South African life insurers and investment firms are pouring resources into anti-financial crime tools, yet R131.6m continues to slip through to criminals every year.
The issue is not a lack of spend but a lack of effectiveness, particularly at the underwriting stage, where risk should be caught first, stated RelyComply.
At most insurers, AML and fraud defences sit in separate silos. Transaction monitoring typically falls under compliance, while fraud detection is handled by underwriting and claims teams.
The split widens as a firm’s data systems and volumes grow more complex, echoing a pattern also seen across banks and other financial institutions. Where digital maturity is stronger and AML processes are properly integrated, red flags can be spotted immediately rather than uncovered after the fact.
Insurance also presents a distinct risk profile compared with banking. As accountable institutions under Schedule 1 of the Financial Intelligence Centre Act (FICA), insurers operate within complex networks of intermediaries and cross-border financial groups. Products such as single-premium life policies, large lump-sum claims, high-net-worth offerings and beneficiary switches can create criminal opportunities that standard bank transaction-monitoring alerts often fail to catch.
Five red flags are emerging as central to underwriting-led AML detection. The first is beneficiary changes made around major policy events, such as maturity dates, where new beneficiaries have no clear or legitimate link to the policyholder. The second is uncharacteristic premium activity, including large overpayments or unexpected third-party funding, which can signal staggered laundering.
The third is the ease with which some surrenders are accepted, particularly repeated early surrenders where clients absorb heavy penalties without justification. The fourth is inconsistent claims patterns, such as claims filed shortly after a policy begins, costs manipulated to hit maximum payout limits, or suspiciously round claim totals. The fifth is anomalies linked to intermediaries, including a single broker driving unusually large and fast fund flows, premiums routed through high-risk jurisdictions, or unexplained spikes in payment activity.
Closing the gap requires more than technology. Firms with strong digital infrastructure can already mine centralised underwriting files for these signals, but a cultural shift is also needed. Compliance, underwriting, legal and executive teams must share a common framework for identifying and escalating AML and fraud risks, with close attention paid to the Insurance Act’s prudential standards. Greater collaboration between insurers and both public and private sector bodies is also encouraged.
Partnering with RegTech providers offers one route to bridging historically siloed governance, entity resolution and transactional data, enabling real-time AML monitoring built for insurance’s specific risk environment.
Read the full RelyComply post here.
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