Financial services companies are still at risk of fines for failing to carry out due diligence when screening new clients, research has warned.
Analysis of UK financial services companies by anti-money-laundering software specialist SmartSearch has revealed a lack of commitment to screening new customers against sanctions or politically exposed persons lists.
Any firm that fails to screen new customers against the sanctions could face substantial fines due to anti-money laundering breaches. The firms could also face significant reputational damage if not careful and thorough while screening.
The survey indicated that 54 per cent of surveyed firms confessed to not making any changes to their compliance procedures even after a year since the implementation of Russian sanctions in the aftermath of its invasion of Ukraine.
The digital compliance company's analysis found that few firms carry out essential checks, with the worst offenders being:
- Property developers (less than a third)
- Challenger banks (less than 25 per cent)
- Cryptocurrency firms (less than 20 per cent).
SmartSearch also suggested that casinos were more likely to screen new customers against sanctions and PEP lists, compared to online and high-street betting firms.
Martin Cheek, managing director of SmartSearch, stated: “These firms face the arduous task of keeping up with ever-changing compliance requirements, but simply screening new customers ‘often’ is not enough”.
Cheek also advised firms to adopt robust digital compliance solutions that can efficiently flag PEPs and provide the necessary data to make informed decisions.
This comes amid SmartSearch's ongoing Electronic Verification Uncovered campaign, which is attempting to make regulated firms aware of the dangers of flawed methods of identity verification.
The campaign is in line with the government's 2020 Money Laundering and Terrorist Finance Act which attempts to stem the flow of dirty money into the UK and protect firms from the fines and reputational damage that come with breaches.
Theo Gray is doing work experience with FTAdviser
