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Ministry of Commerce & Industry
Minister's Office
Date : 22 September 2013
Ref : M.D/569/36/2013
Doc # : 013798
MoCI Minis...
Article 2 : Policies & Work Procedures
All companies, agents and insurance brokers must provide policy and work procedures...
b) Risk factors pertaining to geography or countries:
o Countries ranked by reliable sources for example joint ratings rep...
a) Obtain the name, for the beneficiary defined as a natural or juristic person or legal arrangement
b) Obtain sufficient ...
Article 6 : Identify the actual beneficiary
Insurance companies, agents and brokers commit to the following:
1. Take the n...
Article 13 : Risk Commitments towards Suspicious Operations
Insurance companies must advise the Kuwaiti Financial Investig...
Insurance companies must supply an annual statement of account and an approved budget and any other records
required by th...
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MoCI Ministerial Decree 412 FY13 with regards controls and instructions regulating the working of insurance companies brokers and agents

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Kuwait Ministry of Commerce & Industry Ministerial Decree 412 FY13 with regards controls and instructions regulating the working of insurance companies brokers and agents especially with regards combating money laundry and terrorism financing

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Transcript of "MoCI Ministerial Decree 412 FY13 with regards controls and instructions regulating the working of insurance companies brokers and agents"

  1. 1. Ministry of Commerce & Industry Minister's Office Date : 22 September 2013 Ref : M.D/569/36/2013 Doc # : 013798 MoCI Ministerial Decree No. (412)/2013 with regards Controls and Instructions regulating the working of insurance companies, brokers and agents From the Desk of the Minister of Commerce & Industry After review of: Law (24)/1961 regarding insurance companies and agents and its associated amended laws Commercial Law issued by decree (68)/1980 and its associated amended laws Companies Law issued by decree (25)/2012, amended by Law (97)/2012 Law (106)/2013 regards combating money laundry and fighting terrorism and its executive regulations Law (111)/2013 regulating licensing of commercial outlets Minister of Finance decree (37)/2013 issuing the executive regulations for the Law (106)/2013 regards combating money laundry and fighting terrorism On the misgivings of the Undersecretary of the Ministry of Commerce & Industry And in the best interests of the work It is decreed, Article 1 : Definitions In applying the provisions of this decision are the definitions contained in the first article of Law No. (106)/2013 regards combating money laundry and fighting terrorism are an integral part of this decree. 1. Law: means the law against money laundering and the financing of terrorism, No. 106 for the year 2013 2. Banking Correspondence: means the provision of banking services by the bank (correspondent bank) to another bank (Effector Bank) 3. Strict due diligence measures : measures include additional due diligence , where the risk of money laundering or the financing of terrorism is high, for example : Tighten the degree and nature of control over the employment relationship , in order to determine whether these operations or activities unusual or suspicious , obtain additional information about the client , to obtain additional information about the nature of the employment relationship to be established , to obtain information about the source of the client money or wealth , or any other actions determined by the regulatory authorities. 4. Person politically affiliated : a) Is any natural person , whether a customer or beneficiary actually entrusted to him now or in the Common Tasks former supreme in the State of Kuwait , or a foreign country , such as heads of state or of government , senior politicians or government officials , judicial or military , senior executives in state-owned companies , and senior officials in the political parties , b) Anyone entrusted to him now or in the former functions of positions in international organizations , such as directors and deputy directors and members of the Board of Directors: this includes the term as well as members of the family to the second degree or close partners . 5. Regulators : means the following entities in the State of Kuwait Central Bank of Kuwait on censorship: banks, exchange companies and finance companies Ministry of Commerce and Industry on the control of: insurance companies, agents and brokers, and banking institutions, real estate brokers, dealers of precious metals and gemstones, and accountants Capital Markets Authority ( CMA ) on the control of : investment companies , securities trading companies , brokerage firms , and the faithful , and asset managers , mutual funds , and custodians Bar Association lawyers involved in overseeing the law firms and offices and private law practices
