More than half of regulated firms struggle to verify business ownership, SmartSearch finds
More than half of UK regulated firms are struggling to verify who ultimately owns or controls the businesses they deal with, according to research from SmartSearch.
More than half of UK regulated firms are struggling to verify who ultimately owns or controls the businesses they deal with, according to research from SmartSearch.
The firm’s 2026 Compliance Report found that 52% of organisations across financial services, property, legal and accountancy sectors experience difficulties identifying ultimate beneficial ownership (UBO), exposing what it described as a significant weakness in the UK’s financial crime defences.
The research, based on a survey of 1,000 senior decision-makers, found that complex ownership structures, overseas entities and layered holding companies can make it difficult for firms to identify the individuals who ultimately control a business.
SmartSearch warned that these structures can allow sanctioned individuals or those linked to organised crime to avoid detection during onboarding processes.
The report also found that 54% of identity verification checks are still carried out manually, despite growing concerns over increasingly sophisticated fraud techniques.
Nearly a quarter (24%) of respondents identified the misuse of digital identity and certified ID processes as their biggest compliance challenge, while 22% cited synthetic identity fraud and the exploitation of personal data.
Cryptocurrency-related money laundering was named as the greatest compliance concern by 19% of respondents, while 13% pointed to terrorist financing risks.
Phil Cotter, chief executive of SmartSearch, said: “Identity is the foundation every business relationship is built on, but criminals are now exploiting the gaps between who a company says it is and who actually controls it.
“A firm that cannot credibly establish ultimate beneficial ownership is not just carrying a compliance risk; they are leaving the door open to sanctioned individuals, bad actors and the proceeds of organised crime.”
He added: “Those risks are becoming harder to spot because criminals are no longer just forging documents.
“They are manufacturing synthetic identities, manipulating digital verification processes and hiding behind complex ownership structures, all designed to defeat checks that rely on what can be seen on the surface.
“Firms still relying on manual processes are bringing paper to a digital fight, and the ability to verify identities and beneficial ownership quickly, accurately and at scale is now what separates the businesses criminals target from the ones they avoid.”
The report comes as regulatory requirements around beneficial ownership and fraud prevention continue to tighten.
SmartSearch noted that planned changes to the Money Laundering Regulations and the ongoing implementation of the Economic Crime and Corporate Transparency Act are expected to increase firms’ obligations to identify and verify those who ultimately control corporate entities.
The commercial consequences of compliance failures were also highlighted by the research.
Some 87% of respondents said they would stop working with a business following a confirmed money laundering, fraud or compliance breach, while 77% said the reputational risk of being associated with a major fraud scandal was a significant concern.
Cotter said: “Firms are entering an era where weak verification carries real consequences. If you can’t prove who ultimately owns or controls the businesses you deal with, you are leaving yourself exposed to prosecution, reputational damage and commercial fallout.
“Compliance cannot be a one-off event. The businesses doing this well are continuously monitoring, with a clear audit trail of every step they took to identify and mitigate compliance and fraud risks.
“The firms gambling on outdated processes to catch modern fraud threats are risking their company, their clients and their directors’ liberty.”
Related
88% of advice firms put client outcomes at centre of technology strategy, study finds
Olmo cuts Ingard compliance review times by more than half
Dip in mortgage activity persists in Q3, Stonebridge finds
TDS Group and Nationwide Foundation launch Better Renting programme
Thirdfort delivers more than 100 product releases following platform rebuild
Half of adults believe energy efficiency upgrades are essential due to high utility bills – Barclays
Stonebridge and HL Partnership record strong AR firm growth in 2026 – Network Consulting
Brokers cite affordability checks as biggest barrier to expat lending – Suffolk BS
45,000 LISA savers hit with multiple withdrawal penalties in 2024/25, FOI reveals
47% of aspiring homeowners do not expect to ever buy a property – Leeds Building Society
Eight in 10 property professionals confident homebuying reforms will deliver positive change – CSS
