These can be misused to launder someone else's black money
Did you know that your lapsed insurance policy can be used to launder black money? Well, with 1.4 crore lapsed policies worth Rs 1.58 lakh crore of sum assured as on 2010-11, there are surely a lot of policies that can be used to convert black money into white.
So, the first thing you should do when you have decided to let a policy lapse is to either claim the surrender value, if applicable. Otherwise, take a letter from the insurance company that the policy has been closed and maintain that document. The latter needs to be done if the policy does not reach any surrender value.
How does it happen? Suppose, you are unhappy with the insurance policy and decide to let it lapse. It could be because of high premium or unhappiness with the insurer's services. According to life insurance company officials, if a policy (unit-linked or endowment) has been lying idle with the insurance company for, say four-five years, it can be sold to someone else for premiums. While a third person is buying it, the policy will continue to exist in the original owner's name. The documentation for such second-hand policies is very less.
The fraudulent person stands to earn on two accounts - one, if the original policyholder dies, he will get the entire sum assured thereby, turning his money into white. Or, when the policy matures he will get the entire amount in white. There can be problem only if the original policyholder wants to revive the policy. The best part: If there is an enquiry, it will be on the original policyholder. On the books, the policy will continue to be lapsed, good for the company as lapsed policies are profitable.
Similarly, if you have dormant demat accounts, keep a constant watch on the statements. As a brokerage executive says, "One of my clients held some stocks in the account and had not checked on it for over three years. But he was lucky as the branch manager was a friend. The branch manager called him to ask how he was suddenly buying shares worth Rs 5 lakh? He immediately blocked his demat account." In this case, it was a contractual bank representative trying to help someone. The representative's service was terminated.
There are almost 20 million demat accounts in India. According to experts, around 20-30 per cent of these are dormant. There are a lot of options for someone to cheat a person. There are many who had opened demat accounts when banks offered it for free or for Re 1 and most haven't used these accounts but are maintaining them.
To prevent falling prey to such traps, always complete your Know Your Customer (KYC) norms when investing or opening accounts. Link all investment accounts with your Permanent Account Number, so that all transactions are recorded. Also, link your mobile number and e-mail IDs to the investments for regular updates. Enable internet or mobile banking for random checks on the go. Remember, even if you are not involved directly, you may end up being penalised or harassed for being lackadaisical. Source business standard
Best Regards
Prakash Nair
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