The “worrying weight of compliance” is taking its toll on banks. Almost two thirds (60%) say they are concerned about committing an anti-money laundering (AML) breach according to a SmartSearch survey.
One in seven go even further, saying they are “very worried” about the robustness of their compliance procedures.
SmartSearch surveyed 500 compliance decision-makers in banks, challenger banks, crypto platforms, property developers and gaming outlets.
The National Crime Agency estimates that the amount of money laundered annually in the UK could be up to £90bn. This often occurs through the financial services sector.
However, despite their concerns, many banks also admit to a continuing reliance on flawed manual processes to verify customers.
More than a third (40%) said they verified new individual and business clients manually. They do so in the mistaken belief that copies of official documents like passports provide “reassurance” that customers were genuine.
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In fact, official documents are easily forged by sophisticated criminals. By not verifying them, firms are making themselves vulnerable to the breaches they are worried about committing.
Challenger banks less likely to use e-verification than incumbents
Surprisingly, challenger banks, are less likely than high-street banks to use electronic verification to onboard new individual and business customers. Almost half (49%) of high-street banks used electronic verification, compared to 37% of challenger banks.
Martin Cheek, MD, SmartSearch, said: “As regulators fine and name and shame an increasing number of firms, the worrying weight of compliance is clearly front-of-mind in the banking sector.
“But what’s most concerning is the surprisingly significant number of challenger banks which admit to relying on hard-copy documents to onboard new customers. It’s head-scratchingly short-sighted. These firms are offering their customers cutting-edge digital banking. But they are not investing in the similarly advanced technology which exists to reduce their risk of an AML breach.
“All these banks should be investing in a digital compliance solution to protect themselves from the potentially eye-watering fines and considerable reputational damage which accompany a breach.”
SmartSearch Electronic Verification Uncovered campaign
The survey is the third in SmartSearch’s continuing Electronic Verification Uncovered campaign. This aims to make regulated firms aware of the dangers of relying on flawed, old-fashioned methods of identity verification. The campaign argues that regulated 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 aim is to stem the flow of dirty money into the UK. In addition, it protects firms from the fines and reputational damage which come with breaches.
SmartSearch’s next-generation platform includes a seamless new interface. Its digital compliance solution supports more than 6,000 clients and 55,000 users across the world. SmartSearch says this helps clients deploy millions of complex identity checks in seconds.