Over two-thirds of regulated firms in the emerging financial sectors say they are concerned about committing an anti-money laundering (AML) breach.
Meanwhile, one in five report being “very worried” about the robustness of their compliance procedures.
The admissions are revealed in a new survey of 500 compliance decision-makers in banks, challenger banks, crypto platforms, property developers and gaming outlets by SmartSearch, a provider of digital compliance solutions.
Last year, £6.4bn is estimated to have been laundered using cryptocurrency, while corruption watchdog Transparency International UK has calculated that £6.7bn of suspicious funds has been invested in UK property since 2016.
Casinos were the most anxious about their regulatory risks, with more than a third (34%) saying they were “very worried” about breaking the rules. Almost one in five (18%) crypto exchanges were similarly nervous about their compliance responsibilities.
Martin Cheek, managing director of SmartSearch, said: “As regulators fine and name and shame an increasing number of firms, the worrying weight of compliance is clearly a big concern for regulated companies, particularly those in the neo financial sectors like cryptocurrency and challenger banking.”
However, despite their concerns, many firms 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, believing that copies of official documents like passports or driving licences provided “reassurance” that customers were genuine.
The survey is the third in SmartSearch’s continuing Electronic Verification Uncovered campaign, which 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 – as recommended by the Government in the 2020 Money Laundering and Terrorist Finance Act – to stem the flow of dirty money into the UK and protect firms from the fines and reputational damage which come with breaches.
Cheek added: “What’s concerning about our survey is that it shows that a significant number of regulated firms have concerns about being vulnerable to an AML breach but aren’t doing anything to mitigate the risk – even though the regulators are becoming more likely to enforce the rules and crack down on breaches. Breaking the regulations unintentionally is not a defence. These firms 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.”
