Prospect of further sanctions against Russia underlines importance of ongoing client monitoring

The prospect of further sanctions being imposed on Russia in addition to those recently brought in by the UK, the US and the EU has underlined the importance of ongoing client monitoring, according to a leading anti-money laundering expert.

Commenting after the EU’s High Representative for Foreign Affairs, Josep Borrell, said that more sanctions against Russia were an option, Martin Cheek, managing director of SmartSearch, said: “The situation on sanctions against Russia is constantly evolving.

“Just days after sweeping new sanctions against Russia were announced by the UK, the US, and the EU, it has been made clear that another round of sanctions could be instigated by the EU, with the bloc’s top diplomat Josep Borrell declaring that: ‘Sanctions are always on the table.’

“This highlights why regulated companies in the UK cannot rely upon having previously successfully screened clients, and underlines the importance of undertaking ongoing monitoring to accurately identifying newly sanctioned individuals and entities.”

He warned: “Those businesses that are not using an electronic verification system which provides monitoring and updates will not be getting alerts to flag up any new additions to sanctions or PEP lists.

“Given the speed at which new sanctions are being introduced, they are running the risk of breaching sanctions and as a result being subjected to punitive action including hefty fines.”

Mr Cheek – whose company SmartSearch has a market-leading digital monitoring service featuring over 1,100 worldwide sanctions and PEP (politically exposed persons) lists – said it was important that regulated sectors took a proactive approach to avoiding involvement with individuals and entities on sanctions and PEP lists.

“The Russian invasion has meant sanctions are now very much in the public eye, and businesses need to recognise they could be affected by the recent strengthening of the UK’s sanctions policy and also by further sanctions that might be brought in at a later date,” he said.

“Under the Economic Crime Act that was fast-tracked through parliament, breaches of financial sanctions are designated a strict liability civil offence, punishable by fines of up to £1m.

“Even when no financial penalty is imposed, companies found to have breached sanctions can be named and shamed.”

Last week saw the UK and US impose co-ordinated asset freezes against Russia’s largest bank, Sberbank, and Credit Bank of Moscow.

The UK has targeted a further eight Russian oligarchs, and has banned all new outward investment in Russia, as well as the export of key oil refining equipment, and the import of Russian iron and steel products.

The US has prohibited new investment in Russia, and has sanctioned members of the Russian elite including foreign minister Sergei Lavrov and senior members of Russia’s security council.

The EU formally adopted its fifth package of sanctions on Friday, which includes a ban on transactions with all four Russian banks and bans on the import of coal, wood, and chemicals.

The UK, The US and the EU have also imposed sanctions on Vladimir Putin’s two adult daughters.

Pressure is mounting for sanctions to be introduced against Russia’s natural gas and oil supplies, with Putin’s former chief economic adviser, Dr Andrei Illarionov, telling the BBC that this would end the war in Ukraine within a month.

Asked ahead of a meeting of foreign ministers in Luxembourg if the EU was ready to consider a Russian oil embargo, Josep Borrell, declared: “Sanctions are always on the table. Ministers will discuss which are the further steps.”

DAPS UK signs up for SmartSearch verification

National property sales and lettings company DAPS UK has partnered with leading anti-money laundering specialist SmartSearch.

The company, which will shortly be opening its seventh UK office, is the latest property-related business to sign up to the SmartSearch digital customer verification and screening system.

Martin Cheek, managing director at SmartSearch, said: “DAPS UK is the latest property company to sign up to our digital platform, which is now used by over 1,000 estate agents and property-related businesses.

“We are anticipating further partnerships with businesses in the property sector, as in addition to the importance of being fully compliant with regard to anti-money laundering there is now the added pressure of checking for sanctioned companies and individuals following Russia’s invasion of Ukraine.”

Companies in the property sector which use the state-of-the-art SmartSearch platform, include JLL, Winkworth, and Alto, the cloud-based software for agents which is part of Zoopla.

DAPS UK – which stands for Darren Anderson Property Services – is headquartered in Birmingham, and also has offices in the Black Country, Manchester, Liverpool, Dorset, and London. It will be opening a seventh office in Manchester South later this month.

Darren Anderson, managing director at DAPS UK, said: “We handle both sales and lettings, and with seven offices the volume of work involved in conducting identity checks was becoming overwhelming so we decided to invest in electronic identity digital verification to simplify the process and give us extra security.

“After researching different providers, we chose SmartSearch because it offers next generation identity verification and security, and gives peace of mind to our landlords.”

