• 1. Removing manual complexity 

  The manual method of guarding against money laundering involves gathering physical documents and inferring, from the information included on these, what money laundering risks apply. However, it can be tricky and time consuming to meet AML requirements in this way.

  A single round of manual checks can take at least a day to complete. However, in one survey of 500 AML-regulated firms, we found that, for 82% of the companies, a series of manual KYC checks would swallow up two or more days — and more than a week for 22% of the survey respondents.

  Conversely, verifying customers electronically garners quicker and more accurate results. For each customer, the initial Know Your Customer (KYC) checks can be completed in just two seconds, and can use regularly updated international databases — like those accessible to SmartSearch clients.

  A mere 6% of the companies that used manual checks indicated that they would be ‘completely confident’ in their ability to spot a fake document. Meanwhile, our TripleCheck service can thoroughly establish a document’s authenticity through utilising: 

  • Sophisticated biometric facial recognition techniques 

  • A customer Selfie Liveness Video (SLV)

  • Anti-fraud technology 

  Traditional KYC leaves other AML shortcomings for money launderers to potentially exploit. While manual KYC checks would usually be carried out only periodically after the initial assessment, electronic verification (EV) has enabled continual monitoring in the form of pKYC.

  Known in longhand as ‘Perpetual Know Your Customer’, pKYC offers what has been referred to as ‘client lifecycle management’ — where, once you have got your pKYC system up and running, you can leave it to run quietly in the background while you shift your attention to other work responsibilities.

  However, if you implement a SmartSearch pKYC system, you can still trust it to notify you if it detects that an onboarded client’s status has changed in a way that risks your firm’s AML compliance.

• 2. High level data located within minutes 

  With the manual approach to AML compliance, the business would typically undertake KYC checks for the client onboarding process and then at very particular times thereafter — such as every year, two years, or five years. However, pKYC differs in checking onboarded clients continually.

  For fulfilling this responsibility, a SmartSearch-provided pKYC programme would, for your company, scan a wide range of data sources and, in response to any relevant changes to the data held by these sources, update the client profiles your company has on file.

  This pKYC system would even allow you to incorporate your company’s own existing client data as well as data from the following free and paid-for sources: 

  • Utility companies 

  • The electoral roll

  • Phone companies 

  • Email providers

  • The Post Office

  The option to integrate internal data into a pKYC system can pay dividends in the fight against money laundering if, for example, a new customer provides you with ID details that are actually already linked to a client registered on your company’s database.

  How does pKYC use external or internal data sources in practice? Basically, imagine a situation where the system does detect a relevant change to the client’s status. Perhaps the client has recently become a PEP, and so would now be a higher money laundering risk to your firm.

  If the customer is added to a PEP list that a SmartSearch-provided pKYC system repeatedly scans as a matter of routine, the system can not only immediately record the client’s new status as a PEP but also automatically complete a fresh risk assessment on the client.

  Therefore, the pKYC system’s access to a wealth of data can enable SmartSearch to help you update not only raw facts and figures about your clients but also each client’s risk profile.

• 3. Access to a bigger database on a global level 

  Naturally, if you are running a particularly ambitious business, you could be keen for it to reach out to potential customers or clients based abroad. However, moving into international markets would also require you to meet international standards when it comes to AML efforts.

  This, in itself, can throw up new problems. As AML regulations differ between countries, it can be difficult to detect unusual activity on the part of the customers based in foreign countries.

  However, to assist businesses in identifying, verifying, screening, and monitoring customers, we at SmartSearch have partnered with the best of breed global data partners. These include:

  • Dow Jones

  • Equifax

  • Experian

  • TransUnion

  What this all basically means is that, if you are keen on striking deals with clients based outside the UK, you can take comfort that using SmartSearch’s AML platform will enable you to verify these clients under the same high standards to which our UK checks adhere.

  This will be the case whether the international clients at the heart of the matter comprise individuals, businesses, or a mix of both.

  Having access to a wealth of global data can be especially crucial when you want to reliably determine if a client is sanctioned, a PEP, or an RCA. However, even if you do have such data at your fingertips, checking it manually can still be challenging.

  This is because there is no single, formal source specifying all the sanctions, PEPs, and RCAs. Fortunately, SmartSearch screenings are both accurate and reliable due to their use of the Dow Jones Watchlist, which is updated daily and encompasses over 1,100 databases.

• 4. Reduced costs

  Having all this AML functionality at your fingertips does not have to prove a large financial burden for your business. Save on overheads with SmartSearch’s AML software, which can be tailored to meet your business’s unique needs and requirements.

  We can assist you in tailoring your SmartSearch package to suit the number of AML searches you require — we do not impose a pay-as-you-go model. If you find that your organisation agrees to a particular package but later needs it adjusting, an Account Manager from SmartSearch can help you.

  In consultation with you, we can arrange a bespoke plan that suits your needs and budget. The price you pay will be tied to this plan, making for a highly cost-effective AML solution — especially as you will be handed access to the same platform and customer service as the rest of our clients.

