Commissioner for Insurance, Fola Daniel
By Nnamdi Duru
The Nigerian Insurers Association (NIA) has highlighted some of the rudiments of the Know Your Customers (KYC) requirements mandate handed insurance organisations by the regulatory body, National Insurance Commission (NAICOM).
The umbrella body for insurance and reinsurance companies in the country said these measures in addition to protecting companies from reputational risks, shields them from operational and other risks and helps them to establish a reliable customers’ database in-house.
The Director-General of the association, Mr. Sunday Thomas, made this known in his presentation at the Anti-money Laundering and Combating Financing of Terrorism (AML/CFT) workshop organised by NAICOM in Lagos recently.
He reflected on the topic, “A Practical Exposition of the Industry KYC Guidance Note”.
The director-general said KYC “is the due diligence that financial institutions and other regulated entities must perform to identify their clients and ascertain relevant information before entering into financial relationship with them.”
It is a regulatory-requirement, which is vitally important in the fight against money laundering and terrorist-financing, he added.
The rationale for KYC requirements on insurance companies, according to him, springs from the fact that it is now a legal and institutional requirement which protects institution from legal and reputational risks.
It also shields an institution from operational and other risks while enabling it to establish a customers’ database, he added.
Thomas also identified those that insurance companies must be on the look-out for where KYC is concerned including the various insureds, policyholders where they are differed for insureds as well as beneficiaries of insurance policies.
Others that should be subjected to KYC by insurers, according to him, are intermediaries if one is involved in a transaction, controllers of corporate customers and previous or existing customer with whom there has been no recent contact.
The director-general emphasised that insurance operators should conduct such checks before any business relationship is established, when an amendment to the original contract is being effected, and when previously lapsed policies are being revived.
Thomas also identified the various situations where KYC is mandatory for insurance companies including when they are dealing with any client for the first time and where a client insists on secrecy or refuses to provide requested information without a reasonable explanation.
Also where a company is worried about the honesty, integrity, identity or location of a client as well as when an illogical third party transactions is being carried out including where funds are routed or received from third parties or through third party accounts, it is necessary to conduct a KYC checks on such transaction..
He also advised insurance companies to conduct checks on customers where the transaction involves an unconnected third party without logical reason or explanation and where payment of a substantial sum in cash; particularly in excess of N5 million for individual or N10 million for corporations.
The NIA director-general also urged top managers of insurance firms to always conduct a KYC checks where frequent related cash transactions or overpayments by a client and in the absence of an obvious legitimate source of the funds.
This is also necessary here movement of funds overseas, particularly to a higher risk country or tax haven or where, without reasonable explanation, the size, nature and frequency of transactions or instructions (or the size, location or type of a client) is out of line with normal expectations.
The director-general listed the procedures for doing this type of checks on customers to include establishment of customers identity, taking evidence of identification, carrying out certification where necessary and/or conduct physical inspection and creation of a record of the evidence as required.