Agenda-setting campaign exposes AML loopholes

21 February 2023

SmartSearch, the UK’s leading provider of digital compliance, has published an agenda-setting whitepaper to highlight the anti-money laundering shortcomings and sanctions loopholes which continue to allow up to £100bn of illicit wealth to impact the UK economy every year.

The paper is part of the company’s continuing Electronic Verification Uncovered campaign, which aims to raise awareness of the dangers of relying on out-dated, manual methods of identity verification for regulated businesses.

Its findings are based on a comprehensive survey of 500 decision-makers in regulated firms from the finance, legal, banking and property sectors. Some of the insights revealed by the survey include:

• Almost half of regulated firms have seen a rise in criminals attempting to launder money or commit financial crime.
• Despite the increased threats, a quarter of regulated firms admit to still using flawed manual checks on easily forged hard-copy documents like passports and utility bills.
• More than three quarters (77 per cent) of property firms have not changed their approach to onboarding new customers since the invasion of Ukraine and thousands of new sanctions were imposed on Russia.
• Nearly half of all regulated firms fail to check for the “ghost” firms used by criminals as part of a corporate infrastructure designed to hide the connection of criminal beneficiaries.

But there was some positive news, too. As a growing number of firms feel the increasing weight of AML compliance, more than three quarters say they are considering a switch to electronic verification (EV).

SmartSearch’s managing director Martin Cheek said: “The use of electronic verification is recommended in the 2020 Money Laundering and Terrorist Finance Act. However, our Electronic Verification (EV) Uncovered campaign shows there is still a widespread and worrying reliance on the use of paper and manual methods of customer verification.

“These outdated practices are leaving regulated firms open to AML and sanctions breaches, which come with eye-watering, record fines and significant reputational damage.

“As criminals and money-launderers become increasingly sophisticated, regulated firms need the cutting edge technology of EV to meet them head-on.

“EV uses credit reference data, combined with other robust sources, to create an efficient, cost-effective and fully compliant, perpetual know your customer (pKYC) solution which can complete checks in seconds. It fulfils KYC and AML obligations as well as producing watertight compliance audit trails.

“In short, EV allows regulated firms to take control of their compliance. It also allows them to control their costs and improve their own customer journeys.”

The white paper can be downloaded here.