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Most banks lack cutting-edge technology to reduce AML risks, study shows

By Puja Sharma

June 28, 2023

  • AML
  • AML breach
  • AML Compliance
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Money laundering, AML, banksThe “worrying weight of compliance” is taking its toll on banks, with almost two-thirds (60%) saying they are concerned about committing an anti-money laundering (AML) breach. One in seven go even further, saying they are “very worried” about the robustness of their compliance procedures.

The admissions are revealed in a comprehensive new survey of 500 compliance decision-makers in banks, challenger banks, crypto platforms, property developers, and gaming outlets by SmartSearch, the UK-based provider of digital compliance solutions.

The National Crime Agency estimates that the amount of money laundered annually in the UK could be up to £90bn, often 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 – wrongly believing that copies of official documents like passports or driving licences provided “reassurance” that customers were genuine.

Official documents are easily forged by sophisticated criminals, and, by not verifying them, firms are making themselves vulnerable to the breaches they are worried about committing.

Surprisingly, challenger banks, often characterised by their use of technology to improve their users’ experience, 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, managing director of SmartSearch, said, “As regulators fine and name and shame an increasing number of firms, the worrying weight of compliance is front-of-mind in the banking sector.

“But what’s most concerning is the surprisingly significant number of challenger banks that 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 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.”

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.

SmartSearch has launched its next-generation platform which includes a seamless new interface as well as a host of features and a level of configurability never before available. Its digital compliance solution supports more than 6,000 clients and 55,000 users across the world, helping them deploy millions of complex identity checks in seconds.

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