Over two-thirds of regulated firms in the emerging financial sectors are concerned about committing an anti-money laundering (AML) breach; UK-based digital compliance solutions provider SmartSearch has revealed in a new report.
2022 saw an estimated £6.4billion laundered using cryptocurrency, while corruption watchdog Transparency International UK calculated that £6.7billion of suspicious funds has been invested in UK property since 2016. With money laundering remaining such a large issue, the onus is on financial firms to ensure compliance with the latest AML regulations.
In a new survey of 500 compliance decision-makers in banks, challenger banks, crypto platforms, property developers and gaming outlets, SmartSearch also found that one in five financial firms are “very worried” about the robustness of their compliance procedures.
Casinos emerged as the most anxious about their regulatory risks, with 34 per cent explaining they were “very worried” about breaking the rules. Almost one in five (18 per cent) crypto exchanges were similarly nervous about their compliance responsibilities.
Are firms addressing their AML concerns?
Despite considerable concerns regarding AML regulations, a large proportion of firms admitted to continuing to rely on flawed manual processes to verify customers. Forty per cent said they verify new individual and business clients manually – wrongly believing that copies of official documents like passports or driving licences provided “reassurance” that customers were genuine.
SmartSearch warned that sophisticated criminals can easily forge official documents and, by not verifying them, firms make themselves more vulnerable to the very breaches they are worried about committing.
Martin Cheek, managing director of SmartSearch, said: “As regulators fine and name and shame an increasing number of firms, the worrying weight of compliance is clearly a big concern for regulated companies, particularly those in the neo-financial sectors like cryptocurrency and challenger banking.
Martin Cheek, MD of SmartSearch
“What’s concerning about our survey is that it shows that a significant number of regulated firms have concerns about being vulnerable to an AML breach but aren’t doing anything to mitigate the risk – even though the regulators are becoming more likely to enforce the rules and crack down on breaches.
“Breaking the regulations unintentionally is not a defence. These firms should be investing in a digital compliance solution to protect themselves from the potentially eye-watering fines and considerable reputational damage which accompany a breach.”
The latest survey was the third in SmartSearch’s continuing Electronic Verification Uncovered campaign, aiming 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.
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