  To benefit from our digital compliance AML solution, you simply need to take the following steps :

  • Fill in and submit this online form to request a personalised SmartSearch demo and quote 

  • Use this demonstration to gain an insight into the practical experience of using the platform

  • Let us help you to determine the AML search volumes you will need

  • Arrange for these volumes to be monitored 

  • Liaise with your Customer Success Managerr if the agreed package fails to meet your needs

  We have designed the pricing structure for SmartSearch in such a way that our AML offering will remain affordable to all companies, regardless of their size.

• 5. Live monitoring and automated ongoing checks 

  Through carrying out a round of initial KYC checks on a prospective client, you can learn a lot about what kind of money laundering risk they would pose to your business. However, once you have completed these checks and onboarded the client, further checks will be needed.

  This is because you can’t be certain that this risk won’t change during the course of the client’s professional relationship with your business. Therefore, failing to regularly reassess the client’s risk profile could potentially result in your company unknowingly facilitating organised crime.

  Here are selected examples of developments that could too easily elude your notice if your company fails to regularly carry out fresh AML checks on its clients: 

  • Suspicious transactions made by the client

  • AML sanctions levelled against the client

  • Financing of terrorism 

  • The client transforming illicit funds into seemingly legal funds

  When you adopt the SmartSearch digital compliance AML system, you can not only use it for undertaking initial KYC checks but also arrange for it to automatically screen all your clients every night.

  If any of these screenings detect that any particular one of these clients has received a financial sanction or become a PEP, your firm will be alerted.

  As we have established, a pKYC-based system can go even further than this — by monitoring clients continually rather than at intervals, no matter how regular.

  However, pKYC is not only good for helping you to optimise a risk-based approach to AML compliance. It also offers ‘huge cost benefits too due to the reduced demand on time and resource.’

  If you currently have any remaining uncertainties about how pKYC could work for you in practice, we encourage you to get in touch.

The highest risk industries for money laundering and terrorist financing 

• Financial services

  As the UK’s financial sector is responsible for processing large volumes of money made through legitimate business, criminals find financial services companies attractive places to launder the proceeds of crime — as this ‘dirty’ money can easily be mixed in with the ‘clean’ money.

  Companies in the UK’s financial services sector can be categorised into the following: 

  • Retail banking

  • Payment services and electronic money 

  • Wholesale banking 

  • Wealth management and private banking 

  These can differ in the reasons they are targeted. For example, while wholesale banking and wealth management institutions are much more appealing to money launderers than to individuals seeking finance terrorism, retail banking firms are highly attractive to both groups.

  This is largely due to the online banking services offered by these institutions, some of which also accept cash deposits, making it easier for money launderers to elude detection.

• Hospitality

  Cash-intensive businesses — in other words, companies where customers pay primarily with cash — can risk providing a clear pathway to money laundering or terrorism financing. This is because criminals can hand these businesses money without needing to reveal its source.

  Examples of cash-intensive businesses include:

  • Scrap metal dealers

  • Money Service Businesses (MSBs)

  • Car washes 

  • Coin-operated amusement arcades 

  However, there is an especially high concentration of cash-intensive businesses in the hospitality sector. The various types of hospitality businesses that still often accept cash as payment include:

  • Pubs

  • Restaurants 

  • Cafes

  • Theme parks

  • Zoos 

  Once cash has been passed off as legitimate business proceeds or placed into company accounts, it can’t be traced back to any specific person. What’s more, using cash does not — compared to alternative, electronic forms of payment — require any specialist expertise or planning.

• Retail

  Many brick-and-mortar retail stores accept various payment methods, including the use of contactless payment cards as well as digital wallet solutions like Apple Pay. 

  However, cash also continues to be widely accepted at such stores, with some supermarkets even having ‘cash-only’ self-service checkouts.

  This means that many in-person retail stores can attract money launderers and terrorists due to the ease with which they would be able to pay with cash. Examples of common store types for this include: 

  • Supermarkets 

  • Department stores 

  • Newsagents 

  • Independently-run shops 

  • Market stalls 

  Online stores, too, could be used for money laundering purposes — even if the criminals would have to launder all the money electronically rather than as physical coins or banknotes. 
  

• 1. Placement 

  This stage is so-called as it indeed involves placing the illegally sourced money. As for exactly where, the basic answer is: where the criminal hopes this money will not be suspected of having been sourced illegally. The legal financial instruments that could be used for placement include: 

  • Bank accounts

  • Offshore accounts 

  • Money orders 

  • Cheques 

  Sometimes, once the money has been placed into one of these instruments, the instrument itself could be moved — enabling the money to be shifted even further from its original ‘dirty’ source. The money could even be repeatedly transferred between businesses, such as: 

  • Small independent retail stores 

  • Casinos 

  • Bars

  • Strip clubs 

  When added to an existing company’s accounts, the funds could be disguised as financial transactions — potentially even for products the business intentionally never provides.

