2.2.3. Distribution Channel and Intermediary Risk Factors

Effective from 31/10/2022

The distribution channel is the method a customer uses to open a new policy or account. The distribution channel risk is identified by assessing how vulnerable the channel is to money laundering or terrorist financing activities based on attributes that may make it easier to obscure customer identity.

The risk of failing to identify a customer correctly may be higher for distribution channels that use an intermediary or do not require face-to-face contact. Depending on the product, distribution channel risk may be mitigated by using distributors who are also subject to AML/CFT obligations or a pension scheme subscribed through the customer’s employer.

The following table describes attributes used to assess the vulnerability of distribution channels and provides lower- and higher-risk examples of each.

Attribute	Lower-risk example	Higher-risk example
The distributor has AML/CFT obligations	The distributor is overseen by a regulatory authority and subject to AML/CFT laws equivalent to or stronger than the insurer	Distributor is not subject to AML/CFT requirements
Payment to an insurer	Customer pays the insurer directly from their account at a bank or securities dealer	The customer pays the distributor, who then pays the insurer
The direct relationship of customer to insurer	Tied agents, brokers, and banking consultants; products distributed directly by insurers	Non-face-to-face relationships⁶ with insurers or agents (e.g., trusts or insurance sold by telephone or online without adequate safeguards for confirmation of identity)

⁶ As discussed in section 3.3.1.5 below, relationships in which personal contact between an insurer or agent and the customer is achieved via video teleconference are not considered to be non-face-to-face relationships.