Insurers cautioned against anti-money laundering, terrorism financing

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The Insurance Regulatory Authority of Uganda (IRA) has directed all licensed insurers and intermediaries to rigorously review their internal policies and procedures to ensure they are robust enough to prevent misuse for money laundering or the financing of terrorism.

According to a directive issued by the regulator, players have been urged to adopt a risk-based approach while combating financial crime.

IRA emphasises the need for a robust compliance framework and transparency to build trust among policyholders and foster sustainable industry growth.

In a statement issued recently, all insurance players are directed to comply with Section 120 of the Insurance Act and the Anti-Money Laundering Act Cap 11, as the directive seeks to ensure that players tighten scrutiny in their processes to lower exposure to money laundering and terrorist financing threats.

“Players are required to periodically conduct document reviews of their policies and procedures and maintain robust enterprise-wide risk assessment, covering money laundering and terrorism financing risks inherent in their respective entities, especially the life insurance policies with investment components, annuity contracts, and single premium policies,” a directive signed by the IRA Chief Executive Officer, Alhaj Dr Kaddunabbi Ibrahim Lubega, read.

The players were further directed to conduct anti-money laundering and terrorism financing risk assessments, prior to introducing new products and any business practices in the form of a delivery mechanism in relation to a product or service, and technology for both new and pre-existing products and services.

They were further directed to categorise customers based on occupation, source of wealth, geographical location, and beneficial ownership structures, assess customers’ risk levels prior to, or while establishing a business relationship and establish the source of wealth and funds for high-risk customers.

Where investments are made in non-traded assets or entities in non- equivalent jurisdictions, the players are required to conduct and document an assessment of the money laundering/ terrorism financing risks posed by those assets.

“They must monitor transactions against the background of the customer’s risk profile and records of risk assessments must be preserved for at least five years after the end of the business relationship,” the directive added.

The directive comes at a time when the insurance sector, particularly life and investment-linked products, is increasingly seen as a target for money launderers looking to convert illicit funds into clean assets.

The directive now requires the Company Boards and Senior Management to approve their enterprise-wide risk assessment, ensuring that the risk assessment remains current and reviewed periodically or upon the occurrence of a material triggering event.

Players react to directives

According to Christine Nassuna, the managing director of AAR General Insurance Limited, the caution by the regulator is timely as it seeks to protect the insurers and the entire industry from money-laundering-related activities.

According to the Financial Action Task Force (FATF), insurance-related money laundering can account for significant portions of global illicit financial flows, with billions of dollars laundered annually.

The global insurance industry collected €6.2t in premiums across life, property & casualty, and health insurance in 2024. This massive financial flow, combined with complex product structures and cross-border transactions, creates significant vulnerabilities that criminals exploit for money laundering purposes.

As regulatory scrutiny intensifies, insurance companies must strengthen their anti-money laundering (AML) frameworks to protect against sophisticated financial crimes while maintaining operational efficiency.