Anti-money laundering law

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The Law of the Republic of Kazakhstan “On Combating the Legalisation (Laundering) of Proceeds of Crime and the Financing of Terrorism” (AML/CFT law for short) sets out the rules under which financial organisations and a number of other persons are required to check clients, monitor transactions and report suspicious cases to the authorised state body. Below is a brief review of the law with an emphasis on how it applies in insurance.

Purpose of the law

The law is aimed at preventing the use of the financial system for the “laundering” of money obtained by criminal means and for the financing of terrorism and extremism. To this end a financial monitoring system has been created: organisations through which clients’ money passes record certain transactions, study clients and transmit information to the state, and the state analyses it and, where necessary, passes it to law enforcement bodies.

Who it applies to

The law defines the range of subjects of financial monitoring. It includes banks and other financial organisations, among them insurance (reinsurance) organisations and insurance brokers, as well as professional securities market participants, notaries, gambling organisers and a number of other persons listed in the law. Besides the subjects of monitoring, the law indirectly affects their clients – individuals and companies that are required to provide information for verification.

Main obligations of subjects of financial monitoring

  • Develop and apply internal control rules for AML/CFT purposes and appoint a responsible employee.
  • Carry out proper due diligence on the client: identify the client and its representative, establish the beneficial owner, and find out the purpose and nature of the business relationship.
  • Assess the risks of clients and transactions and apply enhanced measures in the case of higher risk, for example in respect of politically exposed persons.
  • Report threshold and suspicious transactions to the authorised financial monitoring body in the manner and within the periods established by legislation.
  • Check clients against the lists of persons involved in terrorist and extremist activity and apply the measures provided for, including suspension of transactions.
  • Keep information and documents on clients and transactions for the period established by law.
  • Train staff and not disclose to the client the fact that information about them has been passed to the authorised body.

What this means for an insurance company’s client

It is the requirements of the law that explain why, when concluding a contract, the insurer or broker asks you to fill in a questionnaire, present documents, state the beneficial owner of the company and sometimes explain the source of funds. This is not a sign of distrust but a mandatory procedure. If the client refuses to provide information or the check cannot be completed, the organisation is entitled to refuse to establish a business relationship or to carry out a transaction.

Heightened attention in insurance is usually drawn by situations involving the movement of significant sums: large one-off premiums in life insurance, early termination of a contract with a refund, payment of the premium by third parties, payment to a person other than the policyholder, frequent changes to contract terms without a clear economic reason. In such cases additional explanations and documents may be requested.

Rights of the client

Information obtained as part of due diligence is used for the purposes established by law and is protected as personal data and legally protected secrecy. The client is entitled to know which documents are required from them and to receive the contract and the insurance rules before signing. Decisions to refuse to carry out a transaction are taken on the grounds provided by law and by the organisation’s internal rules.

What matters in practice

  • Prepare constitutional documents and information on the ownership structure in advance – this will speed up the formalisation of corporate contracts.
  • Notify the insurer promptly of changes in details, the manager or the owners.
  • Pay premiums from your own accounts: payment by third parties without explanation raises additional questions.
  • Companies that are themselves subjects of financial monitoring must keep their internal rules in line with the latest changes in legislation.

Current version

The law has been amended repeatedly, so the file available for download may not reflect the latest amendments. Before applying its provisions in practice, check them against the current version of the law in the information and legal system of regulatory legal acts “Adilet” (adilet.zan.kz), as well as against the subordinate acts of the authorised body and ARDFM.

If you need to understand which documents will be required to arrange life insurance or a corporate contract, you can get a consultation from an insurance broker.