The Prudential Authority (PA), responsible for supervising and enforcing compliance with the provisions of the Financial Intelligence Centre Act 38 of 2001 by the life insurance sector, has published its third Money Laundering, Terrorism Financing and Proliferation Financing (ML/TF/PF) Sector Risk Assessment (SRA) for the South African life insurance sector, a provider of essential financial products and services and a critical player in the national economy.

The SRA presents a structured evaluation of how and why the life insurance sector may be vulnerable to ML/TF/PF, covering the period from January 2022 to December 2024. It uses diverse data sources such as the South African National Risk Assessments on ML and TF, input from  private and public stakeholder, reporting data and typologies and open source information.

Key findings

Inherent risks:

• The inherent ML risk = medium-high
• The inherent TF risk = medium-low
• The inherent PF risk = low

Mitigating controls:

Controls introduced by life insurers, together with supervisory actions implemented by the PA − including market-entry controls, targeted inspections, remediation, administrative sanctions and awareness initiatives − have collectively contributed to mitigate risk.

The strength of the mitigating controls within the life insurance sector have been assessed as follows:

• ML controls = adequate
• TF controls = weak
• PF controls = weak

Residual risks:

The overall residual risks for the sector have been assessed as follows:

• ML residual risk = medium
• TF residual risk = medium-low
• PF residual risk = low

The SRA provides a comprehensive evaluation of ML/TF/PF risks in the South African life insurance sector, highlighting the higher risk areas. The findings are intended to enhance awareness of ML/TF/PF risk within the sector, helping it to recognise potential misuse and adopt a risk-based approach to mitigate specific ML/TF/PF risks posed to it. It also assists in informing the supervisory priorities of the PA and serves to contribute to South Africa’s broader efforts to combat financial crime and ensure a more resilient financial system.