Why Money Launderers Love Annuities

Trust Me! It's all Clean Money! At least it will be!
Trust Me! It's all Clean Money! At least it will be!. dblight / E+ / Getty Images

One of the most well kept secrets in the financial world is where money launderers love to “clean” their ill-gotten booty (pirate talk for dirty money).  Most are surprised that the answer is life insurance and annuities.  Yes, money launderers and criminals love these products.  You’ve got to be scratching your heads with this revelation, so let’s dig a little deeper into why bad people are drawn to these products and what’s being done to stop this from happening.

Buy it….clean it….repeat

Because I am Stan The Annuity Man and the most prominent national figure in the world of annuities, I frequently receive too good to be true annuity buying calls.  It goes something like this, “Stan, I’ve got $7 million dollars to put in annuities.  How soon can we get the paperwork done?”  You think I’m kidding, but it happens all of the time. 

The obvious red flag is that they don’t care which of the 15 types of annuities the money is placed into, and they haven’t given the solution or goal they are trying to solve for.  They just want to buy annuities.  My world doesn’t work like that, and it’s not supposed to be that easy because it isn’t. 

What happens if an agent actually goes through with the transaction is that the annuity purchase will be surrendered and cashed out regardless of the penalty.  To the criminal, the surrender charge penalty is the “fee” to clean the money.

 

Recently, the criminals have tried to be less obvious with their laundering requests and are trying to buy “period certain” Single Premium Immediate Annuities.  In other words, they place the money with the annuity company and get a 10 year or 15 year guaranteed payout in order to clean the money. 

LIMRA to the rescue!

LIMRA (Life Insurance and Market Research Association) is the organization that oversee the agent training to prevent money laundering.  If you’re an agent that sells annuities, you have to take and pass LIMRA training to be compliant.  LIMRA calls their program the “U.S. Anti-Money Laundering (AML) Training.”

On the surface, this AML training is a good thing and is a preventative measure for agents by reminding them of the issue.  However, in a world of greed and immoral behavior, the lure of a high commission influences a few agents to be willing conduits for this criminal strategy.

Just as an added point of reference read the article What are the Agent Qualifications to Sell Annuities?

 

Bad news….the agent is the final defense

All of the training and examples of agents getting caught still can’t prevent the ongoing efforts of criminals attempting to use annuities to clean their money and legitimize it back into the financial system.  The industry has done its best to put procedures in place to catch potential money laundering, and annuity carriers are constantly trying to spot odd and abnormal buying behavior as well.

At the end of the sales process, there is only one person standing between the criminal and the possibility of laundering money.  That person is the selling agent, and that is a scary thought.  Most independent annuity agents are starving, and couldn’t sell anything to anybody.  So when the money laundering call randomly comes in and the right agent takes the call, that’s when problems can happen.  Scary thought, huh?

My most recent “let’s test Stan” call came in from a gentlemen from California that said he wanted to buy a 20 year period certain Single Premium Immediate Annuity (SPIA) with $7 million dollars.  He wanted to get it done ASAP (first red flag).  He claimed that he owned a company in Utah that sold private jets, and on the surface it sounded legit.  Because I am “The AnnuityMan”, my discernment red flags went off….as well they should have.

To make a long story short, I flew to Utah to see the planes and validate that there was actually a business in place and the money was legitimate.  The bottom line is that it was a scam, and no transaction happened.  AnnuityMan 1.  Criminals 0.  That’s a story that had a good ending.  Let’s hope that it’s a story that get’s repeated.

There are plenty of appropriate Annuity Strategies which are within the law!

Income Now Annuity Strategies Provide Guaranteed Immediate Income

Income Later Annuity Strategies

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