Smartsearch Finds 10% Of Regulated Businesses Do No Checks on Business Customers

  • A regulatory technology (RegTech) company has launched a new campaign to encourage UK organizations to ditch manual “outdated” identification and verification methods for regulated businesses.

    SmartSearch, based in West Yorkshire, UK, launched its Electronic Verification Uncovered campaign to raise awareness of the dangers of manual ID checks. As part of the campaign, it has published its SmartSearch Index report, conducted by 3Gem Market Research, to highlight the ongoing threat of money laundering in the UK.

    The research, which surveyed 500 regulated businesses in the UK in June 2021, found more than a third (34%) of regulated businesses across the financial services, legal and property sectors still make manual checks when onboarding new customers. In the legal sector, manual verification methods are still preferred, says the report, with 42% of the firms saying it’s their preference. Whereas a third (33%) of financial services, banks and estate agents confirmed they relied on manual checks.

    SmartSearch also found that almost one in ten (8.5%) firms in the property agency sector said they do not verify customer ID at all, with 10% of all firms in the report saying they carry out no checks on business customers.

    John Dobson, chief executive officer, says, “It’s really important for regulated businesses to realize that when it comes to secure methods of customer ID verification, documents are high risk and should be at least supplemented with reliable low-risk electronic verification. This is not only because of the increase in money laundering and financial crime we’ve seen since the start of the pandemic but also the increasing cost of manually complying with regulations.

    “Businesses need to make due diligence and Know Your Customer (KYC) obligations more efficient in terms of speed and cost, as well as remaining secure and accurate,” he continues. “That is not possible by relying on checking passports, driving licenses and council tax bills.”

    When SmartSearch asked the business why they still used manual verification methods, one-third said they felt hard copy documents reassured them that the customer was genuine. “It’s that kind of belief that we are looking to overturn with our campaign, because increasingly when you’re inviting a customer to send copies of hard documents for verification, you’re actually inviting fraud in through the front door,” explains Dobson.

    According to the research, businesses cite “Issues of compliance” to be behind their decisions to still use manual methods of verification. A quarter overall (24%) say it meets Anti Money Laundering (AML) obligations and a further 30% claim it’s the only way to guarantee a person’s identity.