The Philippine Insurance Commission (IC) has introduced new guidelines for institutional risk assessment concerning anti-money laundering (AML) and combating the financing of terrorism (CFT). This initiative aims to ensure that insurance companies conduct these assessments thoroughly and consistently.
Background
These guidelines build on a 2018 circular from the IC, which mandates that insurance entities perform institutional risk assessments at least every two years. The frequency of these assessments may vary based on the board’s direction, the risks identified in previous evaluations, or new AML/CFT developments affecting the operations of regulated entities.
Risk-Based Approach
IC Commissioner Reynaldo Regalado emphasizes that a risk-based approach to AML/CFT and proliferation financing (PF) is essential. Such an approach ensures that insurance companies adopt appropriate measures to address and mitigate identified risks effectively.
Stages of the Risk Assessment Process
The new guidelines outline a three-stage process for conducting risk assessments:
1. Identification of Risks
Threats and Vulnerabilities: The first stage involves identifying various threats and vulnerabilities related to money laundering (ML), terrorist financing (TF), and proliferation financing (PF) that are specific to the business operations of insurance entities.
2. Risk Analysis
Likelihood and Impact Assessments: This stage includes analyzing the identified risks by assessing their likelihood of occurrence and potential impact on the business.
3. Risk Estimation
Level of Risk: The final stage involves estimating the level of each identified risk to determine the appropriate measures needed for mitigation.
These guidelines are designed to enhance the effectiveness of AML/CFT practices within the insurance sector, ensuring that institutions can better manage and reduce their exposure to financial crimes.
