
A separate unit with at least four employees is required for the seriousness of the issue, the size of the insurer’s business, regular investigation by various regulatory bodies, regular reporting by the insurer, internal monitoring and control work.
It is not clear how many people will be included in the directive, as only the issue of appointing adequate manpower is included in the directive. Insurers are using the same employee for such sensitive work by giving him the responsibility of other regular tasks of the office as well as the responsibility of the compliance officer.
In order to effectively carry out the provisions as per the Act, Regulations and Directives, it is necessary to formulate many policies, procedures necessary, build a strong internal control system, arrange skilled human resources, and arrange adequate resources.
According to sub-section (3) of Section 7 of the Prevention of Money Laundering Act, 2064, a management level implementation officer should be appointed to fulfill the obligations as per the Act, Rules and Directives. While appointing the executing officer, it has to be ensured that he is not a director or basic shareholder of the regulatory body or insurer or an employee of the top management or a member of his or her single family.
In addition to sub-section (4) of Section 7 of the Act, it has been provided that the functions, duties and rights of the implementing officer should be determined as follows:
(a) To act as a contact person to make the work of the insurer effective in accordance with the Act, Rules and Directions,
(b) formulate policies, procedures and systems for effectively carrying out the work of the insurer in accordance with the Act, Rules and Directives and submit it to the Board of Directors,
(c) to analyze and examine the information regarding unnatural or suspicious transactions received from the officers and employees of the insurer, other department branch managers in accordance with the Act, Rules and Directions,
(d) to consult with other departments or officials to carry out their work or to obtain any documents, details or information required at any time freely,
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(e) Monitor whether the act, rules and directives have been followed by the stakeholders and mention it in the compliance report.
(6) If the executing officer fails to provide the information, information, documents, records or details sought in connection with the implementation of the Act, Rules and Directives, the concerned officer or employee of the insurance company shall be recommended to the Board of Directors for departmental action.
(7) The authority shall be informed of the action taken pursuant to Sub-section (6).
(8) The implementing officer shall submit a report to the Board of Directors at least once for three months, monitoring the works carried out by the Act, Rules and Directives and making improvements.
(9) The Board of Directors shall review the matter mentioned in the report referred to in Sub-section (8) and take an appropriate decision.
