Insurance companies keep taking hits: The insurance industry's anti-money laundering regulation is being upgraded

Insurance companies are undergoing a regulatory storm targeting the compliance of “customer due diligence.” On April 6, a reporter from Beijing Business Today noticed that, in recent days, multiple insurance companies have consecutively received large administrative fines issued by branch offices of the People’s Bank of China, directly pointing to core violations such as inadequate customer due diligence and non-compliant suspicious transaction reporting.

Behind the concentrated punishments is an upgrading of anti–money laundering (AML) regulatory intensity in the insurance industry, and it also exposes systemic weaknesses on the part of insurance companies in AML compliance management. The entire industry is now facing an all-round examination of fulfilling AML duties. How to solidify the first line of defense in AML has become a new problem that insurance companies urgently need to solve.

Multiple insurance companies’ AML internal-control shortcomings exposed

As an important part of the financial sector, the insurance industry—due to its characteristics of frequent capital transactions and diverse product forms—has become one of the channels that money-laundering criminals may potentially exploit. Because the transaction process of insurance products is more complex, once internal-control management has gaps, it is easy for criminals to take advantage.

Administrative penalty information recently released by regulatory authorities clearly shows the AML internal-control shortcomings of insurance companies. On April 3, the Jilin branch of the People’s Bank of China released an announcement table of administrative penalty decision information. It shows that Dubu Insurance (property and casualty) was fined 400,000 yuan because it failed to conduct customer due diligence as required; it provided services to customers with unidentified identities and conducted transactions with them.

Not surprisingly, on March 27, the Hunan branch of the People’s Bank of China issued a fine targeting Caixin Jixiang Life Insurance. The fine shows that the company’s main illegal and non-compliant facts (case description) were: failing to conduct customer due diligence as required; failing to report suspicious transactions as required. It was fined 615,000 yuan. Also on March 27, Zhonghong Life Insurance was fined 1,468,000 yuan by the Shanghai branch of the People’s Bank of China for failing to conduct customer due diligence as required and failing to report suspicious transactions as required.

The fact that insurance companies have been repeatedly fined for reasons such as failing to conduct customer due diligence as required—and other related issues—echoes the timing of the new version of the Measures for the Administration of Customer Due Diligence and the Preservation of Customer Identity Information and Transaction Records by Financial Institutions, which will formally take effect on January 1, 2026 (hereinafter referred to as the “Measures”). It can be seen that regulators, with a “zero tolerance” stance, are once again reiterating the seriousness of the first line of defense in AML across the whole industry, and are pushing insurance companies to pay attention to and address internal-control shortcomings by strengthening enforcement.

Customer due diligence is a core link in which financial institutions fulfill their AML obligations, and it is also an important line of defense for identifying abnormal circumstances and blocking money-laundering activities. Fu Yifu, a special research fellow at Boshan Bank, said that behind the cluster of fines, systemic loopholes in AML compliance management at insurance companies have been exposed. Without effective due diligence on customers and beneficiaries, it becomes impossible to confirm the authenticity and legality of customer information, which in turn leads to an inability to identify and monitor abnormal transaction behavior, such as large-amount cash transactions and cross-border fund transfers.

How to keep the compliance gate in the new rules

With the rapid development of society and the economy, various crimes and money-laundering activities have increasingly become intertwined and interpenetrated, and the money-laundering field has gradually extended to insurance institutions. In recent years, regulators have gradually strengthened AML oversight of the insurance industry, and the intensity of administrative penalties has continued to increase.

Looking closely at the reasons insurance companies were fined, most are due to non-compliant business operations such as failing to conduct customer due diligence in accordance with regulations and failing to timely report suspicious transaction reports. As an important member of the financial industry, how should insurance companies prevent criminals from taking advantage of loopholes—especially under the background of stricter regulation in the revised “Measures”—how should they plug internal and external oversights, and how should they take up the banner of AML?

Lin Xianping, deputy professor at Zhejiang University City College and executive deputy secretary-general of the China Urban Experts Think Tank Committee, suggests that on the sales side, insurance companies need to strengthen customer identity verification, improve the due diligence process in the insurance application stage, and strengthen compliance training for agents, and they can introduce stricter tools for screening suspicious transactions. On the claims side, insurance companies need to strengthen monitoring of the flow of funds, conduct more prudent reviews of large-amount or abnormal claims, establish an AML risk assessment mechanism for the claims process, and ensure that transaction backgrounds are genuine and compliant.

For insurance companies, these measures are an inevitable choice to align with the new round of regulatory trends. Lin Xianping pointed out that, at present, AML regulation in the financial sector has been upgraded into a long-term initiative characterized as “panoramic, penetrative, and intelligent.” It will have a profound impact on the industry: first, it will promote insurance companies to comprehensively integrate internal and external data and improve the precision 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 coordination across institutions and across industries to form a more efficient risk co-prevention mechanism; and fourth, it will force insurance companies to reshape compliance culture, deeply embed AML requirements into business processes, and ultimately improve the industry’s overall risk-control level and its ability to achieve sustainable development.

Beijing Business Today reporter Li Xiumei

(Editor: Qian Xiaorui)

Keywords: