Why proper verification is one of the most powerful weapons in the fight against financial crime

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In our latest blog series, AML expert Jade Kirk explores why proper verification is one of the most powerful weapons in the fight against financial crime, particularly in the age of E-Wallet technology.

The COVID-19 pandemic hugely impacted the payment industry, with many of us adopting a cashless approach via E-Wallets such as Apple Pay, to avoid physical contact. Like other regulated industries, e-wallet firms are also required to comply with running Anti-Money Laundering (AML) and Know Your Customer (KYC) checks, stated by global regulatory authorities.

Proper verification is one of the most powerful weapons in the fight against financial crime and given that 48% of the businesses we surveyed have seen a rise in money laundering activity and over a quarter (26%) have actually been a victim of money laundering in the last six months, it is staggering that some are still not verifying their customers at all, while one in three are still relying entirely on manual processes.

Our survey revealed that while 63% of firms that still run manual checks say they have considered moving to electronic verification (EV), they are reluctant - mainly because they think it will be too expensive (33%) or because they don’t fully trust it (33%).

And while these concerns are understandable, they are also misguided. EV technology has come on so far in the last few years that not only is it more reliable, robust and accurate than manual checks - and recommended by regulators - but it is easier, quicker and cheaper too.

Manual checks take at least a day, for most (82%) at least two days and for one in five (22%) more than a week; EV through SmartSearch takes two seconds. EV can also cross-check details against numerous sources and use the latest biometric, selfie and anti-fraud technology, not only to ascertain if an ID is a legitimate document, but also that it belongs to the person presenting it. In comparison, just 6% of companies that use manual checks are ‘completely confident’ they would be able to spot a fake document.

It is therefore really worrying so many businesses are reluctant to move with the times, especially given that there is now a huge push to move on again to Perpetual KYC, (pKYC) - a much more dynamic process, which, due to its continual nature, simply cannot be done without switching to EV.

A traditional KYC programme is very ‘transactional’ - you run the initial check and then repeat every year, 18 months or whatever period has been determined by the company’s own risk assessment. pKYC is an ongoing process where customer information is continually updated.

At SmartSearch, we already offer a comprehensive platform that is able to verify and screen from one place and provide a level of continuous checking through ongoing monitoring of the client’s PEP/sanction status. pKYC goes a step further; as well as the global data referencing data and PEP and sanctions lists required for the verification and screening checks, businesses running a pKYC programme will also integrate into their processes, data from a huge number of additional free and paid-for public sources, as well as any internal data.

By including data from the electoral roll, utility companies, email providers, phone companies, the Post Office etc, and overlaying their own existing customer data, businesses will be able to identify any changes that could suggest a heightened risk of money laundering. For example, a change of address or changes to the corporate structure of a business client - as well as information that is unique to them - for example, they’d be able to spot if a new customer provides ID information that is already associated with an existing client on their database. Not only is pKYC the most robust compliance tool, but it also makes sense financially.

pKYC uses fewer resources and requires less intervention, making it more cost-effective, as well as opening up business opportunities that enable firms to focus on active clients and maximise profitability.

It is perhaps then understandable that there is a growing demand from regulated firms for pKYC solutions that enable effective ‘client lifecycle management’.

There is currently no single pKYC solution, but our cutting-edge technology has the capability to provide certain aspects of pKYC already and we are currently working towards a full pKYC solution, due to launch early in 2022.

We are paving the way for regulated firms to make the transition from transactional customer due diligence to truly dynamic KYC; contact us today to find out how we can help you make the move saving you time, money and resource, and ensuring you really do know your customers.


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