Independent Audit and Insurance AML Transaction Monitoring

Author: Vicki Landon, CAMS-Audit

The Bank Secrecy Act (BSA) requires that insurance companies identify and report suspicious activities, which is the ultimate goal of transaction monitoring. Companies are free to choose how they monitor transactions – via manual processes, exception reports, and/or transaction monitoring systems (TMSs) – as appropriate for their size and risk profile, as long as the method(s) effectively identify suspicious activities and support timely reporting.

To ensure effectiveness, regulations require that life and annuity insurers test their transaction monitoring periodically as part of the required independent testing or audit. The Federal Financial Institutions Examination Council (FFIEC) BSA/Anti-Money Laundering (AML) Examination Manual states that “Independent testing should, at a minimum, include…a review of the effectiveness of the suspicious activity monitoring systems (manual, automated, or a combination) used for BSA/AML compliance.”1 It instructs examiners to verify the adequacy of the independent audit.

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