)
According to a government notification, “Beneficial owner refers to the person(s) who ultimately owns or controls a customer and/or the person on whose behalf a transaction is being conducted, including a person who exercises ultimate effective control over a legal person or arrangement.”
In September 2010, Irda had bought out guidelines on anti-money laundering/counter-financing of terrorism, which required insurers to identity and verify the beneficial owner in an insurance contract. To introduce a uniform approach across the financial sector, the Ministry of Finance, along with various financial sector regulators, has specified the procedures for determination of beneficial ownership. According to the ministry’s guidelines, in case a customer is not an individual or a trust, the insurer has to verify the identity of the natural person, who, whether acting alone or together, or through one or more juridical persons, exercises control through ownership, or who ultimately has a controlling ownership interest.
It was said in case the customer was a trust, the insurance company would identify the beneficial owners of the customer through the identity of the settler of the trust, the trustee, the protector, beneficiaries with interest of at least 15 per cent in the trust and any other person exercising ultimate effective control over the trust through a chain of control or ownership. In case the customer or the owner of the controlling interest was a company listed on a stock exchange or a majority-owned subsidiary of such a company, it wasn’t necessary to identify and verify the identity of any shareholder or beneficial owner of such companies.
Irda said these procedures would only apply above a premium threshold in case of insurance contracts. The threshold would stand at Rs 1 lakh/policy for key-man insurance contracts, Rs 2 lakh/policy for partnership policies and Rs 1 lakh/policy for others, including Hindu undivided families and trusts.
“In cases where employer-employee policies are in the nature of ‘individual’ business, the thresholds laid down, as relevant to the constitution of the juridical person taking insurance contract, would apply,” Irda said.
It added the procedures prescribed would have to be applied whenever know-your-customer norms were carried out, according to requirements under the extant AML/CFT guidelines. Irda has advised insurance companies to amend their AML/CFT policies and implement these from April 1, 2013.
