More than 40% of banks and challenger banks admit that they have been a victim of financial crime, including money laundering, in the last six months. The research is released by digital compliance solution provider, SmartSearch.
It says the findings should come as no surprise. The same survey finds that just 18% of banks always complete checks to verify the identity of new individual customers.
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SmartSearch surveyed compliance decision-makers in banks, challenger banks, crypto platforms, property developers and gaming outlets.
It follows the Economic Crime Survey released earlier this year. The report found that the mean annual cost per business for all fraud incidents was more than £16,000. Meanwhile, 11% of businesses reported annual total costs of over £20,000. Some 3% reported costs in excess of £100,000.
The SmartSearch data found that banks were the biggest victims across the sectors surveyed. Within banking, the number of challenger banks (46%) slightly edged out traditional high-street banks (40%) in making the admission.
Meanwhile, less than a third of banks (31%) often verify the identity of individual customers. Meantime, 34% only complete these necessary checks sometimes. On a rare occasion, just over one in 10 banks said they would ask for proof of identity and verify it manually or electronically.
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By GlobalDataBurden of compliance grows even heavier
Martin Cheek, MD, SmartSearch, said: “There’s no question financial crime can have massive implications for businesses. It’s not just the loss of revenue. It’s also the reputational damage and questions raised for regulators and authorities about the safeguards and compliance measures in place. That’s especially true if businesses are not properly verifying customers – as our survey has revealed.
“As the threat of money laundering and financial crime increases, the burden of compliance grows even heavier. Firms must take action and improve both their systems and their processes to avoid becoming victims too. Advancements in digital compliance are helping firms of all sizes mitigate these challenges. It not only identifies potential red flags as part of detailed checks, but provides constant access to real-time data and intelligence.”
SmartSearch Electronic Verification Uncovered campaign
The survey is the third in SmartSearch’s continuing Electronic Verification Uncovered campaign. This aims to make firms aware of the dangers of relying on flawed, old-fashioned methods of identity verification. The campaign argues that businesses should use digital compliance to ensure they properly identify and screen clients. This is recommended by the Government in the 2020 Money Laundering and Terrorist Finance Act. The legislation aims to stem the flow of dirty money into the UK and protect firms from the fines and reputational damage which come with breaches.
