Based on new data, nearly nine out of ten (92% of regulated groups) do not conduct daily client monitoring. This puts regulated firms at risk of sanctions violations and other financial crimes including money laundering, according to SmartSearch’s digital compliance experts.

In order to prevent mistakenly doing business with entities that are sanctioned or have a track record of financial crime, regulated enterprises operating in the UK are required by law to fully identify and screen all of the people they engage with.

Financial crime and regulated firms

This critically high percentage of 92% was stated from SmartSearch’s September 2023 survey of over 500 compliance decision-makers. The figure is up by an alarming eight percentage points from their previous yearly poll in 2022, when 84% of respondents claimed they did not perform daily client monitoring.

The property sector was determined to be the most vulnerable of the regulated firms studied, with 95% of firms not carrying out daily audits.

Moreover, regulated firms surveyed included financial, legal, property, and accounting companies.

It is quickly followed by the financial services industry, where 94% of finance firms risk violating financial sanctions by failing to complete daily checks on clients, up 6% from 88% in the 2022 poll.

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Accountancy and legal businesses are tied in third position, with 88% of them increasing their risk of fraud.

Martin Cheek, managing director at SmartSearch, stated: “The rising sophistication of financial crime coupled with increasing regulatory pressure can be overwhelming for firms. Everyone is so busy that it can be a real challenge for firms to comply with the law while mitigating financial and reputational risk for them and their clients.

“People in regulated businesses are genuinely worried that a breach of financial sanctions could be considered a criminal offence worth seven years in prison. A simple solution is to switch to electronic verification (EV) and adopt a perpetual KYC (know your customer) model to support daily customer due diligence (CDD).

“A pKYC approach utilises real-time data and intelligence, including robust sanctions and politically exposed person (PEP) screenings to build a complete picture of client, which is constantly updated. This way, the risk level that an individual client or business might pose to a firm is continuously assessed, with any anomalies flagged. These advancements have been a key driver in the shift by many firms to a digital compliance strategy.”