Exploitation of the insurance industry for money laundering: the Malaysian perspective

Haemala Thanasegaran and Bala Shanmugam

Journal of Money Laundering Control, 2008, vol. 11, issue 2, 135-145

Abstract: Purpose - Owing to the vital role played by the insurance sector in the economic growth of a country, the purpose of this paper is to highlight the serious threat posed by money laundering activities in exploiting the insurance industry, from the Malaysian perspective. Design/methodology/approach - Provides a description of the risks posed by money laundering in the insurance sector, along with some useful case examples as illustration. Highlights the measures developed and adopted to control money laundering in the Malaysian insurance sector, with some thoughts on the importance of staying vigilant, as it is the only way in which to effectively counter the menace of money laundering in the sector. Findings - Research shows that two‐thirds of the cases worldwide associated with money laundering in the insurance sector, related to life insurance products, with general insurance accounting for most of the remaining third of the cases reported. Apart from this, insurance intermediaries like agents and brokers, who are an important direct distribution channel for the sector, are easily subject to exploitation by money launderers. Practical implications - The practical implication of this paper is to stress the importance of detecting signs of money laundering activities, as early prevention is the best alternative for insurance companies in countering money laundering in the industry. Originality/value - The formal reporting measures put in place by the Anti‐Money Laundering Act 2001 are a step in the right direction by the Malaysian Government. However, this paper serves as a reminder that in spite of such measures, the insurance sector is particularly vulnerable to money laundering activities, owing to the sector's rapid growth in offering innovative and sophisticated products and services worldwide. Thus, this paper makes for a useful read for practitioners, academics, policymakers and students alike.

Keywords: Money laundering; Insurance companies; Terrorism; Malaysia; Intermediaries (search for similar items in EconPapers)
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jmlcpp:13685200810867465

DOI: 10.1108/13685200810867465

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