"It's disconcerting to see that some of the firms on the frontline in the fight against money laundering still don’t trust the technology of electronic verification over manual processes"
The switch comes as firms feel the growing weight of compliance around anti-money laundering (AML) and sanctions regulations – amid a sharp increase in the number of companies fined by regulators for breaches of the rules.
The most recent figures from HMRC show 85 firms fined and named last year for breaches of compliance regulations. And a freedom of information request revealed a sixfold increase in the number of legal firms fined by the Solicitor’s Regulation Authority since 2017.
Meanwhile, the FCA recorded financial penalties totalling £568m for firms in the financial sector in 2021.
SmartSearch's research found that more than 90% of firms in the financing and banking sector are considering the switch to electronic verification (EV), with two thirds of them “actively” doing so.
However, almost a quarter (23%) of all the firms persisted with the misconception that using hard-copy documents was more reliable than electronic checks.
Property firms were least likely to turn to EV, with 40% saying they wouldn’t consider it and more than one in ten (12.5%) saying they didn’t trust the technology. In fact, the 2020 Money Laundering and Terrorist Finance Act recommends that regulated firms use EV in order to make their due diligence as effective as possible.
Martin Cheek, managing director of SmartSearch, said: “In a digital age, it’s disconcerting to see that some of the firms on the frontline in the fight against money laundering still don’t trust the technology of electronic verification over manual processes around hard copy documents.
“In fact, using EV is by far the most reliable way to carry out know your customer and know your business checks on new clients.
“And, as criminals produce ever-more sophisticated fraudulent versions of documents like passports and driving licences, EV can also verify official documentation quickly and reliably.
“EV also makes the firms’ own customer journeys more efficient and cost-effective. In short, as regulated firms start to buckle under the weight of compliance, investment in EV is a no-brainer.”
