Flow of dirty money into emerging regulated firms is increasing
13 July 2023
The flow of dirty money into emerging regulated firms is increasing, with more than a third (36 per cent) reporting a rise in the number of Suspicious Activity Reports (SARs) they have submitted over the past six months, new data shows.
The “concerning” figures are revealed in a comprehensive new survey of compliance decision-makers in crypto platforms, property developers, gambling firms, banks and challenger banks by SmartSearch, leading UK provider of digital compliance solutions.
However, despite being targeted by criminals, many firms also admit to continuing to rely on flawed manual checks to verify customers. Almost half (40 per cent) said they verified new individual and business clients manually - wrongly believing that taking copies of official documents like passports or driving licences provided “reassurance” that customers were genuine.
The proceeds of Crime Act requires regulated firms to submit a Suspicious Activity Report (SAR) to the National Crime Agency (NCA) if they believe that someone is trying to clean dirty money earned from the proceeds of crime. The number of SARs submitted has doubled in the last five years and the NCA has estimated that it will hit a million for the first time this year.
SmartSearch’s survey of 500 decision-makers showed that High-Street betting shops are the most likely to have to deal with dirty money, with almost two thirds saying they’ve seen a rise in the number of SARs they have submitted. Challenger banks were also targeted, with nearly half reporting an increase.
An FCA review last year raised concerns over the adequacy of challenger banks’ defences against financial crimes.
SmartSearch managing director Martin Cheek, a qualified lawyer, said: “These figures are concerning because they show that there is no abatement in criminal attempts to wash dirty money through the UK economy. Far from it - suspicious activity is clearly increasing.
“But that concern is compounded by the number of firms who also admit to a continued reliance on manual checks to onboard new customers. If these sectors are seeing a rise in suspicious activity, then their customer verification and anti-money laundering procedures should be as robust as possible. But our survey shows that they are not.
“These firms should be investing in a digital compliance solution to limit the risk of breaching compliance rules and having to deal with the considerable fines and reputational damage that come with such a breach.”
SmartSearch has recently launched its next-generation platform which includes a seamless new interface as well as a host of features and a level of configurability never before available. Its digital compliance solution supports more than 6,000 clients and 55,000 users across the world, helping them deploy millions of complex identity checks in seconds.
The survey is the third in SmartSearch’s continuing Electronic Verification Uncovered campaign, which aims to make regulated firms aware of the dangers of relying on flawed, old-fashioned methods of identity verification. The campaign argues that regulated businesses should use digital compliance to ensure they properly identify and screen clients - as recommended by the Government in the 2020 Money Laundering and Terrorist Finance Act - to stem the flow of dirty money into the UK and protect firms from the fines and reputational damage which come with breaches.
The research was conducted by Censuswide with 500 compliance decision-makers, aged 18+, who are in crypto (exchanges, OTC traders), gaming (casinos, online betting platforms, high-street betting shops), property development and banks (including challenger banks) between May 26 and July 2, 2023. Censuswide abides by and employs members of the Market Research Society, which is based on the ESOMAR principles, and are members of The British Polling Council.
For more information please visit: www.smartsearch.com
