Insurance Policies

• Criminals overfund insurance or annuity contracts with illicit proceeds and then mischaracterize the payouts as legitimate insurance settlements.
• Certain policy proceeds are tax-exempt or subject to reduced taxation, minimizing the visibility of illegal funds.
• By hiding the origin of premiums or forging policy details, they disguise dirty money as lawful insurance gains in tax filings.

Criminals acquire insurance-based bond products under the names of relatives or third parties, obscuring the true beneficial owner and source of funds. By placing illicit capital within an insurance wrapper, they legitimize otherwise suspect funds. The interest or redemption proceeds then appear as regular insurance benefits, complicating efforts to trace the criminal origin of the money.

• Criminals open single-premium or investment-linked policies in offshore jurisdictions with lax regulatory frameworks, injecting illicit funds as premium payments.
• They then rapidly redeem or surrender these policies, making the resulting payouts appear to be legitimate insurance proceeds rather than criminal assets.
• In some instances, staged or fictitious claims (e.g., phantom vessels) provide an ostensibly lawful source of payouts, further obscuring illicit origins through multi-jurisdictional layering.
• Offshore secrecy impedes investigations by masking beneficial ownership and complicating funds tracing.

• Criminals deliberately overfund life insurance or similar policies with sums well above typical premium payments, often using third-party payers unrelated to the policyholder.
• They then request partial surrenders or early withdrawals. Insurers issue payouts that appear as legitimate insurance disbursements, obscuring the ultimate source of funds.
• Even when incurring steep surrender charges, criminals treat them as another laundering expense, allowing illicit funds to enter the financial system under the guise of routine policy transactions.

• Criminals purchase insurance policies with illicit funds, often structuring or overinflating premium payments from multiple jurisdictions or via third-party payers.
• They then prematurely surrender these policies, incurring surrender penalties but receiving payouts that appear to be standard insurance refunds.
• The surrender proceeds effectively disguise illicit funds as legitimate policy disbursements, achieving layering and integration.
• Ownership details can be further obscured by naming unrelated beneficiaries and routing premium payments through difficult-to-trace third parties.

Criminals exploit annuity-style insurance policies as follows:

• They place illicit funds by overfunding premiums or making lump-sum payments (sometimes via unrelated third parties), turning cash into a policy asset with purportedly legitimate origins.
• Through partial withdrawals, policy loans, or early surrenders, criminals extract these funds as seemingly normal investment proceeds.
• The frequent surrender or transfer of policies, especially during cooling-off periods, and assigning beneficiaries to nominees obscures the true source and beneficiary of the money.
• Complicit brokers in secrecy-friendly jurisdictions facilitate cross-border transfers and ownership changes, further masking beneficial owners from AML scrutiny.

• Criminals repeatedly change the named policyholder or beneficiaries, concealing the individual who truly benefits.
• Nominee owners or shell entities can be inserted and then substituted again, ensuring the ultimate beneficiary remains nebulous.
• Gaps in beneficiary tracking allow these manipulations to go unchecked, thwarting beneficial ownership transparency.

• Criminals exploit single-premium or investment-oriented life insurance policies to introduce large sums of illicit funds, disguising them as legitimate policy transactions.
• They repeatedly alter policyholders or beneficiaries—often substituting shell companies or unrelated individuals—to conceal the true beneficial ownership.
• Frequent changes serve as a layering technique, creating complex ownership structures that hinder financial institutions' ability to trace the source and flow of funds.

• Criminals deliberately overfund single-premium or investment-linked policies with illicit cash, disguising these contributions as normal premium payments.
• They then request early withdrawals or surrenders, absorbing penalties as a cost of layering, thereby receiving purportedly legitimate payouts.
• By employing captive or offshore insurers, criminals place these overfunded premiums in jurisdictions with weak transparency, further obscuring the origin of the funds. Upon withdrawal, the funds reemerge as standard policy disbursements or refunds.

• Criminals establish or control a captive insurer and issue policies to related parties, allowing illicit funds to enter as inflated premiums under the guise of standard insurance coverage.
• By controlling both sides of the transaction (insurer and insured), they can file fabricated or exaggerated claims, funneling funds back out as supposedly legitimate insurance payouts.
• This cycle of premium payments and claim settlements adds layering complexity, particularly when conducted through offshore jurisdictions, making the illicit origin of funds appear as genuine insurance activity.

• Criminals make large or repeated premium payments (overfunding) into single-premium or investment-linked insurance policies using illicit money.
• They later request partial surrenders or refunds under the guise of legitimate policy disbursements, thus retrieving laundered funds in an apparently routine insurance transaction.
• The policies’ built-in flexibility (e.g., easy top-ups, permissible early withdrawals) and acceptance of penalties mask the illicit origin, facilitating layering and, ultimately, integration of illegally sourced capital into the legitimate financial system.