Insurance Regulatory and Development Authority (Irda) dragging its feet on money laundering probe

The Reserve Bank of India may have scrambled after the recent Cobrapost expose to investigate allegations of money laundering against bank officials, but the Insurance Regulatory and Development Authority (Irda) is in no hurry to initiate its own probe.

This, despite the fact that the sting showed bank officials willing and facilitating conversion of black money into white mainly through insurance products, suggesting lax regulation.

“We will not be carrying out any investigations now; we’d rather wait for the reports to be put out by the banking regulator,” a senior Irda official said on Tuesday, a day after RBI put out a circular saying all banks selling gold coins and wealth management products will be under its scanner.

The expose had many references to guaranteed insurance plans being used as a money laundering instrument.

But Irda would rather wait and watch. “Our money laundering regulations are in place and we will take necessary action if anyone is found non-compliant,” said the Irda official.

The regulator, though, is having second thoughts on implementing lenient know your customer (KYC) norms for insurance policies as suggested by the finance minister in the Budget.

The sting showed misselling of insurance by bank officials, promising guaranteed tax-free returns, accepting money in cash, not asking for a PAN card or following KYC procedures.
“We may have to think twice on implementing single KYC norms on the backdrop of all these incidents,” said the Irda official.

To be sure, unlike banks, insurers have a separate KYC requirements for people of Indian origin and non resident Indians. “Hence, it will not be practical to keep a single KYC norm for insurers,” said the official.

@Aswathy_100