A third of financial sector firms risk eye-watering fines due to compliance audit delays, reveals SmartSearch
18 October 2023
A recent survey reveals that a significant number of firms in emerging financial sectors are still not sufficiently prepared for compliance audits.
The repercussions include the risk of business downtime, as teams are diverted to deal with the audit, as well as the looming threat of “eye-watering” fines and criminal prosecution.
SmartSearch, the UK's leading provider of digital compliance solutions, sheds light on the alarming lack of readiness in a comprehensive new survey of 500 compliance decision-makers in banks, challenger banks, crypto platforms, property developers and gambling outlets. A third of these firms freely admit that they would need more than a week to compile a compliance audit, if they found themselves under investigation.
The property development sector is slightly better prepared compared to others, with over a quarter of firms admitting to needing more than a week to assemble a compliance audit if investigated.
In contrast, the crypto platforms, banking, and gambling sectors show a higher level of vulnerability. More than a third of the firms in these sectors acknowledge that they would require more than a week to prepare a compliance audit, highlighting a significant gap in their current compliance procedures.
Martin Cheek, managing director at SmartSearch, commented: "The financial sectors are under constant siege, and breaching the rules unintentionally is not an adequate defence.
“The inability to swiftly compile a compliance audit when the regulator knocks on the door not only poses a risk of business downtime, but also opens up firms to potential legal ramifications.”
The Financial Conduct Authority (FCA) began the year with a staunch focus on anti-money laundering (AML) handing out fines for compliance failures. The common thread in the FCA's actions has been punishing firms for their shortcomings on AML compliance, even in cases where there is no explicit proof of money laundering taking place.
In fact, principle 3 of the FCA’s Principles for Business requires a firm to “take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.”
Mr Cheek added: "Being audit-ready is not just about adhering to regulations. It's about safeguarding a firm's reputation and ensuring the continuity of business operations without disruptions.”
Digital compliance offers a robust and instantly deployable audit trail that enables firms to remain vigilant against AML and sanctions breaches. These innovative solutions are designed to minimise the risk of a compliance breach, providing a streamlined approach to meeting regulatory requirements.
The next-generation of digital compliance is a game-changer. It simplifies the onboarding of new customers, making it quicker and more cost-effective for firms to comply with AML regulations. Firms can now easily prepare for internal audits and unscheduled regulatory visits at the click of a button.
Mr Cheek continued: “Firms must stop wasting time and resources on inadequate reporting; by adopting a fully automated and easy-to-understand compliance platform, you get the reports you want or need immediately."
As the industry evolves, being audit-ready is no longer an option but a necessity.
SmartSearch’s digital platform is now trusted by more than 6,500 clients and 60,000 users across the UK, Europe and United States. This includes one in three of the UK’s top 200 law firms, 30 per cent of top 100 accountancy firms and more than 1,000 property firms.
For more information, please visit www.smartsearch.com
