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By John Dobson

Chief Executive Officer, SmartSearch


Heavy fines should focus the mind on AML

Organised crime gangs and fraudsters are now thought to be responsible for up to $2trn a year in money laundering, which is being enabled due to a lack of basic ID checks and document verification.

This concerning figure is particularly worrying as the money being laundered is helping finance terrorism, sex and drug trafficking and other despicable acts. This means everyone involved in the property sector has an important role to play in the prevention of this money laundering.

But if the concern over facilitating organised crime isn’t enough of a motivation to ensure compliance, the threat of fines should be. In the first half of 2021, $1billion worth of fines were levied for anti-money laundering failures across the UK and EU.  


These fines are from global regulators which are continuing to fine companies for anti-money laundering shortcomings at an alarmingly high rate, particularly in the UK and EU. Watchdogs are heaping pressure on the financial industry to strengthen its defences against fraud and money laundering.

The huge fines suggest that financial watchdogs are baring their teeth when it comes to the issue of money-laundering and regulated businesses need to take note. The fact that the Financial Conduct Authority (FCA) is pursuing a criminal case against NatWest in the UK is evidence that these failings will no longer be tolerated.

Other notable probes have been carried out in the UK this year. Monzo, the start-up digital lender, revealed last month it was being investigated by the FCA over potential breaches of AML laws. Such oversight issues suggest compliance and Know Your Customer (KYC) processes are often not able to keep up with the pace of customer acquisition.

But it also suggests there are still a significant number of businesses that, for whatever reason, simply do not understand their role in the fight against fraud and global money laundering, particularly in the property sector.

The fines mainly relate to shortcomings in AML management, inadequate suspicious activity monitoring and customer due diligence when onboarding new customers.

What this suggests is that too many businesses are still relying on ineffective, manual methods of ID verification, which are prone to these kinds of failings.

This is worrying for mortgage brokers, and at SmartSearch we recently conducted surveys with regulated businesses which found that almost half have seen a rise in attempted fraud in the past year. However, a third are still relying on outdated manual methods to confirm ID, and check people against sanctions lists.

Manual methods leave lenders exposed

The level of sophistication of forgeries now makes them almost impossible to detect with the naked eye. It takes a trained expert to even know the signs to look for, and even then, there are some forgeries that are indistinguishable from the real thing.

These forgeries are no longer the work of master criminals, anyone with rudimentary photo-editing skills can digitally alter a photo of ID, bank statement, payslip or utility bill that will easily bypass the eye-test.

Therefore, those relying on just a visual examination are leaving themselves woefully exposed.

Using manual documents not only runs the risk of a forgery slipping through the net, but it is also incredibly time-consuming.

Time to plug into EV

Electronic verification negates the need for requesting a physical document, or an image of the document. With just a name, address and date of birth, the latest technology can combine credit reference data, biometric facial recognition, and digital fraud checks as well as electoral roll data and other reliable public sources to establish identity.

By triple-checking these different sources of information a unique ‘composite digital identity’ is produced. This digital identity is virtually impossible to fake. All this can be done online, with no need for in-person meetings, face coverings or hard copies of documents.

Regulating authorities, here and around the world, are putting more pressure on financial services firms to bolster their defences against the surge in financial crime since the outbreak of the pandemic. Realistically the only way to do that is to switch to a digital ID verification system where tasks like suspicious activity reporting and due diligence are automated and carried out in seconds across global databases.

Businesses need to make that switch to a digital smartsearch quickly if they want to see an end to hefty fines and the threat of prosecution. 

*John Dobson is the Chief Executive Officer of SmartSearch


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