Regulated firms that underestimate the importance of compliance are not just risking anti-money laundering (AML) breaches – but also the financial and reputational costs which come with them.
Despite mounting pressures and regulatory demands, many individuals within the industry disregard compliance, leaving their firms vulnerable.
The rise of financial crime
A survey by SmartSearch revealed that 44 per cent of decision-makers at 500 regulated businesses saw a rise in money laundering attempts and financial crimes in the past year. The complexity of evolving regulations contributes to this increase. Traditional paper checks increase the likelihood of unintentional breaches, leading to expensive penalties.
Money laundering poses a significant risk to firms and the integrity of our financial systems. Criminal gangs employ increasingly complex techniques to mask the origins of their “dirty money”, making detection and prevention a challenging task without a digital solution.
As a result, Electronic Verification (EV) plays a pivotal role in compliance processing. From verifying client identities during onboarding to sanction list checking and monitoring, EV provides a risk-free way to conduct thorough due diligence. In fact, the 2020 Money Laundering and Terrorist Finance Act recommends the use of EV as part of the due diligence process for regulated firms.
In addition to sanction checks, firms must also carefully navigate the ongoing screening of clients for Politically Exposed Persons (PEP), Special Interest Persons (SIP), Ultimate Beneficial Owners (UBO), and Relatives & Close Associates (RCA).
The triple bureau trident
By leveraging credit bureau data from Experian, Equifax, and TransUnion, regulated firms gain a complete “triple bureau” view of financial transactions. This improves risk assessment with deeper searches for illicit activities that yield an increased match-and-pass-rate.
Match-and-pass-rate measures the effectiveness of compliance processes by identifying the percentage of successfully matched and compliant transactions. A high match-and-pass-rate reduces manual review burden, enhances efficiency with fast onboarding, and allocates resources to genuine risks.
The role of Electronic Verification (EV)
From verifying the identity of clients during onboarding to sanction list checking and monitoring – even retrospectively – EV is the most robust and risk-free way for firms to conduct their due diligence.
Investing in digital compliance is no longer a luxury, it is a necessity in today’s regulatory landscape. Governments and regulatory bodies are increasingly focused on preventing fraud and money laundering, imposing hefty fines, and reputational damage on non-compliant businesses.
Complacency in compliance is a pitfall that regulated firms must avoid, and legacy compliance processes expose firms to risks and hinder effective combat against financial crimes.
Investing in digital compliance is a necessity. Prioritising digital compliance demonstrates integrity, instils trust, and safeguards reputation.
For more information please visit: www.smartsearch.com.
Martin Cheek is managing director of SmartSearch
