If an individual cash surrenders a recently-issued whole life policy and requests proceeds payable to an unrelated third party, what might they violate?

The correct answer is rooted in the requirement for insurance transactions to adhere to stringent regulations that help prevent illicit financial practices. When an individual cash surrenders a whole life policy and directs the proceeds to an unrelated third party, this can raise red flags under the Anti-money Laundering Rules. These regulations are established to deter and detect activities that may involve the laundering of money obtained through illegal means.

The essence of these rules is to ensure that financial institutions, including insurers, conduct their business in a way that minimizes the risk of funds derived from criminal activities entering the legitimate financial system. Directing policy proceeds to an unrelated third party, especially in the context of surrendering a policy that may be perceived as a means to access cash quickly, could signal potential manipulation or misuse of funds, warranting further scrutiny under anti-money laundering provisions.

In contrast, while tax evasion laws, insurable interest regulations, and fraudulent activity guidelines have their critical roles, they don't directly address the specifics of this situation as cleanly as the anti-money laundering rules do. In short, the act of cash surrendering a policy and transferring its benefits to someone with whom there is no insurable interest can lead to concerns related to money being moved improperly, hence implicating anti-money