For those unfamiliar with the term Life Settlements, (called Traded Life policies in the UK) it involves the purchase of ownership of large life insurance policies written by America's blue-chip life insurance companies, and  held by elderly and retired US citizens, many of whom have one or more serious medical problems. Upon the death of the insured, the investors receive the amount of the policy, and often realise a profit far in excess of what can be obtained in the current financial markets.

Money launderers for wealthy criminal organisations have been investing in those life settlement companies that have substandard, dysfunctional or ineffective compliance departments. They may now hit the panic button and, concerned that this fertile investment may be denied to them in the future, drop large sums into the life settlement companies. How does this affect compliance officers at financial institutions?

Some of these large amounts of illicit capital money will have to be moved from present locations, hidden both offshore and onshore, which means that it may transit your bank. MLROs and Compliance officers should endeavour to watch the life settlement market, and if other states pass similar 5-year legislation, alert their staff to flag any international funds transfers whose ultimate destination are non-bank financial institutions, as they may be life settlement companies. Many life settlement companies have names that are similar to those of insurance companies and investment firms.

Readers who require more information should review:
Money laundering of life settlement investments, World-Check 5 June, 2006; Alert for speculator-initiated life insurance, World-Check 19 December, 2006; Life Settlements with US clients remain high-risk for compliance, World-Check 23 October, 2006.