Suspicious Transaction Reports for Insurers
When a policy looks like laundered money: what counts, who reports it, and by when.
A Suspicious Transaction Report (STR) is the report an insurer files with the Financial Intelligence Unit, India (FIU-IND) when a transaction looks like it may involve the proceeds of crime or terrorist financing. Under Rule 8 of the Prevention of Money-laundering (Maintenance of Records) Rules, 2005 (PML Rules), it must be filed promptly and not later than seven working days after the insurer is satisfied that the transaction is suspicious.
There is no minimum amount. The test is suspicion, regardless of the value involved, and attempted transactions count too. For an insurer, the STR is the reporting half of the AML rules; KYC, due diligence and record keeping are covered on the AML guidelines page.
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What Counts as a Suspicious Transaction
Rule 2(1)(g) of the PML Rules: a transaction, including an attempted one, which to a person acting in good faith does any of these four things.
- Proceeds of crime
- Gives rise to a reasonable ground of suspicion that it may involve proceeds of an offence in the Schedule to the PML Act, regardless of the value involved.
- Unusual complexity
- Appears to be made in circumstances of unusual or unjustified complexity.
- No economic rationale
- Appears to have no economic rationale or bona fide purpose.
- Terrorist financing
- Gives rise to a reasonable ground of suspicion that it may involve financing of activities relating to terrorism.
STR Rules at a Glance
Who receives it
Answer
Director, FIU-IND
Source
PML Rules; IRDAI Master Guidelines 2022
Who files it for the insurer
Answer
The Principal Officer
Source
PML Rules; Master Guidelines para 20.3
Deadline
Answer
Promptly, and not later than 7 working days after being satisfied the transaction is suspicious
Source
PML Rules, Rule 8
Minimum value
Answer
None. Suspicion, regardless of value
Source
PML Rules, Rule 2(1)(g)
Attempted transactions
Answer
Included
Source
PML Rules, Rule 2(1)(g)
Late or wrong report
Answer
Each day of delay, in reporting or in correcting a misrepresented transaction, is a separate violation
Source
Master Guidelines para 18.4
Records behind it
Answer
Kept 5 years
Source
PML Rules, Rule 5; Master Guidelines para 19
| Question | Answer | Source |
|---|---|---|
| Who receives it | Director, FIU-IND | PML Rules; IRDAI Master Guidelines 2022 |
| Who files it for the insurer | The Principal Officer | PML Rules; Master Guidelines para 20.3 |
| Deadline | Promptly, and not later than 7 working days after being satisfied the transaction is suspicious | PML Rules, Rule 8 |
| Minimum value | None. Suspicion, regardless of value | PML Rules, Rule 2(1)(g) |
| Attempted transactions | Included | PML Rules, Rule 2(1)(g) |
| Late or wrong report | Each day of delay, in reporting or in correcting a misrepresented transaction, is a separate violation | Master Guidelines para 18.4 |
| Records behind it | Kept 5 years | PML Rules, Rule 5; Master Guidelines para 19 |
Red Flags in Life Insurance
IRDAI's Master Guidelines on AML/CFT (2022) point insurers to these patterns. Any of them can lead to an STR.
- check_circlePremium out of proportion to the customer's income or assets.
- check_circleFree-look cancellations, especially repeated ones at short intervals.
- check_circleA policy assigned to an unrelated third party. Even assignments to regulated banks, financial institutions and capital market intermediaries get due diligence and an STR if there is suspicion.
- check_circleTop-ups or additional remittances that do not fit the customer's profile, including a customer classed as low risk.
- check_circleComplex or unusually large transactions with no apparent economic or lawful purpose.
- check_circleDoubts about the customer's identity that the insurer can no longer resolve. The guidelines say an STR is filed where the Rule 2(1)(g) criteria are met.
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How an STR Moves Through an Insurer
- 1
Alert
The insurer's software raises an alert when a transaction does not fit the customer's risk category and profile. Insurers may also set internal threshold limits per class of account.
- 2
Review
The compliance cell examines the alert, and also checks a random sample of transactions. Findings on complex or large transactions are recorded in writing and kept for 5 years for auditors, IRDAI and FIU-IND.
- 3
Decision
Once the insurer is satisfied the transaction is suspicious, the 7-working-day clock under Rule 8 runs.
- 4
Filing
The Principal Officer furnishes the report to the Director, FIU-IND. FIU-IND offers editable electronic utilities for STR and CTR filing on fiuindia.gov.in for insurers without their own tools.
- 5
After filing
The fact of filing stays strictly confidential: no tipping off the customer at any level. The insurer must not restrict operations on the policy because an STR was filed.
STR vs CTR
Trigger
Suspicious Transaction Report (STR)
Suspicion, under the four tests in Rule 2(1)(g)
Cash Transaction Report (CTR)
Cash transactions of more than ₹10 lakh (or the foreign currency equivalent)
Amount threshold
Suspicious Transaction Report (STR)
None
Cash Transaction Report (CTR)
More than ₹10 lakh
Judgement needed
Suspicious Transaction Report (STR)
Yes: someone must form a suspicion
Cash Transaction Report (CTR)
No: it is a value rule
Filed with
Suspicious Transaction Report (STR)
FIU-IND
Cash Transaction Report (CTR)
FIU-IND
| Suspicious Transaction Report (STR) | Cash Transaction Report (CTR) | |
|---|---|---|
| Trigger | Suspicion, under the four tests in Rule 2(1)(g) | Cash transactions of more than ₹10 lakh (or the foreign currency equivalent) |
| Amount threshold | None | More than ₹10 lakh |
| Judgement needed | Yes: someone must form a suspicion | No: it is a value rule |
| Filed with | FIU-IND | FIU-IND |
Penalties and Protection
- check_circleUnder Section 13 of the PML Act, the Director, FIU-IND may act against the insurer, its Designated Director or employees for not complying, including by monetary penalty.
- check_circleEach day an STR is late counts as a separate violation.
- check_circleSection 14 of the PML Act protects the reporting entity, its directors and employees: they are not liable to civil or criminal proceedings for furnishing the information.
Exam Traps
STRs go to FIU-IND, not IRDAI, RBI, SEBI or the ED. The deadline is 7 working days from being satisfied the transaction is suspicious, not from the transaction date. There is no rupee threshold for an STR; ₹10 lakh is the cash transaction (CTR) threshold. The Principal Officer files; the Designated Director has overall compliance responsibility. Filing an STR does not freeze the policy, and the customer must not be told.
FAQs
Within how many days must a suspicious transaction report be submitted?expand_more
Promptly, and not later than seven working days after the insurer is satisfied that the transaction is suspicious (Rule 8 of the PML Rules, 2005).
To whom should suspicious transactions be reported?expand_more
To the Director, Financial Intelligence Unit, India (FIU-IND). Every reporting entity, including insurers, must monitor and report suspicious transactions there.
Who files the STR in an insurance company?expand_more
The Principal Officer, a senior officer appointed under the PML Act. The Principal Officer monitors regular reporting of suspicious transactions to FIU-IND.
Is there a minimum amount for an STR?expand_more
No. A transaction is suspicious if it raises a reasonable ground of suspicion, regardless of the value involved. Attempted transactions are reported too.
What is an example of a suspicious transaction in insurance?expand_more
A premium far above the customer's known income, repeated free-look cancellations at short intervals, or a policy assigned to an unrelated third party with no clear reason.
Can the insurer tell the customer an STR has been filed?expand_more
No. The fact of filing is strictly confidential and there must be no tipping off at any level. The insurer also must not restrict the policy because of the STR.
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