In life insurance, it is possible to launder money but it is more difficult than in the banking sector.According to Gérald Cossette, the director of the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), 85% of the transactions that the federal agency is asked to analyze, namely the ones filed in suspicious transaction reports (STRs), come from the banking sector.

In the deposit taking institutions sector, tens of thousands of STRs have passed under FINTRAC’s magnifying glass. Banks, trust, and loan companies submitted approximately 20,000 STRs in 2007, 30,000 in 2008 and 15,000 in 2009. In comparison, reports filed by the insurance industry are minimal.

The director of compliance at Desjardins Insurance, Jean-François Morin, counts them on the fingers of one hand. Suspicious transaction reports from insurance companies are infrequent for two reasons: they don’t accept cash and the nature of their products are poorly suited to money laundering.

“The products meet, first and foremost, protection needs,” says Mr. Morin. In addition, they offer generous commissions that often exceed the amount of the first year premium. “They must therefore remain on the books a few years in order to be profitable. A policy redeemed in a three to five year period sets off red lights with us and an automatic check,” he explains. “Those who want to launder money do not want to hold onto their product for a long time. Insurance is not attractive to them because they want to go unnoticed, buying and selling quickly in order make a disbursement.”

What’s more, due to a lack of communication, little is known about the magnitude of the insurers’ reports. “FINTRAC shares little information or statistics with us that would allow us to better understand the magnitude and the segmentation of questionable transactions according to their origin. We hear it said that there have only been ten since 2008,” reveals Mr. Morin.

The bulk of the sector’s reports come from advisors, who are allowed to receive cash as long as they place it in a separate (in trust) account. It is conceivable that an advisor could be caught up in something by a client who brings him successively smaller amounts, up until the day when he forces him to accept a sum of $10,000 or more, by intimidating him. He says, however, that he has not seen any cases like that at Desjardins.

As for managing general agents, they seem to be out of the picture. “Transactions that lend themselves to money laundering are not the responsibility of the managing general agent,” comments Michel Kirouac, the vice president and general manager of Groupe Cloutier. “Rather, these transactions are the responsibility of advisors, but we must still keep an eye open and be vigilant in case there are irregularities in transactions.”