Insurance Annuities

Criminals convert illicit proceeds into annuity payouts, embedding them into the legal economy under the guise of insurance or retirement returns. This final stage cements the legitimacy of the laundered funds by presenting them as routine policy disbursements.

Criminals frequently employ nominees or unrelated third parties as policyholders or beneficiaries. These opaque or shifting ownership and beneficiary relationships obscure the true individuals behind the illicit funds, hindering standard KYC and beneficial ownership checks.

Criminals exploit the inherent flexibility of annuity products—such as lump-sum or structured premium payments, partial withdrawals, policy loans, and early surrenders—to disguise illicit funds as legitimate investment proceeds. The repetitive nature of policy transfers or surrenders further leverages the features of annuity products, making it more difficult to trace the original source.

The technique relies on jurisdictions with weaker AML oversight to defer scrutiny of annuity ownership structures. Funds may be moved through or held in these regions, making it more difficult for authorities to trace beneficial owners or transactional flows.

• Identify individuals holding prominent public or political positions, as well as their close associates.
• Increase risk assessment for high-profile or influential policyholders or beneficiaries.
• Support enhanced due diligence to detect bribery- or corruption-related money laundering risks.

Using PEP lists helps financial institutions ensure proper scrutiny of annuity contracts when politically exposed individuals are involved.

• Provide risk ratings and watchlists for jurisdictions with known secrecy or weak AML enforcement.
• Flag cross-border premium payments or annuity disbursements involving high-risk regions.
• Identify potential higher risk associated with policyholders or beneficiaries connected to these jurisdictions.

This information supports enhanced scrutiny of suspicious cross-border annuity transactions and helps detect geographic-based ML red flags.

• Confirm the licensing status, professional memberships, and affiliations of insurance brokers or intermediaries.
• Verify whether brokers hold legitimate credentials or if they appear unlicensed.

These databases enable the detection of unauthorized or complicit intermediaries who may be facilitating illicit annuity contracts.

• Provide official filings such as tax returns, balance sheets, and profit-and-loss statements.
• Corroborate a policyholder’s declared financial capacity and sources of funds.
• Reveal discrepancies between reported earnings or assets and large annuity contributions.

These records help confirm the legitimacy of funds used for annuity purchases and detect potential misrepresentation or laundering of illicit proceeds.

• Aggregate publicly available information on intermediaries or brokers, including websites, social media, and news sources.
• Verify regulatory status and licensing, identifying potential unlicensed or complicit operators.
• Check for negative media coverage, historical sanctions, or collusion.

OSINT investigations support detecting rogue or uncredentialed brokers who may facilitate illicit annuity schemes.

• Identify any known relationships or affiliations between policyholders and beneficiaries.
• Verify the policyholder’s declared financial profile and investment objectives.
• Provide a chronological record of policy amendments and beneficiary changes.
• Document the origins of supplied funds and verify their legitimacy.
• Capture declared addresses, citizenship, or residency, highlighting high-risk jurisdictions.
• Assess the stated purpose and supporting documentation of annuity structures.
• Uncover beneficial owners or controlling interests behind all parties to the contract.
• Examine intermediary or broker backgrounds during annuity contract setup.

These records are crucial for verifying identities, tracking changes in ownership or beneficiaries, and detecting inconsistencies that indicate potential money laundering.

• Provide official incorporation, ownership, and registration details for companies or trusts.
• Reveal hidden or layered ownership structures behind policyholders or beneficiaries.
• Detect complex corporate arrangements used to obscure beneficial ownership in annuity contracts.

Access to these registries helps trace ultimate beneficial owners and mitigate the risk of shell or front entities abusing annuity products for laundering.

Apply detailed scrutiny for higher-risk annuity relationships, especially when customers come from secrecy-friendly jurisdictions or present unexplained premium funding. Verify beneficial owners and beneficiaries, confirm their legitimate ties to the policy, and assess supporting documentation to detect layering attempts through nominee or complicit parties.

Require upfront identification and verification of all policyholders and beneficiaries, documenting the legitimate relationship and intended purpose of the annuity. Collect evidence of the source of funds for lump-sum or structured premium payments, and flag instances where third-party payers or beneficiaries have no clear connection to the policyholder.

Implement specialized monitoring scenarios for unusual annuity activities, such as large lump-sum premium payments, structured deposits misaligned with a customer’s financial profile, or rapid cross-border payments involving high-risk jurisdictions. Investigate any alerts, such as short-term policy liquidations, that point to potential layering.

Evaluate and periodically review brokers, agents, and intermediaries involved in annuity sales, especially those operating in high-risk or secrecy-friendly locations. Confirm their licensing and regulatory status, and assess their ownership and business practices to prevent collusion or the facilitation of illicit fund layering.

Train insurance underwriting and compliance personnel to identify red flags in annuity contracts, such as frequent policy surrenders, unexplained third-party payments, short ownership durations, and nominee beneficiaries. Provide clear escalation procedures for when anomalies indicative of illicit layering appear.

Leverage public records and databases to verify beneficial owners, policyholders, and beneficiaries. Cross-check the credibility of stated sources of wealth or connections, particularly where annuity participants are based in secrecy-friendly regions or appear under multiple corporate layers. Escalate findings for Enhanced Due Diligence (EDD) if discrepancies are found.

Restrict or require additional approvals for annuity activities where policy ownership or beneficiary changes lack a clear business or familial reason. Impose holding periods or freeze suspicious partial surrenders and policy transfers until further due diligence is completed.

Continuously monitor annuity policies for early surrenders, repeated beneficiary changes, frequent policy transfers, and partial withdrawals that are inconsistent with stated policy objectives. Investigate discrepancies or emerging red flags to detect layering techniques and suspicious fund movements.

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 deposit illicit funds as lump-sum or structured premiums into annuity-like policies, masquerading these deposits as legitimate investments.

• They exploit partial withdrawals, policy loans, or early surrenders, which appear as typical investment proceeds, thus layering illicit funds.
• Ownership transfers or policy assignments to third parties with no clear connection to the policyholder obscure the ultimate beneficiary.
• Use of secrecy-friendly jurisdictions and complicit brokers further hides real ownership and transactional flows, making it difficult to trace illicit origins.

Insurance companies issue annuity contracts, which criminals exploit by depositing illicit funds as premiums. They may be unaware of suspicious overfunding or the use of third parties with no clear relationship to the policyholder. Repeated early surrenders and ownership transfers can appear as routine transactions, complicating financial institutions' detection of illicit origins.

Politically Exposed Persons (PEPs) can be listed as policyholders or beneficiaries for annuity contracts, leveraging their influence or connections to avoid scrutiny. This arrangement hampers financial institutions' ability to verify the legitimacy of premium payments or withdrawals.

Insurance agents or brokers facilitate annuity setup and management. They may:

• Advise on structures allowing large, lump-sum deposits or frequent partial withdrawals.
• Overlook red flags in premium funding sources or beneficiary designations.
• Operate in secrecy-friendly jurisdictions, knowingly or unknowingly aiding criminals in obscuring beneficial ownership.

Nominees are used as policy beneficiaries or owners without genuine ties to the real policyholder. Their involvement obscures the ultimate beneficial owner and makes it more difficult for financial institutions to trace the source of funds or the true identity behind annuity policies.

Offshore entities registered in secrecy-friendly jurisdictions hold or receive proceeds from annuity policies, concealing the identity of the real policyholder. Their opaque structures complicate financial institutions' ability to trace the source of funds or beneficial ownership.