Life insurance caught up in anti-money laundering cycle

The Investment Savings and Insurance Association (ISI) has expressed its disappointment that recommendations to exempt pure risk life insurance from anti-money laundering legislation have so far not been picked up.

Tuesday, September 8th 2009, 5:00AM

by Sonia Speedy

In a recent submission to the Foreign Affairs, Defence and Trade Select Committee on the Anti-Money Laundering and Countering Financing of Terrorism Bill, the ISI stated it was particularly disappointed that its repeated recommendations to exempt pure risk life insurance from the regime had not been adopted.

It believes pure risk life insurance such as term life; trauma; income protection; accident cover; and permanent disablement cover, should be excluded from the financial activities covered by the bill. The Australian regime offers such an exemption.

"Pure risk life insurance is neither suitable for, nor likely to be used by individuals seeking to launder money or finance terrorism," the ISI submission says.

ISI chief executive Vance Arkinstall believes it got a good hearing from the select committee.

He says: "What we are suggesting is that they should carve out of the anti-money laundering, policies that don't have any prescribed surrender values and policies with an annual premium of less than $1500 a year or a single premium of $3,000 a year," he says.

The ISI is concerned the bill is overly prescriptive, needs to harmonise more closely with Australia and also that adequate time needs to be provided for companies to develop the systems needed to support the legislation.

Select committee chair John Hayes says all submissions have been considered and are taken into account when the legislation is put together.

"Really it's not a matter of what the industry thinks, it's a matter of the obligations New Zealand has to sign up to in the context that this thing is put together by the Financial Action Taskforce and we've got to follow their rules. We don't have a lot of freedom of action to make arbitrary decisions," he says.

The Bill had its first reading in Parliament on June 30, with the select committee's final report due by September 15.

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