Scottish Provident has spoken out against rules concerning the prevention of money laundering with i...
Scottish Provident has spoken out against rules concerning the prevention of money laundering with investment-related products ' such as whole of life, life and critical illness (CI) plans ' which are to be implemented at N2 in December, writes Kirstie Redford.
The rules state that customers that pay a single premium of over e2,500, or pay over e1,000 in premiums in one calendar year, will have to provide proof of identification and residence before purchasing products. This means advisers will have to ask clients for the same documents that are required when opening a bank account before they can proceed with a sale.
But Scottish Provident said that because premiums are paid via direct debits, there should be no need for customers to provide additional identification. The provider also said that because CI plans only pay out if the client is ill, there would be little opportunity to launder money in the first place.
Nick Kirwan, head of product development at Scottish Provident, said the extra identification checks would only result in more cost to advisers.
'This is just another requirement to deal with at N2 and ultimately another cost to advisers. I find the reasoning behind this rule mind-boggling. Premiums are taken directly from bank accounts ' this should prove the identification of clients without the need for further checks. I also do not understand how money could be laundered through critical illness products. It seems superfluous,' he said.
But spokesperson for the Financial Services Authority, Patrick Humphris, said the rules were vital in the fight against money laundering.
'Money can be laundered through any product ' it is simply putting unlawful cash into something legitimate. It is vital firms know who their customers are. Just because a customer has other financial products in place does not mean they are legitimate. Simple identity checks and proof of residence can be surprisingly effective,' he said.
Roger Edwards, head of products at Scottish Life, agreed the new rules were justified, but did not see how the risk applied to CI policies.
'No adviser wants extra administration, but IFAs are in a good position to pick up on suspicious customers due to their ongoing contact,' he said.