The SmartSearch service is available on a single platform via a browser or API, with full sanction, politically exposed person, adverse media screening and then ongoing monitoring.

It is the only organisation with the ability to verify individuals and companies in the UK and internationally, and recently launched a new service that enables businesses to check clients for residency in Russia, Belarus, and other high-risk countries.

SmartSearch launches high-risk country report

A new high-risk country report service has been launched by leading anti-money laundering specialist, SmartSearch in response to the introduction of sanctions against Russia.

The service enables regulated businesses to scan existing clients and check for residency or citizenship in Russia, Belarus, or any other high-risk countries.

The new reporting tool instantly checks all clients that the regulated business has previously run searches on, and returns matches for those that have a connection to the specified country.

The aim is to support those companies looking to quickly and efficiently evaluate their existing client bases following sanctions placed on a number of Russian individuals and businesses.

In addition, the search provides a list of all UK business searches on companies where a corporate structure is returned and an entity within the structure that is operated in a high-risk country.

“With the potential reputational and financial damage that could ensue for those working with clients connected to Russia or Belarus, regulated businesses have rightly been reviewing their existing clients.” Martin Cheek, managing director of SmartSearch explained.

“This new product will give businesses peace of mind that they aren’t working with anyone they shouldn’t be. The information will be provided quickly and efficiently, and will also be regularly updated for ongoing monitoring purposes.”

As a one-stop-shop for anti-money laundering and protecting against fraud, SmartSearch is constantly innovating to protect regulated businesses. Working with the world’s best data suppliers, SmartSearch is the only company to offer the breadth of multiple checks, all in one place.

SmartSearch also is the only organisation with the ability to verify individuals and companies in the UK and internationally. The service is available on a single platform via a browser or API, with full sanction, politically exposed person, and ongoing monitoring to guarantee anti-money laundering compliance.

Bounce Back Loan fraud could have been avoided

Digital fraud checks could have significantly reduced the £11.8 billion pounds now estimated to have been lost by the government to fraudulent and erroneous applications for Covid-19 support, according to a leading anti-money laundering specialist.

New figures from the House of Commons library show that fraud and errors involving coronavirus support schemes such as furlough and Bounce Back Loans cost taxpayers an estimated £11.8 billion. This is almost twice the amount lost as a result of Black Wednesday when Britain crashed out of the Exchange Rate Mechanism in 1992.

Martin Cheek, managing director at SmartSearch, commented: “It is disgraceful that such a vast amount of public money has been lost to preventable fraud.

“While it was essential that loans were made available swiftly so businesses could be supported after the outbreak of the pandemic, that does not justify a failure to conduct due diligence. Digital fraud checking could have been used to review within seconds the validity of claims for Bounce Back Loans and other support.

“This ineffective stewardship of taxpayers’ money is likely to have long-term implications for public finances, and has underlined the need for effective checks to be put in place when allocating public money.”

The House of Commons library used a central estimate of £11.8 billion for coronavirus fraud, and then compared this to Treasury estimates for the cost of Black Wednesday. This was £3.3 billion from August 1992 to February 1994, which when adjusted to today’s prices is around £6 billion.

Putin, national economic security and the end of globalisation as we knew it

In 2006 J.K. Gibson-Graham published a highly influential book entitled The End of Capitalism (As We Knew It). This book envisioned alternative economies, but now an alternative form of globalisation is forming. Covid-19 was a global inflection point, or a key event that changed the trajectory of socio-economic processes. Inflection points change the future. Inflection points are usually identified by historians as they reflect back on events. It is difficult to identify an inflection point in real-time. Putin’s ‘special military operation’ in Ukraine is another inflection point that is reenforcing some of the drivers of change that emerged with COVID-19.

COVID-19 highlighted the dangers of over-reliance on global supply chains. Globalisation is associated with many benefits related to economic efficiency resulting in the production of cheaper goods and services. But globalisation is also associated with labour exploitation, carbon-intensive production systems, risks related to the complexity of distributed production systems, and it also erodes national economic security. COVID-19 required all countries to have access to personal protection equipment (PPE), vaccines and computer chips as everyday living became even more dependent on the Web. Nevertheless, over-reliance on global value chains led to major supply issues. The European Commission began to appreciate that there was a blurring of national economic interests with national security as China and the US increasingly exploited economic connections to gain geopolitical advantage.

