A concerning trend has emerged in a recent survey by SmartSearch, showing that the influx of dirty money into emerging regulated firms is on the rise.
Over the past six months, more than one-third (36%) of these firms reported an increase in the number of Suspicious Activity Reports (SARs) they have submitted.
The survey took into account the perspectives of compliance decision-makers in sectors including crypto platforms, property developers, gambling firms, traditional and challenger banks.
The reliance on outdated manual checks for customer verification, which are prone to flaws, persists despite the increase in criminal targeting.
Surprisingly, around 40% of these firms still use manual methods to verify new individual and business clients, mistakenly believing that photocopies of official documents such as passports or driving licences provide sufficient proof of a customer’s legitimacy.
According to the Proceeds of Crime Act, regulated firms are obliged to submit a SAR to the National Crime Agency (NCA) if they suspect an attempt to launder ill-gotten funds.
SAR submissions have doubled over the past five years and are estimated to reach a record one million this year, according to the NCA.
Among the sectors surveyed, high street betting shops appear most vulnerable to dirty money, with nearly two-thirds observing an increase in SAR submissions.
Challenger banks have also become popular targets, with almost half noting a rise in suspicious activity. Last year, a review by the Financial Conduct Authority (FCA) expressed concern over the sufficiency of these banks’ defenses against financial crimes.
“These figures are concerning because they show that there is no abatement in criminal attempts to wash dirty money through the UK economy,” said Martin Cheek (pictured), managing director at SmartSearch. “But that concern is compounded by the number of firms who also admit to a continued reliance on manual checks to onboard new customers.”
SmartSearch, a leading UK provider of digital compliance solutions, suggests investing in digital compliance solutions to mitigate the risk of compliance breaches, which can lead to significant fines and reputational damage.
The company has recently introduced its next-generation platform with a new user-friendly interface, various features, and an unprecedented level of configurability. The platform supports over 6,000 clients and 55,000 users globally, facilitating millions of complex identity checks within seconds.
This is the third survey as part of SmartSearch’s ongoing Electronic Verification Uncovered campaign, aiming to highlight the risks of outdated identity verification methods. The campaign advocates for the use of digital compliance as recommended by the 2020 Money Laundering and Terrorist Finance Act, to curb the flow of dirty money into the UK and protect businesses from the penalties and reputational harm associated with compliance violations.
