Surya Jyoti Life Insurance indulged in money laundering and regulatory violations!

KATHMANDU, DECEMBER 26: The allegations that black money is laundered through insurance companies in Nepal are not new. These companies have consistently denied such claims, but the available evidence clearly suggests something shady.
Despite the enforcement of the Money Laundering Prevention Act, some of them, under the protection of the Insurance Authority, seem to have been engrossed in black money laundering. One such example is Surya Jyoti Life Insurance. The Insurance Authority recently launched an assessment and investigation into certain policies of the company and detected several irregularities.
These include the issuance of policies exceeding the policyholder’s income, acceptance of premiums from unrelated third parties without verifying the source of funds, and violation of insurance regulations by providing excessive commissions, among others.
Similarly, the company was found to have appointed employees in breach of regulations, disregarded the issue of qualifications of board members, and issued policies without full premium payments.
According to documents obtained by aarthiknews.com, the company was even found to have deposited the commission for a policy issued under one agent's name into the account of another agent.
Insurance policies issued beyond income sources
Surya Jyoti Life Insurance has been found to have issued insurance policies with coverage amounts that exceed the policyholders' stated income.
It is revealed that policy number 1030000397 has a sum assured of 1.51 million rupees with an annual premium of 1.49 million rupees. However, the income statement submitted by the policyholder shows an annual income of only 125,000 rupees, which is insufficient to cover the premium. Despite this, the company issued the policy.
Similarly, for policy number 1090000436 (with a sum assured of 2.5 million rupees and an annual premium of 620,300 rupees), policy number 76100000484 (with a sum assured of 50 million rupees and an annual premium of 44.36 million rupees), and policy number 75100000211 (with a sum assured of 20 million rupees and an annual premium of 22.28 million rupees), reliable documents proving the source of income have not been found. Additionally, policies numbered 76100000325, 51200000276, 51200000277, and 81300000057 were also found to lack concrete evidence of the source of income during the investigation.
When issuing a policy, an insurer is required to conduct a financial risk assessment. This assessment involves evaluating the policyholder's ability to pay the premium after meeting other expenses during the policy term. Using proof of income tax paid as evidence of income is considered more reliable and leads to a more effective financial risk assessment compared to other documents. However, the investigation found that the policies issued by the company lacked documents ensuring the source of income.
Furthermore, it was discovered that the premium for policy number 1120000794 (with a sum assured of 306,000 rupees) and policy number 86600000272 (with a premium of 33,766 rupees) was paid one day after the policy was issued.
Section 64 of the Insurance Act, 2079, states that an insurer cannot issue a policy without collecting the full premium. Additionally, Section 55 of the Insurer's Corporate Governance Directive, 2075, stipulates that an insurer should not issue a policy without collecting the full premium. The company has failed to comply with this provision.
Premium payment from unknown sources
Surya Jyoti Life Insurance Company has been found issuing insurance policies by accepting premiums from unknown sources.
For policy number 11200000554, with a coverage amount of 15 lakh rupees, a premium of 1,21,750 rupees was received from an unidentified source. For policy number 71100000525, with a coverage amount of 20 lakh rupees, out of the total premium of 4,59,720 rupees, 2,69,000 rupees was deposited by someone other than the insured.
For policy number 70800000408, with a coverage amount of 20 lakh rupees, the premium of 9,32,000 rupees could not be verified as being paid by the insured or someone related to them. Instead, it was found that part of the premium was adjusted from the agent’s commission.
Policy number 82400000665, with a coverage amount of 5 lakh rupees and a premium of 27,755 rupees, was paid by Kamala Ghimire, who was found to have no relation to the insured.
Policy number 71100000407, with a coverage amount of 25 lakh rupees and a premium of 1,28,625 rupees, was paid by Shubhadra Timilsina, who also had no relation to the insured.
