The SmartSearch Index - Electronic Verification Uncovered III

Financial crime such as money laundering and sanctions breaches continue to damage the UK economy and society.

In September 2023, for the third consecutive year, SmartSearch surveyed decision-makers in 500 regulated UK businesses across finance, accountancy, legal and property sectors on a range of digital compliance issues.

The campaign highlights the digital compliance issues, inefficiencies and shortfalls that are exposing regulated firms to debilitating fines and reputational damage. Its objective is to explore attitudes and approaches of regulated firms across the UK in relation to compliance and electronic identity (ID) verification.

Daily checks neglected

Just over nine in 10 regulated firms are exposing themselves to potential sanctions breaches and other financial crime by not carrying out daily digital checks on clients. That is even more than last year, 2022.

Under UK law, regulated firms must identify and verify anyone they work with to ensure they do not unknowingly become involved with a person or business under sanctions with a history of financial crime. The risk level that they might pose to a firm should be continuously assessed and any anomalies flagged. 

Electronic verification provides a perpetual KYC (Know Your Customer) model to support daily customer due diligence (CDD). A perpetual KYC (pKYC) uses real-time data and intelligence including robust sanctions and PEP screenings to build a complete and constantly updated client picture.

Misplaced faith in the paper trail 

Four in 10 regulated firm are resisting the shift to electronic ID validation and verification, instead of relying on paper ID checks. 

This outdated method is costly, time-consuming and risky - at a time when increasing compliance and cost pressures are further straining regulated firms. 

Manual processing leads to backlogs, delays and business inefficiencies, which can cause firms to inadvertently breach AML and sanctions rules. 

Electronic verification provides a robust, efficient and cost-effective way to verify new and existing customers without the need for official documentation.