Insurance companies had just begun building capacities good enough to touch the tip of the insurance frauds iceberg. All of a sudden, they find themselves accosted by an infinitely more complex problem: Perpetration of insurance frauds with the specific purpose of funding terrorists by using the money laundering conduit. What is it about insurance that lends itself to money laundering? What is the typical modus operandi of the perpetrators? And how can insurers graduate to tackle this phenomenon?

The World Trade Center holocaust on 9/11 brought home two aspects of grim reality to the insurance industry, worldwide. The first inexorable truth that insurers realized was that the volume of claims from the massive New Generation disasters, both natural and man-made, could well drive them out of business. As they indeed did, in many cases, such as 9/11 and natural super calamities such as Hurricane Katrina and Hurricane Rita right back to Hurricane Andrew (1992) and the Northridge Earthquake (1994). The other truth that insurers have come to terms with is the fact that they could be involved, inadvertently, or otherwise, in the financing of terrorism through fraudulent claims and other diversionary tactics often by using the money laundering conduit. And that could be the biggest challenge they would be facing in the foreseeable future.

As global insurers become increasingly aware of this growing challenge, they have begun grappling with the actual dimensions of the problem in right earnest—and understandably so. All that is known for sure is that the global insurance sector today generates insurance premiums of almost US$3 tn and is extremely vulnerable to terrorist financing through money laundering because of its capital-intensive nature and a host of other factors. Some of the prime factors are

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