  2. 2. Article 2 : Policies & Work Procedures All companies, agents and insurance brokers must provide policy and work procedures, systems and internal controls to combat money laundering and terrorist financing commensurate with the size of the company and the nature and scope of operations; to be approved by the senior management of the company and to apply to all local branches and foreign subsidiaries of the Group. Allinsurance companies must also put in place mechanisms for the exchange of information within the group. 1. The following Measures & Mechanisms: a) Risk assessment for clients & transactions b) Confirm & identify client, beneficiary and person politically affiliated c) Retain transactions and records related to clients d) Implement due diligence actions towards client and beneficiary e) Advise the Kuwaiti Financial Investigative Unit with suspicious transactions as per article (12) of Law No. (106)/2013 regards combating money laundry and financing terrorism, and article (14) of its executive regulations. f) Policies & Work Procedures, systems and internal controls must undergo revision and audit by independent qualified parties g) Appointment of a compliance officer, at a top management level, who will be responsible for acting on provisions of Law No. (106)/2013 regards combating money laundry and financing terrorism, and its executive regulations and these instructions. h) Placement of high standards when hiring staff i) Placement of continued training programs for both new and current staff, Board Members, Executive Management, Senior Staff, supervisory and management level directors. j) Any other requirements imposed by the Ministry of Commerce & Industry 2. In the event an insurance company employs agents (where the insurance company agents must be licensed by the Ministry of Commerce & Industry and subject to insurance company policies, procedures, systems and controls); it is imperative that the insurance company monitor the agents to ensure that they abide by insurance company policies, procedures, systems and controls. Article 3 : Risk Assessment Insurance Companies, agents and brokers commit to the following: 1. Evaluate correlative risk of money laundering & terrorism financing, including the risks related to the development of new products and techniques, and maintain a study of the risk assessment and data related to it in physical (written) form; updating it constantly & providing copies to the Ministry of Commerce & Industry when requested. 2. Placement of suitable proceedings to identify risks of money laundering & terrorism financing, and their evaluation, monitor, management and proliferation, whilst taking into account the following: Probability of risk from client Countries or regions where clients conduct their business or the source of transactions or their destination The nature of products and services being provided Channels of providing said products and services 3. The probable causes that influence high risk situations, and require companies implement the necessary extreme measures, include but are not limited to the following: a) Risk factors pertaining to Clients: o The business relationship being conducted in abnormal situations o Client not residing in the State o A juristic person or the legal arrangement that manages others assets o The company that includes named shareholders or share for the beholder o Activities that deal in cash transactions or are subject to money laundry and terrorism financing risks o An unusual or overly complicated company organizational structure that does not have any clear economic activity or legality relative to the nature of its activity o The work relationships & transactions that are not conducted without the actual presence of the client o The work relationships established with or in countries described in (b) below o Persons politically affiliated or related to a person politically affiliated o Clients who have massive assets or the source of their income or assets is unclear
  3. 3. b) Risk factors pertaining to geography or countries: o Countries ranked by reliable sources for example joint ratings reports or published investigative reports as countries that do not have enough controls to combats money laundry and terrorism financing o Countries ranked by the Kuwaiti Financial Investigative Unit as high risk countries o Countries subject to sanctions or embargoes or similar actions from for example the United Nations. o Countries ranked by credible sources as countries with high levels of corruption or other criminal activities o Countries or geographic regions ranked by credible sources as countries that provide financing for or support terrorist activities or specific terror groups operate from its territory c) Risk factors pertaining products or services or transaction or provision channels: o Unidentified transactions (may include cash transactions) o Transactions conducted in the absence of the client for purposes of identification o Installments received from unidentified parties or with no clear relation to the effector 4. Insurance companies, agents and brokers apply the evaluation foundations as per the first paragraph of this article by adopting the following controls for Risk Management: a) Evaluate Risk Factor, including 1. The purpose of the relationship 2. The size of the transaction conducted by the client 3. Recurrence of transactions or the time period of the relationship b) Obtain additional information on the client, the actual beneficiary, the benefitting person & the transaction c) Build a risk profile around the clients and the transaction, based on sufficient information about the client and the actual beneficiary in case of his availability; including the potential business relationship with the insurance company, the source of the client's monies and assets when required. d) Apply strict due diligence controls on clients with high risks e) Update information on all clients regularly and efficiently f) Apply other controls set by the Ministry of Commerce & Industry and theKuwaiti Financial Investigative Unit Article 4 : Requirements to Identify the Client Insurance companies, agents and brokers commit to the following: First: Insurance companies, agents and brokers are prohibited to