https://www.thinkadvisor.com/2025/03/18/crooks-are-using-life-and-annuity-products-to-launder-money-fraud-tracker-says/

Traditionally, criminals used banks to make the cash produced by illegal activities look clean.

That history has helped turn life insurance and annuity products into the new frontier for money launderers.

Michelle Rafeld, executive director of the Coalition Against Insurance Fraud, talked about life and annuity money laundering at a recent in-person session of the National Association of Insurance Commissioners' Life Insurance and Annuities Committee.

"While banks and other financial institutions are typically bound by 'know your customer' regulations, criminals have recognized the insurance industry has fewer regulatory requirements for vetting customers and their sources of funds, making life and annuity products the perfect tool to wash illegal funds," according to draft meeting minutes included in a committee meeting packet.

Some money launderers like putting cash in whole life policies and making use of the policies' withdrawal, loan and surrender features.

Other money launderers are putting dirty money in annuities and taking clean dollars out through income distributions.

Rafeld has also talked about:

◆ Money launderers applying for life insurance policies or annuity contracts on behalf of a law-abiding consumer without the consumer's knowledge, putting dirty cash in, then pulling clean cash out.

◆ Human traffickers applying for insurance on the lives of the people they have trafficked.

◆ Ordinary crooks using phishing or social engineering strategies to trick ordinary consumers into letting them into their accounts.

Insurers and regulators could respond by borrowing know-your-customer ideas from the banks, Rafeld said.

Regulators could also use the insurance company financial examination process to ensure that insurers have strong antifraud programs in place, she added.