Crimebusters are warning of a money laundering "frenzy" among criminals using the UK insurance market for illicit deals.
According to the National Criminal Intelligence Service (NCIS), criminals will increase their activities, as the deadline for the introduction of the euro approaches and they must rid themselves of national currencies.
An NCIS spokesman said: "Criminals have four months left to get rid of it all. They have a tremendous amount of money and they do not want it in that currency."
He added this could lead to a money laundering "frenzy" and was "a very serious issue".
He said the annual turnover of drugs was about £8bn, with 56% of people trying to launder money.
Insurers have been urged to crack down on money laundering attempts or they could face fines and prison sentences.
"All financial service sectors must put in the appropriate measures to combat money laundering, as it seriously affects the economy," he said.
"Those that don't can be subject to fines or prison sentences."
Last year, more than 600 insurance cases were reported as "suspicious" to the NCIS.
The warnings come in light of fears that attempts at illicit dealings, involving drug trafficking and Third-World corruption, will become widespread in the London Market.
Head of regulation at Lloyd's, David Gittings, said: "At any given point in time we have a number of cases we are looking into cases where it appears people are endeavouring to use insurance transactions as a means to clean up or cover up something. We have issued guidance to make people aware that attempts have been made by insurance contracts or arrangements being cancelled and premiums refused. Insurance marine cargo has also been used as a cover for smuggling drugs," he said.
Although attempts have so far been unsuccessful, Lloyd's and the Company Market are now warning insurers to stay on their guard.
Chief executive of the International Underwriting Association (IUA), Marie-Louise Rossi, said: "The topic is a concern. It is something we are taking on.
"As world trade increases, so do the opportunities for fraud and it is something the market has to be vigilant about. But it is about having the proper controls and knowing who to do business with."
The Financial Services Authority (FSA) is now threatening to take a tougher stance on insurers that fail to crack down on crime.
Spokesman Patrick Humphris said: "There is a risk that criminals with a lot of cash will look to insurance to make it clean. London as an international financial centre will be targeted.
"When the FSA takes its full powers at the end of November for the first time, it will have explicit rules on money laundering. All regulated firms will be obliged to adhere to them and we can investigate, name and shame them."
Cap Gemini Ernst & Young consultant Stephen Banks said: "We are trying to help clients create better systems where they can track unusual payments.
"There has definitely been a rise in Third-World dictatorships laundering money through the UK market."
