Insurance companies keep taking hits; anti-money laundering regulation in the insurance industry is being upgraded

Ask AI · How the regulatory storm is forcing insurers to plug gaps in anti-money-laundering internal controls

Insurance companies are going through a regulatory storm targeting the compliance of “customer due diligence.” On April 6, Beijing Business Today reporter noted that, recently, multiple insurers have consecutively received large penalty notices issued by branch offices of the People’s Bank of China, directly pointing to core violations such as inadequate customer due diligence and noncompliant suspicious transaction reporting.

Behind the wave of dense penalties is an upgrade in the intensity of anti-money-laundering supervision in the insurance sector, and it also exposes systemic shortcomings among insurers in anti-money-laundering compliance management. The entire industry is entering a full-spectrum, comprehensive test of fulfilling anti-money-laundering obligations. How to strengthen and safeguard the first line of defense against anti-money-laundering has become a new issue that insurers urgently need to solve.

Multiple insurers’ anti-money-laundering internal-control shortcomings are exposed

As an important part of the financial industry, the insurance sector has become one of the channels that money-laundering criminals may seek to exploit, due to the frequent movement of funds and the diverse forms of its products. Because the transaction process for insurance products is more complex, once there are gaps in internal-control management, it is easy for criminals to take advantage.

The administrative penalty information recently released by regulators clearly shows insurers’ anti-money-laundering internal-control shortcomings. On April 3, the People’s Bank of China Jilin Branch released a public notice table of administrative penalty decision information, showing that Dubang Property & Casualty Insurance was penalized 400,000 for failing to conduct customer due diligence as required; providing services to, and conducting transactions with, customers whose identities were unclear.

No exception—on March 27, the People’s Bank of China Hunan Branch issued a penalty notice targeting Caixin Jixiang Life. The notice shows that the company’s main illegal and noncompliant facts (case causes) were: failing to conduct customer due diligence as required; failing to report suspicious transactions as required, and it was fined 61.5 million. Also on March 27, China Merchants Sinoye Life was fined 146.8 million by the People’s Bank of China Shanghai Branch for failing to conduct customer due diligence as required and failing to report suspicious transactions as required.

The timing echoes are evident: insurers have been repeatedly fined intensively for reasons such as failing to conduct customer due diligence as required, in line with the newly revised Measures for the Management of Financial Institutions’ Customer Due Diligence and the Preservation of Customer Identity Information and Transaction Records, which will officially take effect on January 1, 2026 (hereinafter referred to as the “Measures”). It can be seen that regulators, with a “zero tolerance” posture, are reaffirming the seriousness of the first line of defense against anti-money-laundering to the entire industry. By strengthening law enforcement efforts, they are pressuring insurers to take seriously and fill in gaps in internal controls.

Customer due diligence is the core step for financial institutions to fulfill their anti-money-laundering obligations, and it is also an important line of defense for identifying abnormal situations and blocking money-laundering activities. Fu Yifu, a special research fellow at Sushang Bank, said that behind the barrage of densely issued penalty notices are systemic loopholes in insurers’ anti-money-laundering compliance management. Failure to conduct effective due diligence on customers and beneficial owners leads to an inability to confirm the authenticity and legality of customer information, which in turn results in the inability to identify and monitor abnormal transaction behaviors, such as large cash transactions and cross-border fund transfers.

How to keep the compliance gate under the new regulations

With the rapid development of the social economy, various crimes and money-laundering activities have become interwoven and increasingly infiltrated each other, and money laundering in particular has gradually extended to insurance institutions. In recent years, regulators have progressively strengthened anti-money-laundering oversight of the insurance industry, and the intensity of administrative penalties has continued to rise.

Looking closely at the reasons insurers were penalized, most were due to noncompliant business operations such as failing to conduct customer due diligence in accordance with regulations and failing to submit suspicious transaction reports in a timely manner. As an important member of the financial industry, how should insurance companies prevent criminals from exploiting loopholes—especially under the strict regulatory background of the newly revised “Measures”—and how can they plug both internal and external oversights and shoulder the banner of anti-money-laundering?

Lin Xianping, vice professor at Zhejiang University City College, and standing deputy secretary-general of the China Urban Experts Think Tank Committee, suggests that on the sales side, insurers need to strengthen customer identity verification, improve due-diligence processes in the underwriting stage, and strengthen compliance training for agents; they can introduce stricter suspicious transaction screening tools. On the claims side, insurers need to strengthen monitoring of fund flows, conduct more cautious reviews of large or abnormal claims, establish an anti-money-laundering risk assessment mechanism for the claims stage, and ensure that transaction backgrounds are true and compliant.

For insurers, these measures are an inevitable choice aligned with the new round of regulatory trends. Lin Xianping pointed out that, currently, anti-money-laundering regulatory supervision for the financial sector has been upgraded into a long-term project characterized by “panoramic, penetrative, and intelligent” features, which will have a profound impact on the industry. First, it will drive insurers to comprehensively integrate internal and external data to improve the accuracy of risk identification. Second, it will prompt the industry to increase investment in technology and use technologies such as artificial intelligence to optimize monitoring systems. Third, it will strengthen cross-institutional and cross-industry coordination to form a more efficient risk prevention and control mechanism. Fourth, it will force insurers to reshape their compliance culture, deeply embedding anti-money-laundering requirements into business processes, and ultimately enhance the industry’s overall risk-control level and sustainable development capability.

Beijing Business Today reporter Li Xiumei