"As the fraudsters become more sophisticated and make more effective use of technology to go about their business, so should the honest brokers, intermediaries and financial services firms trying to keep them out."
The start of International Fraud Awareness Week (Nov 15 to 21) comes as an urgent reminder to the financial services and property sectors of the real threat posed by fraudsters and criminals.
This year more than ever financial fraud and money laundering has seen a spike in activity as criminals seek to exploit an opportunity presented by the coronavirus crisis, which has left real gaps in fraud protection.
Not only are consumers bombarded with ever more sophisticated online scams but businesses, particularly operating in the housing market, have had to battle against a wave of illegal activity.
We know from the FinCEN Papers leak in September that globally the money laundering industry is worth an estimated $2trillion, with dirty money being flushed through the banking system on a daily basis.
But also, as highlighted in Financial Reporter, this year the Financial Conduct Authority (FCA) has issued 1,031 scam warnings involving individual attempts to defraud consumers, which is up 80% overall on 2019.
The FCA has also identified an increase in the number of fake financial services firms being set up to carry out these scams, creating websites and email marketing campaigns that are by most standards very convincing.
This has made it even more important to ensure best practice not only when it comes to Know Your Customer (KYC) compliance, but also Know Your Business (KYB) if, as a regulated business you are looking to enter into a relationship with another firm.
In many ways it is much easier to set up as a bogus business, than it is to steal an individual’s identity, in order to carry out fraud. And the front line of defence against those fake firms is a small team at Companies House that has some two million or so businesses to oversee.
In a year of exceptionally bad news, none of this is what business wants to hear of course, especially as the coronavirus crisis has led to many businesses being unable to carry out anti-money laundering (AML) checks in person.
That has been a problem for firms with no technological solution to rely on as a back-up. In fact research we carried out at SmartSearch this month highlighted that almost one in five (23%) of businesses still have no automated processes in place when it comes to AML checks.
However, as we learn to live and do business within lockdown conditions again, the good news is that there is technology available to businesses to protect themselves against the threat of fraud, while also being AML compliant.
In some ways, the coronavirus is irrelevant when it comes to the move towards more automated processes, because it is simply not good enough these days to rely on somebody turning up in your office with a piece of paper in hand and a scribbled signature of declaration to prove who they are.
As the fraudsters become more sophisticated and make more effective use of technology to go about their business, so should the honest brokers, intermediaries and financial services firms trying to keep them out.
The data and technology has existed for almost ten years to carry out automated KYB and AML checks identifying and verifying Businesses, Beneficial Owners, Persons of Significant Control, Directors and Shareholders. The same automated processes carry out KYC and AML checks on individual ‘Officers’ of the business with full sanction and PEP checks on the business and individuals - the whole process takes less than three minutes.
So, the question is why wouldyou not make use of this service when the alternatives take several hours or in some cases several days? It’s a much more efficient, accurate and reliable way to be sure you know who you are dealing with.
If we’ve learnt anything this year it’s that adapting our response to a new threat is the best way to keep the wheels of business turning. And by embracing the technological solutions now available to businesses they will be in a position to fight fire with fire and stay a step ahead of the fraudsters.