The risk of money laundering and terrorist financing in the Finnish life insurance sector remains “moderately significant”, the Finnish Financial Supervisory Authority FIN-FSA has concluded in its new review of the sector.
Distribution channels are identified as a “significant risk” and singled out as the biggest in the industry. The assessment has been evolving from the last review in December 2020, and stems from life insurance companies having hundreds of insurance agents as a distribution channel.
“The large number of agents elevates the risk of money laundering and terrorist financing,” FIN-FSA said, adding that the companies need “need sufficient risk controls and resources.”
Same main risk level
Since the last review in 2020, the authority says that no major changes have happened concerning money laundering and terrorist financing in the sector. The risks have almost stayed on the same levels, with a few changes beside the increase in distribution channels, such as:
- risk related to organization of operations went up from less significant to moderately significant;
- risk related to customers dropped from moderately to less significant; and
- the importance of a risk-based approach dropped from significant to moderately significant.
| Risk categories (Scores 1 – 4) | December 2020 | Dec 2024 |
|---|---|---|
| Products and services | 2 | 2 |
| Geographical location | 1 | 1 |
| Customers | 2 | 1 |
| Distribution channels | 1 | 3 |
| Control categories | ||
| Risk-based approach | 3 | 2 |
| Organization of operations | 1 | 2 |
| Customer due diligence | 2 | 2 |
| Monitoring | 2 | 2 |
| Overall risk level of the sector | 2 | 2 |
Even though the risk of money laundering and terrorist financing within the life insurance companies’ product range, risk life policies, and voluntary pension insurance is rated second lowest on a four-step scale, the authority concludes that there is room for improvement of risk controls. Especially relating to customer due diligence and actions connected to updating that information.
“Potential risks must be identified and also prepared for in the life insurance sector’s activities,” FIN-FSA points out, while acknowledging that the companies’ awareness of potential risks around their activities has increased.
The work includes more comprehensive risk analysis, which means more accurate classification of customers and products. The companies were also found to have made improvements to IT systems, internal guidelines and training of staff.