  Often, when an especially large amount of money has been obtained illegally, it will be divided into smaller sums that might subsequently all be placed in different locations.

  For a money launderer, it would be a rookie mistake to deposit a large sum of unaccountable cash all at once — as the financial institution where this money is deposited could, as a result, quickly suspect that some wrongdoing has taken place.

  Of course, some financial criminals who are inexperienced at money laundering could still make this blunder, perhaps just due to lacking knowledge about what behaviours tend to be flagged by AML compliance platforms like ours.

  However, experienced money launderers — like those belonging to organised crime syndicates — are likely to be more cautious and strategic about how and where they place their ill-gotten gains.

  Any client of your company who does use it to engage in money laundering will be determined to always remain at least several steps ahead of you as you look for evidence of money laundering. However, you can tip the odds more in your favour when you use reliable AML procedures.

• 2. Layering 

  While this can be an especially complex part of money laundering, this complexity can also make layering especially effective at preventing the criminal’s money laundering activities from coming to light. For the criminal, layering basically involves adding extra ‘layers’ of safety.

  Layering can also be a relatively varied and time-consuming phase of the money laundering process, as layering involves moving the money between multiple different sources. Good examples of layering techniques include: 

  • Blending illicit money with legitimate money 

  • Moving the illegally sourced money from one account to another 

  • Transferring the money through different foreign currency exchanges 

  • Gambling the money in a casino 

  The more elaborate the layering method, the more difficult it can be for accounting investigators to distinguish between ‘dirty’ money and funds generated legally.

  As some jurisdictions do not participate in AML investigations, these are places where criminals could choose to have accounts for use in storing laundered money.

  As explained above, a money launderer could give themselves away if they deposit too much money at once in a single bank account. However, they can conceal their illicit activities more easily if the money is separated into much smaller chunks each placed into a different account.

  This strategy’s obfuscating effect can be heightened when each of those accounts is in a different jurisdiction, with several of the jurisdictions used perhaps being at least somewhat lax in their AML measures.

  For example, in money laundering cases where the money is originally made from drug sales, the ‘placement’ and ‘layering’ stages can essentially be combined into one stage.

  This money could be divided into smaller amounts for ‘money mules’ to deposit. The funds could then be transferred to a shell company, purportedly to pay for services it offers.

  If you run a business that a criminal could potentially use for money laundering purposes, it would be beneficial for you to know many different warning signs that a customer or client of the business could be channelling laundered money through it.

• 3. Integration 

  This is about putting — or ‘integrating’, you could say — the laundered money back into the legitimate economy. However, money launderers know they still have to be meticulous even at this final stage, as they need to be able to provide a plausible explanation for how the money was made.

  For this reason, before the criminal does integrate the money, they will need to make sure the money will be transferred from what comes across as a legitimate source — or, at least, the trail has been obscured enough to prevent it from being easily followed.

  The criminal’s objective here is to make it possible for them to spend the money without running the risk of being suspected of — or caught for — money laundering. The criminal will not want to leave any potentially incriminating documentation from earlier stages of the process.

  Once the money has been integrated, it can be spent on many different things, including: 

  • Luxury assets 

  • Long-term investment 

  • Real estate holdings 

  • Highly priced commodities, like artwork and jewellery 

  • New business assets 

  The money could also be used to purchase assets that would be useful for facilitating other money laundering efforts further down the line.

  In this sense, then, a lengthy chain of money laundering events can start to form unless this chain is broken — such as if money launderers are successfully prosecuted and sentenced for this criminal behaviour.

  Your organisation can help to break this kind of money laundering chain — such as if you arrange for AML and fraud monitoring to be conducted on your customers on an ongoing basis. That way, you can be alerted if a customer does something that could lead you to suspect a money laundering case.

How can your business combat fraud and financial crime? 

• Training

  We can provide tailor-made but comprehensive AML training for you and your workers, enabling everyone in the company to get to grips with our user-friendly AML software and use it to perform quick and easy AML checks.

• Develop a strategy

  If you are eager to ensure AML compliance in a manner that would be especially efficient in both time and cost, you should take a risk-based approach. Our AML specialists have the expertise to help you in designing and implementing an AML strategy that will suit your specific corporate needs.

• KYC checks with robust software remove human error

  When you switch from manual to electronic means of making KYC checks, you can make them more quickly and reliably — especially when you use SmartSearch, with its access to immense amounts of external data.

• Ongoing monitoring of new and existing clients

  Our ongoing monitoring service scans the Dow Jones Watchlist databases every night, allowing for customer information held by SmartSearch subscribers to be updated quickly. 

• Use automation to deliver better fraud and risk management

  The SmartSearch platform can carry out a wide range of AML checks automatically. What’s more, you can have these checks happen continuously when you utilise Perpetual Know Your Customer (pKYC), an especially dynamic solution for risk management.