Policy number 82700000731, with a coverage amount of 46.31 lakh rupees and a premium of 3,50,000 rupees, showed 73,000 rupees being deposited in the name of Rajkumar Gartoula, who was not related to the insured. Additionally, 99,000 rupees was deposited, but the depositor’s identity could not be confirmed.
As per Clause 4(4) of the 2075 Directive on Prevention of Money Laundering and Financing of Terrorist Activities, individuals other than the insured or the agent are not allowed to deposit cash premiums or other amounts exceeding 1 lakh rupees in the insured’s name at any office in Nepal.
If such a payment is made, the name, surname, contact number, address, and relationship with the insured must be documented. However, the company has been found in violation of this regulation.
Cash transactions exceeding one lakh in violation of regulations
The company has been found conducting cash transactions exceeding one lakh rupees, which is against the law. This issue was uncovered during an inspection by the regulatory authority.
For policy number 20600000224, with a coverage amount of 15 lakh rupees, the company accepted a premium payment of 1,06,680 rupees in cash. Similarly, for policy number 20600000235, with a coverage amount of 5 lakh rupees, a premium of 1,03,934 rupees was also transacted in cash.
For policy number 20600000237, with a coverage amount of 5 lakh rupees, a premium of 1,04,860 rupees was paid in cash. Additionally, for policy number 20600000219, with a coverage amount of 3.05 lakh rupees, a total premium of 3,01,438 rupees was transacted in cash.
It was found that the company not only accepted cash transactions exceeding one lakh rupees but also allowed premiums to be paid by individuals unrelated to the insured.
As per Clause 18(1) of the 2075 Directive on Prevention of Money Laundering and Financing of Terrorist Activities, premiums of one lakh rupees or more must be paid through a bank, financial institution, banking instruments, or POS (Point of Sale) machines. However, the company violated this provision by conducting such cash transactions.
Furthermore, the company was found to have offered commissions exceeding the limits set by the Insurance Regulations of 2049 while issuing policies numbered 5020226, 70400108, 71100147, and 50800004.
Problems persist in insurance claim payments
By the end of Ashar 2081 (mid-July 2024), the insurer had pending claim payments amounting to 10 crores and 19 lakhs rupees. It was observed that some claim applications from policyholders were registered with significant delays. In other cases, when additional documents were requested from policyholders, there was no evidence in the claims department to confirm whether the policyholders received the request. Furthermore, in some instances, the insurer requested claim-related documents but did not follow up for extended periods.
On 4 Ashoj 2081 (September 2024), a commission payment of 2,49,438 rupees via voucher no. 61 was mistakenly made to a person other than the intended agent, Srijana Pant. Similarly, on 5 Bhadra 2081 (August 2024), another commission payment of 3,40,953 rupees via voucher no. 28 was also paid to someone other than the rightful recipient, Srijana Pant.
When aarthiknews.com contacted the company’s information officer regarding these irregularities, the officer denied the allegations, claiming that the company fully adheres to the regulations issued by the authority. He stated that before issuing policies, the company verifies the insured's income source, avoids cash transactions exceeding one lakh rupees, and informs the authority if black money is suspected. He added, "Different branches within the company handle specific areas, and each branch performs its duties regularly."
Regarding the irregularities at Surya Jyoti Insurance, Poonam Gyawali, Assistant Spokesperson for the Authority, stated that the authority takes action against companies violating regulations. However, she mentioned that she was unaware of specific issues involving Surya Jyoti.
"The authority conducts regular and emergency monitoring of companies. We inspect life insurance companies for three days and non-life insurance companies for another three days as part of our routine. If complaints are received or departments report problems, we investigate further," she said. "The monitoring team submits a report to the authority, which is reviewed by the senior management, and the board makes the final decision."
Under the Insurance Act, if irregularities are found, the authority summons the company's management and board for discussions. Companies are instructed to rectify the issues, and if they fail to comply, actions are taken, including imposing fines. Gyawali added that penalties are part of the authority's enforcement measures.
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