Banks have long carried the heaviest anti-money laundering (AML) burden, but regulators are increasingly turning their attention to life insurers. Handling large premiums over long timeframes, the sector has become an appealing route for criminals, particularly as many providers are seen to treat financial crime risk with a degree of complacency.
In South Africa, long-term insurers have been classed as accountable institutions under the Financial Intelligence Centre Act (FICA) for years, South African RegTech RelyComply detailed.
Yet many have been slow to upgrade their monitoring capabilities, risking falling permanently behind increasingly sophisticated criminal methods. The industry’s reputation will only improve once compliance leaders stop viewing AML as a periodic box-ticking exercise and start treating it as a continuous, proactive defence.
Life insurance holds a distinctive position in financial planning. Policies are widely regarded as a responsible social norm, far less conspicuous than a large one-off cash deposit, which allows illicit funds to masquerade as legitimate cover.
Long policy durations also let launderers spread placement and integration over many years, making the money trail harder to follow. Hybrid products add further risk. Universal life policies, for instance, may be tax-deferred or linked to funds, bonds or equities, opening additional channels for dirty money.
While banks have invested heavily in onboarding and ongoing controls, many insurers have concentrated verification at two points: policy issuance and claims. The years in between often go largely unmonitored.
South Africa’s AML framework faced intense scrutiny after the country was placed on the Financial Action Task Force (FATF) greylist in February 2023. Following 32 months of reform, it exited the list in October 2025, but pressure has not eased. Life insurers remain overseen by the Financial Intelligence Centre (FIC), the Prudential Authority and the Financial Sector Conduct Authority (FSCA), and the FIC now expects firms to demonstrate how effectively they monitor customer and transaction data, not simply document their controls.
Several typologies regularly slip through the net. Early surrender sees criminals pay a large single premium, then cash out within around 36 months, accepting the penalty in exchange for funds returned by a regulated firm. Overpayments exploit systems that flag missed payments but ignore excess ones, with refunds returning cleaned money. Policy loans allow holders to borrow against accumulated cash value, recycling funds without triggering surrender alerts.
Generic, rules-based platforms built for banking often miss these patterns, and one-off risk ratings quickly become outdated. Poorly calibrated alerts also flood stretched compliance teams with false positives.
RegTech offers a way forward. Insurance-ready platforms combine behavioural pattern recognition across the policy lifecycle, rationality scoring of premium behaviour, real-time sanctions, PEP and adverse media screening, automated escalation to enhanced due diligence, and full audit trails for regulators.
As South Africa approaches its next FATF Mutual Evaluation cycle, insurers that tailor AML to their own products, rather than copying bank setups, will be best placed to protect their reputation and relationships with investors, clients and correspondent banks.
Read the full RelyComply post here.
Copyright © 2026 RegTech Analyst
Copyright © 2026 RegTech Analyst
