South African Reserve Bank's Prudential Authority publishes sector risk assessment rating life insurers' money laundering risk medium-high and flagging weak terrorism and proliferation financing controls

The South African Reserve Bank’s Prudential Authority published a sector risk assessment of money laundering, terrorism financing and proliferation financing risks in South Africa’s life insurance sector, covering January 2022 to December 2024. It rates inherent money laundering risk as medium-high, inherent terrorism financing risk as medium-low and inherent proliferation financing risk as low, with residual risks assessed at medium for money laundering, medium-low for terrorism financing and low for proliferation financing. The assessment identifies fraud, corruption and bribery, tax evasion and drug trafficking as the main money laundering threats, with vulnerabilities concentrated in complex investment-linked and cash-value products, large once-off premiums, third-party premium payments, and value-transfer features such as beneficiary changes, assignments, policy loans and early surrenders. It also points to increasing reliance on non-face-to-face onboarding and third-party intermediaries as compounding factors, and finds that while money laundering controls are assessed as adequate, terrorism financing and proliferation financing controls are weak, including gaps in targeted financial sanctions screening practices at some insurers. Supervisory inspections over the period highlighted recurring weaknesses in risk management and compliance programmes, business risk assessments, customer due diligence and beneficial ownership verification, transaction monitoring, training, record-keeping and governance, alongside concerns about timeliness of responses to Financial Intelligence Centre information requests.