Anti-money laundering (AML) refers to the laws, regulations, and internal controls designed to prevent criminals from using financial institutions, including insurers, to disguise the origins of illicit funds or finance terrorism. AML programs require risk-based customer due diligence, monitoring of transactions for suspicious patterns, and timely reporting of suspicious activity to regulators. In the context of life insurance and annuities, AML focuses on unusual premium payments, rapid surrenders, third-party ownership, and clients unwilling to provide identifying information. Effective AML frameworks protect the financial systemTMs integrity and reduce legal and reputational risk for carriers and producers.

Advisors interact with anti-money laundering requirements through customer identification procedures, source-of-funds questions, and training modules. They are expected to recognize red flags such as large cash payments, complex ownership structures without clear purpose, or inconsistent financial profiles, and to escalate concerns according to firm policies rather than investigating on their own. Carriers and broker-dealers leverage technology to monitor transactions and file required reports. Understanding anti-money laundering helps advisors appreciate why certain questions are asked, support robust compliance cultures, and protect their business from association with illicit activity.