I am an insurance broker [e.g. GIMB] – why do I need to sanction screen my customers

Sanctions responsibilities cannot be delegated to others just because insurance brokers [e.g. Jersey GIMBs] are.

• Not caught by many AML rules and
• Are neither risk carriers nor insurance buyers.

In Jersey (and elsewhere), from a rule-based view, AML and sanctions are not the same, but from a risk perspective, they are both financial crime risks that brokers must manage.

1. The General Insurance Mediation Business [GIMB] rules do not expressly require sanction monitoring through the AML/CTF/CPF rules because GIMB activity is not caught under the MLJO or the JFSC AML/CTF/CPF financing handbook.
2. However, GIMB activity is covered by the Sanctions and Asset-Freezing (Jersey) Law 2019 (SAFL) and the Sanctions and Asset-Freezing (Implementation of External Sanctions) (Jersey) Order 2021 (SAFO)
3. When caught by SAFO/SAFL, the JFSC expects you to do screening through the GIMB codes of practice requirement to guard against involvement in financial crime, although this requirement is implicit, not explicit.

Brokers responsibilities

1. Brokers' role as intermediaries in a complex and ever-changing marketplace makes them especially susceptible to criminal targeting and unwittingly facilitating transactions with sanctioned entities and individuals.
2. The war in Ukraine has brought sanctions to the broader public attention. The US, EU and UK have together sanctioned over 1,000 Russian individuals and businesses.
3. However, brokers' need for robust systems and processes for compliance is not new. It cannot be ignored and must form part of all brokers' overall governance controls.
4. Regardless of their role in an insurance deal, brokers must verify that their potential clients and trading partners aren’t barred from entering insurance transactions.

Insurance intermediaries in the UK (including Jersey and Guernsey) need to apply targeted sanction screening for several important reasons:

1. Legal and Regulatory Compliance: UK insurance market participants are legally required to comply with the UK’s financial sanctions regime. This includes screening clients and transactions against sanction lists to ensure they do not deal with entities or individuals.
2. Risk Management: Sanction screening helps manage financial crime risks, such as money laundering and terrorist financing. By identifying and preventing transactions with sanctioned parties, intermediaries can protect themselves from being inadvertently involved in illegal activities.
3. Regulatory Action: Failure to comply with financial crime risk management processes can result in significant penalties, including fines and regulatory action. This can also affect the intermediary's reputation and operational capabilities.
4. Global Business Concerns: Many UK-based insurance intermediaries operate internationally. Compliance with UK and international sanctions regimes is crucial to avoid conflicts and potential enforcement actions from other jurisdictions, such as the US.
5. Senior Management Liability: senior management in insurance firms is held accountable for ensuring adequate systems and controls are in place to manage financial crime risks, including sanctions compliance.

By implementing targeted sanction screening, insurance intermediaries can ensure they meet their legal obligations, manage risks effectively, and maintain their reputation and operational integrity.

Source:  

• Sanctions and the Insurance Market - PwC UK. https://www.pwc.co.uk/forensic-services/assets/sanctions-and-insurance-september-2016.pdf.
• Sanctions Screening and Responsibilities of Insurance Brokers. https://reg.uk.com/news/sanctions-screening-and-responsibilities-of-insurance-brokers/.