establish business relationships with unidentified or with fabricated names They must identify the client or the actual beneficiary and ascertain this identity in the following cases: a) Before conducting any transaction with the client b) Before conducting any transaction worth more than KD 3000 or its equivalent in foreign currency with a one- off client that does not have a business relationship with the insurance company, whether this is a single transaction or seemingly related string of transactions c) When suspicion rises regards money laundry or terrorism financing operations d) When suspicion rises regards quality or measure of the identifying data of the client that was previously obtained Valid documentation must also be obtained to identify the client or the actual beneficiary: a) The Civil Identification Card for citizens and expatriates b) Passport or travel document for those non-residents in Kuwait c) The Commercial License issued by the Ministry of Commerce & Industry for companies and establishments registered in Kuwait; with regards foreign companies and establishments – the documents issued by the relevant entities in the nation of issue or establishment d) Documents, papers, instruments and court decision that prove that a person has been appointed to represent the person related. e) Official identity documents attested and verified from entities or authorities assigned to issue these documents, for clients not mentioned above. Second: The following due diligence controls must be taken towards the beneficiary of Life insurance policies or other investment related insurance instruments; as soon as the beneficiary is identified or assigned, in the case of Life insurance policies or other investment related insurance instruments provided by insurance companies in addition to the standard due diligence controls required for the client and the actual beneficiary:
  4. 4. a) Obtain the name, for the beneficiary defined as a natural or juristic person or legal arrangement b) Obtain sufficient information about the beneficiary to ensure the insurance company can identify the beneficiary when a claim is paid; as for beneficiary defined as a certain group (for example a spouse or children when the event insured against happens) or through other instruments (for example a will) Article 5 : Persons Politically Affiliated Insurance companies, agents and brokers commit to the following: 1. Insurance companies must place suitable systems to manage risk to identify if the client of the actual beneficiary is a politically affiliated person. The procedures to identify a politically affiliated, whether a client or actual beneficiary, must include: a) Require relevant information from the client b) Refer to information available regarding the client c) Refer to commercial electronic databases for politically affiliated persons in the event they are available 2. In the event the insurance company has identified the client or the actual beneficiary as a politically affiliated person, it has to apply the following necessarily sufficient due diligence controls: a) For foreign politically affiliated persons: o Obtain approval from upper management before establishing a business relationship or pursuing it with that person o Take all suitable measures to determine the source of the funding or the assets o Apply strict and continuous oversight for the business relationship b) For local politically affiliated persons, or anyone who is holding or has held a prominent position in an international organization, the above controls are enacted, when and where the insurance company determines the risk of money laundry and terrorism financing is higher. Article 6 : Strict Due Diligence Controls for High Risk Clients Insurance companies, agents and brokers commit to the following: 1. Examine the background of complex, sizeable and unusual transactions and their utilizations, and all kinds of abnormal transactions that have no clear economic nor legal utilization. In cases where there is a high risk of money laundry or terrorism financing; including transactions for politically affiliated persons and clients who do not conduct transactions face to face; the insurance companies must take the necessary due diligence measures relative to specific risks. Insurance companies must especially increase the level and nature of oversight of the business relationship to determine if these transactions or activities appear unusual or suspicious, and include the strict due diligence measures that are placed on high risk business relationships including but not limited to the following: a) Obtain additional information regarding the client (for example the profession, size of assets and information available about it) and update the client data and the actual beneficiary with greater regularity. b) Obtain additional information on the expected nature of the business relationship c) Obtain additional information on the source of the clients' monies and assets d) Obtain additional information on the reasons behind expected transactions or those already conducted. 2. Strict due diligence measure must be applied on high risk clients in a regular fashion in each step of the due diligence procedure. 3. Strict due diligence measures related to the business relationships with a client who is not present to conduct the transaction face to face for the purpose of specifically identifying the client must also include: a) Attest documents as per pertaining laws and procedures b) Requesting any additional documentation and placement of independent procedures to stipulate the identity of the client and/or contact the client.
