Which investment feature of life insurance products places them at greater risk for money laundering?

• A. Fixed interest rate
• B. Non-transferable features
• C. Guaranteed cash value
• D. Transferability

Answer: (D)

Transferability drives money-laundering risk because it lets policy rights, ownership, or value move easily between parties. When a life insurance policy can be transferred, assigned, sold, or pledged, illicit funds can be layered and moved through different hands, obscuring who ultimately benefits and where the money came from. This creates opportunities to disguise the origin of assets, complicate the transaction trail, and evade standard Know Your Customer and source-of-funds checks. In practice, arrangements like policy assignments, life settlements, or premium-financing deals can enable rapid changes in ownership and control, making it harder for investigators to trace funds. Other features, such as a fixed interest rate, non-transferable terms, or guaranteed cash value, do not by themselves provide a mechanism to transfer ownership or control, so they carry less AML risk in terms of concealment.