New business verification checks neglected by finance companies

UK anti-money laundering (AML) regulations state that financial services firms must determine the ultimate beneficial owner of any business they have dealings with. 

Despite this, the research conducted with Censuswide with 500 compliance decision-makers in banks, crypto platforms, property developers and gaming outlets, found that 56% of challenger banks said they didn’t carry out checks -- but concerningly 70% of high street banks also failed to carry out the same checks. This also applied to two thirds of crypto firms, more than half of property developers and half of casinos.

SmartSearch’s ongoing Electronic Verification Uncovered campaign, revealed A mere 28% of firms often carry out verification checks while 21% only did so sometimes. 

Without researching into a company or client, firms are unable to identify the true ownership of assets or origins of funds, leaving them open to potential sanctions and AML breaches.

Martin Cheek, managing director of SmartSearch stressed the gravity of this oversight, “Firms across financial services have long been seen as the gatekeepers of the UK’s financial system. Without these fundamental verification checks, it’s impossible to not only fulfil this responsibility, but to protect their businesses from illicit funds and financial crime.”

“While Know Your Customer checks are a well-established part of compliance, Know Your Business is just as critical, enabling firms to assess the risk posed by new business customers. This includes identifying beneficial owners and the true source of funds, screening for sanctions or politically exposed persons, and verifying the company’s existence."

SmartSearch’s campaign argues that businesses should use digital compliance to ensure they properly identify and screen clients. Cheek said, “This onerous task has been made much simpler through innovations in digital compliance, allowing firms to access real-time information and complete detailed checks in minutes.”

The data comes just a year after the launch of the Register of Overseas Entities, which identified thousands of UK properties owned by offshore shell companies with complex corporate structures and anonymous ownership.