  5. 5. Article 6 : Identify the actual beneficiary Insurance companies, agents and brokers commit to the following: 1. Take the necessary measure to identify if the client is acting on behalf of the actual beneficiary or more, through obtaining a signed certificate from the client when conducting the transaction that states that the client is not acting nor conducting the transaction on behalf of another person or through any other resources the insurance country finds necessary to expose. 2. If the insurance company identifies that the client is acting on behalf of an actual beneficiary or more, it has to identify the identity of the actual beneficiary or beneficiaries through use of relevant information or data that has been obtained from reliable sources, thus making the insurance company sure of the identity of the actual beneficiary or beneficiaries. Strict due diligence measures must be applied to the actual beneficiary or beneficiaries in this case. 3. In the event the client is a stock exchange listed company, the insurance company does not need to identify the shareholders or the actual beneficiaries in the company and investigate it, on the condition the company applies suitable disclosure rules that disclose the identity of the actual beneficiary. In this case the insurance company can suffice with the documents identifying the company. 4. In the case the client is a juristic person or any other legal arrangement, the insurance company must take necessary measures to understand the ownership and control framework of the client, including the final natural person that owns or controls the client, as per the following: a) For juristic persons, the identity of every natural person must be identified as: Owns or controls in a direct or indirect manner 50% or more of the juristic person Responsible for management of the juristic person b) For legal arrangements, determine the identity of the committer or the executor or the beneficiary or any other persons proxiedfor similar tasks. Article 8 : Accepting Clients Insurance companies must refrain from establishing a business relationship or execute transactions or terminate business relationships if the identities of the client or the actual beneficiary are difficult to determine and in this case the insurance company must report the Kuwaiti Financial Investigative Unit. Article 9 : Retain Information Related to Clients Insurance companies must gather information related to clients and actual beneficiaries and maintain the information for the term of the transaction. These documents, information and data that are collected within the framework of due diligence measures must be updated and investigated for its validity through review of the records within a suitable time period determined by the insurance company. Article 10 : ContinuedOversight Client Transactions Insurance companies must oversee client and business relationships continually, noting that oversight includes audit of their transactions to determine that they are conducted with the insurance company's knowledge of the client and his risk profile, and when needed the source or his monies and assets. Oversight includes previously determined restrictions on the value of the transactions, their size and type. Article 11 : Termination of the Client Relationship If insurance companies find themselves unable to comply with strict due diligence measures towards clients, including relations that are in effect before the issue of this decree, must terminate the client relationship and advise the Kuwaiti Financial Investigative Unit. Article 12 : Aid from other Parties Insurance companies are allowed to receive aid from other parties to implement some due diligence measure, through obtaining consent from the Ministry of Commerce & Industry on these measures and comply with the following conditions: (though final responsibility of identifying and confirming the client lies with the insurance co) a) Ability to immediately obtain all required information with regards due diligence. b) Confirm availability of the other party when required without delay with a copy of the data determining identity and other documents related to the due diligence measures. c) Ensure the other party is subject to regulation, oversight or controls adhering to due diligence & record keeping measures, and that party adopt the measures to comply with these measures.
