Half of UK regulated firms report rise in financial crime
Almost half (48%) of regulated firms in the UK reported seeing a rise in financial crime attempts in the past 12 months, with a further 26% confirming they have been victims themselves – according to new research by leading regtech firm SmartSearch.
The survey of 500 regulated businesses in the financial services, legal and property sectors found just a quarter (25%) said they have not seen any change in the level of financial crime attempts.
Across the sectors more specifically legal firms, including conveyancers, were hardest hit with a third (33%) saying they had been victims of financial crime.
The findings form part of the SmartSearch Electronic Verification Uncovered campaign and reflect the unprecedented pressure on the property market during a long hot summer for house sales – a prime target for organised crime gangs laundering cash.
There were also significant variations across the regions of the UK with almost two thirds (64%) of regulated businesses in the East Midlands reporting a rise in fraud attempts, as well as 55% in London.
The increase in financial crime and money laundering has been driven primarily by the gaps in security that opened up due to the global coronavirus pandemic, as businesses rushed to adapt to new working practices.
Carrying out processes such as Know Your Customer (KYC) checks, and the due diligence required by anti-money laundering regulation, became increasingly challenging as face-to-face meetings were banned.
But while criminals were able to take advantage of those changes by making forgeries of hard documents such as passports and driving licences, legislation was introduced to help businesses by endorsing the use of electronic verification.
However, the SmartSearch survey also revealed that a significant number of firms, 13%, were not aware of the change which, according to CEO John Dobson, could prevent them becoming victims of money laundering.
He added: “There’s no doubt the conditions since the outbreak of coronavirus have been ripe for criminals to seize the opportunity for money laundering and other fraudulent activities in the property market. They have been able to do this because a lot of business still rely on manual methods of verification when onboarding new customers.
“Even so, the fact that half of the businesses we surveyed have reported an increase in criminal activity brings home the sheer scale of the problem.
“The most effective way of preventing this is by switching to a digital solution which does away with the need to riffle through documents which are easily forged by today’s organised crime gangs.
“In September 2020 the Money Laundering and Terrorist Finance Act recommended the switch to electronic verification, so it’s a concern that more than one in ten firms are still not aware of it.
“It is a key development in the AML sector as a digital platform ensures your business is 100% compliant with FCA regulations at all times. This avoids the potential for punitive fines or even criminal proceedings for non-compliance if your firm is found to be in breach.
“The message for regulated business that comes out of these findings is that switching to electronic verification is the smart thing to do, providing confidence through automated perpetual KYC processes.
“If the country is on the brink of another lockdown this winter, it is vital that businesses are not caught out by not having the right tools to avoid business disruption.”