How to meet the challenges of financial crime risk in the insurance sector

By James Thomas, 12 October 2026

Financial crime risk in the insurance sector has come into sharper focus in recent years as products and distribution networks have grown in complexity and regulatory expectations have evolved in parallel. Risks – from sanctions to proliferation financing – have multiplied, heightening the importance of customer and third-party due diligence, source of wealth verification and compliance culture. Firms’ understanding of these risks, however, has not always advanced at the same pace.

A recent ICA webinar explored these issues using a practical, interactive case study. ICA President, Pekka Dare, James Booth (Principal Advisor AML, CTF & Sanctions Learning, ICA), and panellists Henry Yu (Executive Committee, Association of Blockchain Compliance Professionals) and Charles Wong (Executive Director, Head of AML/KYC at Julius Baer) guided attendees through an immersive scenario in which they highlighted key red flags and provided practical insights on how to prioritise compliance efforts in the face of a rapidly changing risk landscape.

Complexity

Booth set the scene, suggesting that: ‘Insurance has moved from the edge of financial crime supervision towards the centre of it.’

One feature of this shift is the greater complexity of insurance products. As Yu explained, solutions favoured by high-net-worth individuals today often take the form of complex investment products with a life insurance wrapper around them. These are designed with tax planning in mind and often involve the use of trusts or complex structures. Greater regulatory scrutiny has followed on the heels of these product advances, he said.

Wong agreed, adding that, in the wealth management space, the element of succession planning inherent in many products can add to the complexity and the need for effective KYC. ‘In some situations, products can not only pass within the family tree, but can also pass to a third party,’ he continued. ‘That can increase the AML red flags, because you need to understand why they can transfer to someone they have no connection to.’

In addition to this complexity, the very nature of insurance products can raise its own concerns. As Dare explained: ‘You are in a fundamentally different product world here compared to, say, retail banking. The volume of transactions is typically much, much lower, so actually spotting unusual patterns and monitoring for those can be more challenging.’

Further challenges

Another consideration is the nature of the distribution network for insurance products. As Dare suggested: ‘Typically there is a big introducer/broker dimension, particularly in the life space, so that puts a layer between the product provider and the underlying client, which obviously is a challenge for AML purposes. There’s evolution going on in terms of the scrutiny and supervision of brokers and intermediaries by product providers.’

The scope of the financial crime risk has also expanded. He continued: ‘Increasingly, financial crime risk has evolved to include things like proliferation financing and sanctions. We [also] talk about maritime insurance, reinsurance, and some really complex issues are coming out there as well.’

A safe space for discussion

Within the immersive scenario, attendees were walked through a series of key decision points, from customer onboarding, to suspicious transactions and finally regulatory escalation. At each stage, audience polls highlighted the major red flags and compliance concerns, while attendees were also able to submit questions and comments, providing an opportunity for them to exchange ideas on sensitive issues within the safe space of a fictional scenario. Concerns discussed included:

• the challenge of assessing the adequacy of systems and controls in a shifting risk landscape
• resourcing of the compliance function in the face of rapid business expansion
• the difficulty of balancing commercial objectives against the requirement for effective risk management
• how to manage regulatory relationships
• the value of communication
• how to engage with the business when you identify potential systems and controls, or culture, issues; and how to set about remediating them, and
• the importance of board and senior management support, not only in setting the ‘tone from the top’ but in securing sufficient resource for compliance and remediation work.

Key takeaways

The panel concluded by offering some practical suggestions for those working in this dynamic and increasingly demanding area. Chief among these were the requirement for testing customer due diligence on a regular cycle – particularly when relying on introduced and broker business – and for systematically reviewing portfolio activity to reflect product risk on an ongoing basis. As Dare suggested: ‘The key takeaway is trying to move our control framework in the insurance space from a reactive to a proactive one.’