  6. 6. Article 13 : Risk Commitments towards Suspicious Operations Insurance companies must advise the Kuwaiti Financial Investigative Unit within two working days as a maximum, any transaction or attempt of transaction regardless of value, if there is suspicion that this transaction is being conducted by monies that are revenues of crime or related to money laundry or terrorism financing or can be used for this purpose. Insurance company managers and staff are banned from disclosing to the client or others that any risks or any other information has been passed to the Kuwaiti Financial Investigative Unit, as per previous paragraph, or if there is an investigation in money laundry or terror financing, without hindering disclosure or communication between insurance company managers and staff, officers, lawyers, regulating parties or the Public prosecution. Article 14 : Products and New Business Activity Insurance Companies must determine money laundry and terrorism financing risks that may arise from the following operations, thus evaluating them and taking necessary measures towards them: a) Product development and new business activity including provision methods of new products and services. b) Using new or updated technologies for new and modern products Article 15 : Internal Systems & Controls Insurance companies, agents and brokers commit to the following: 1. The compliance officer and other staff with credentials that allow them direct observation of data determine the identity of the client and other information related to the due diligence measures and transactions records and other pertinent information. The compliance officer must have the relevant qualification and experience in combating money laundry and terrorism financing, the authority to conduct his work, independence and to answer only the upper management. 2. Insurance companies must provide the MoCI with details regarding the compliance officer, including the name, qualification, contacts and email. The companies must also inform MoCI of any change regarding the compliance officer. 3. Upper management of Insurance companies must regularly review the company's commitment to measure enacted under Law (106)/2013 regards combating money laundry and fighting terrorism and its executive regulations. The regular review reports provided for upper management must include details of all suspicious transactions with theirrepercussions and measures taken by the compliance officers to enforce company policies, work procedures, systems and controls in the frame work of combating money laundry and terror financing. The upper management must be kept award of any field investigation conducted by the MoCI including corrective measures needed to be taken by company. 4. Insurance companies must conduct audits and independent examinations to ensure the compliance officer and other company staff is carrying out their duties in line with internal precautionary company policies, work procedures, systems and controls in the frame work of combating money laundry and terror financing. 5. The external accounting report must contain an evaluation of the internal oversight procedures in insurance companies and a measure of the compliance the insurance companies with regards local applicable laws, ministerial decree's and MoCI instructions relative to combating money laundry and terror financing, in addition to its own work procedures, systems and controls. 6. Insurance companies must implement an ongoing training program for all staff, agents (new and old), board members, executive management, supervisors and managers to make certain they are up to date including trending information and profiles in the field of combating money laundry and terror financing, and its executive regulations and these instructions. 7. Insurance companies must determine appropriate liabilities and integrity measures, as it must also place appropriate rules to hire staff and choose suitable and qualified employees to ensure the following: a) Employees enjoy high level of efficiency in order to perform their duties b) Employee capacity and integrity are appropriate to carry out the activities of the insurance business c) Taking cases of potential conflicts of interest, including the financial background of the employee d) The insurance company is not employ people who have been accused or convicted of crimes involving fraud or dishonesty or other similar crimes Conditions set forth in item (7) above from (a) to (d) relate to employing executive management, supervisory and management roles and appointment of Board Directors.
  7. 7. Insurance companies must supply an annual statement of account and an approved budget and any other records required by the MoCI. Insurance companies must keep the following records: Total Insurance Record Claims record for claims above KD 3000 per client Record of cancelled policies Article 16 : Requirements of Record Keeping Insurance companies must keep the following record and information: a) Replicate all records obtained during due diligence, including documentation of identity of clients and actual beneficiary's or financial files and business exchanges for a period of at least five years after the conclusion of the business relationship or the date of the transaction execution for the benefit of a client with nor business relation with the insurance company. b) Records of all local and international transactions, whether actually executed or that were going to be executed for at least five years after the execution of the transaction or the attempt to. These records have to be detailed as much as possible in terms or recreating the process of each transaction separately. c) Replication of notifications sent and related documents for at least five years after the advice has been submitted to the Kuwait Financial Investigative Unit. d) The risk assessment when it is required by the MoCI and any other information required for at least five years for the date of the risk evaluation or its update. Article 17 : Commitment to other Regulations Insurance companies must place policies, work procedures, systems and internal controls to ensure compliance to all rules and regulations relating to article (25) of the Law (106)/2013 to combat money laundering & terror financing. Article 18 : Sanctions and Legal Proceedings Sanctions mentioned in article (15) of Law (106)/2013 to combat money laundering & terror financing will be levied on to anyone who infringes on this decision. Article 19 : Officials, each in his field of expertise, are to carry out this decree and act on it from the date of publication in the Kuwait Gazette. Anas Khaled Al Saleh Minister of Commerce & Industry

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