It always starts small

One suspicious claim- a client paying unusually high premiums in cash, a member of staff bypassing standard due diligence checks, and before you know it, you have a date with the regulator! Many insurers cannot imagine that behind some of their premiums, lies a web of dirty money, funnelled through layered policies and quick payouts!

Financial crime is no longer a distant risk; it is happening in the insurance industry. Kenya’s 2023 National Risk Assessment ranks the insurance sector’s money laundering risk at medium high.

• Some of the reasons money launderers prefer insurance include:
• It’s easy to purchase single premium life policies using dirty cash without raising many questions.
• Early withdrawals or policy surrenders create the illusion of legitimate funds.
• Third-party premium payments hide the real owners of the policies.
• Long-term policies allow illicit funds to sit undetected for years.
• The insurance sector is perceived as lenient when it comes to verifying the source of funds. However, this is changing fast, as the Insurance Regulatory Authority (IRA) is cracking the whip.

What makes Kenya’s Insurance sector vulnerable?

There are several factors that make Kenya’s insurance market vulnerable: First, the agency-driven models make it difficult to enforce uniform KYC standards. Cash payments and third-party transactions which are still common also add another layer of risk. Additionally, the sector has been slow in adoption of technology that aids the fight against financial crimes. This has made it harder to effectively screen customers and to monitor transactions.

As seen from other jurisdictions, these risks can lead to real consequences like regulatory fines, reputational damage and loss of customer trust. And with Kenya still on the grey list of the Financial Action Task Force (FATF), the pressure to clean up is even higher.

According to the United Nations Office on Drugs and Crime (UNODC), an estimated 5% of global GDP – around $2 trillion – is laundered annually, and insurers are increasingly being caught flat-footed. A 2025 Anti-Money Laundering (AML) report by NICE Actimize estimates that between $80 billion and $100 billion is laundered through insurance products each year; most of it through life insurance.

These figures reveal the sad reality that insurance is becoming a preferred channel for cleaning illicit funds given the banking sector’s enhanced anti- money laundering controls.

Enforcement Actions: The Global wake-up call

In 2024, regulators took decisive action. In South Africa the Reserve Bank fined Old Mutual Life Assurance Company R15.9 million (over Kes 110 million) for weak customer due diligence and failure to report suspicious transactions. AIA Group’s Hong Kong branch was fined HK$23 million (over Kes 350 million) for delays in identifying politically exposed customers and poor transaction monitoring. These are not isolated events. They reflect a global shift toward tougher enforcement and higher AML standards.

Risk-Based Supervision: Not just a buzzword

In line with global AML standards, Kenya is transitioning to a risk-based supervision model. This means controls should match the level of risk; thus, no more one-size-fits-all compliance. More attention and resources will go to higher-risk areas.

If implemented effectively, this model will transform the insurance sector from a routine, checkbox exercise into something stronger and a more resilient, credible, and globally competitive industry.

What can we learn from more mature markets?

Mature markets such as the UK, Australia and Singapore have shown us what consistent, proactive enforcement can look like. In the UK, insurers are mandated to undergo regular independent AML audits. In Australia, insurers must tailor AML programs to the risk level of each product and review them annually. In Singapore, regulators have developed clear red flag indicators and simple, step-by-step KYC guides for life insurers.

Where do we go from here?

• If you’re reading this as an insurer in Kenya, ask yourself:
• Are we collecting enough data to meet Know Your Customer (KYC) and Customer Due Diligence (CDD) requirements?
• Are Kenya’s relevant AML laws and guidelines embedded in our day-to-day operations?
• Do we have a clear AML framework and policy?
• Are staff trained to spot and act on red flags?
• Have we mapped out all AML risks?
• Are we using compliance to tick a box – or to build trust and stay ahead?

It is imperative to build a compliance culture that starts at the top. When the board champions Anti-Money Laundering (AML)/ Countering Terrorist Financing (CFT) and Proliferation of Weapons of Mass Destruction (CPF) it is easier to integrate into the culture and processes of the organization.

The bare minimum is no longer enough.

The writer is a Manager, Financial Crime Compliance at Flywheel Advisory