Putin’s so-called ‘special operation’ in Ukraine has finally persuaded European countries to develop solutions to their over-dependency on Russian oil and gas. This is to be welcomed and should be considered as an important shift towards decarbonisation and enhancing European national security. Sanctions imposed by governments and businesses are also severing Russia’s connections to the global economy. Putin’s war is also beginning to impact on China. A senior executive of a machine parts manufacturer located in eastern China is worried that a Munich-client justified cancelling orders on the grounds that “it feels terribly wrong to send money to a country that is tolerating war in Ukraine – sorry”.

In 2014, Putin’s annexation of Crimea led to a deterioration of Russia’s ties with the West. One response was an attempt to increase the independence of Russia’s financial system. Russia developed the System for Transfer of Financial Messages (SPFS) as an alternative banking messaging system to SWIFT, the global payments system, and also introduced MIR, a local card payment system sponsored by the Russian government in 2015.  The creation of SPFS and MIR was an attempt by Russia to enhance national economic resilience by policy interventions intended to increase economic sovereignty.

Economic sovereignty has moved up the political and business agenda and is challenging globalisation resulting in the end of globalisation as we knew it. All countries are increasingly under threat of economic coercion. This is especially the case for any commodities, products, or services in which there is over-dependence on another country including food, medical goods, infrastructure-related equipment, military supplies, and energy.

COVID-19 and Putin’s special operation has highlighted the critical importance of all countries developing approaches to protect and enhance national economic sovereignty. This has important implications for the United States, the European Union, and countries like the UK. China is a special case as strategies are already in place intended to balance the tensions between three Chinese policies that lie at the intersections of foreign and economic policy: economic security (jingji anquan), strong trading power (maoyi qiangguo) and economic diplomacy (jingji waijiao).

China has adopted an ambidextrous approach to economic policy. On the one hand, economic diplomacy underpins strategies to ensure that China plays a critical role in global economic relations. One outcome of this, is that too many countries have become over-dependent on China, and this erodes their economic sovereignty and national security. On the other hand, China also focusses on economic security to enhance national resilience to any threats, and disruptions that might impact on its own economy. This Chinese approach needs to be adopted by all countries. All countries need to become ambidextrous by balancing local capacity and capability with involvement in global transactions.

China, the United States and Russia have merged geo-politics with geo-economics deploying economic transactions as a weapon. For Putin, the European Union’s over-dependency on Russian gas and oil has been a weapon to force cooperation, or passive acceptance, of Russian aggression. In 2019, the European Union  realised that there was a danger that Europeans could be negatively impacted by Sino-American competition that would reduce European economic sovereignty. One outcome was the European Union’s Digital Compass plan that was announced in March 2021. This plan is intended to reduce Europe’s dependence on semiconductor chips made in Asia by doubling European capacity by 2030 with a focus on ensuring that European production accounts for 20% of global supply.

Deepening globalisation is behind all the products and services that support everyday living, but it comes with benefits and risks. One risk is any one country’s overdependence on exports from countries that might decide to weaponize economic relationships. A new form of globalisation is required based on every country paying due attention to the critical importance of maintaining economic security and sovereignty. This requires a very different balance between activities that are controlled and regulated nationally compared with imports.

China is very much aware of the tensions that exist between economic security and being too reliant on imports of key components including food. It is time, for all countries to appreciate that economic weapons might be even more powerful than military weapons. All countries must develop an ambidextrous approach to balancing globalisation with national economic security.

By John R. Bryson, Professor of Enterprise and Economic Geography, Birmingham Business School.

Paradigm launch fundraising drive to support Ukraine Crisis Appeal with promise to match donations

Paradigm, the mortgage, protection and compliance services proposition, has launched an emergency fundraising drive to support the Ukraine Crisis Appeal run by the British Red Cross Society.

A Just Giving page has been set up by Paradigm at: www.justgiving.com/fundraising/ukraine-paradigm to accept donations which will go directly to the British Red Cross Society’s appeal to help the Ukrainian Red Cross.

Paradigm has also announced its parent company, Tatton Asset Management plc, will be matching donations made via the page.

Paradigm is working with the Association of Mortgage Intermediaries (AMI) on this fundraising campaign which it hopes will find a wide industry audience and provide more support to those caught up in the war in Ukraine.

All money will go to provide food, medicine, clothing and shelter, as we all as first aid training in bomb shelters. The Red Cross has continued to distribute food and hygiene parcels plus thousands of litres of water since the fighting began.

Paradigm is asking its members and all stakeholders within the advisory community to share details of the appeal or other campaigns to raise funds for the people of Ukraine.

It has also asked people to stay informed on the war and its impact, plus help in other ways such as donating clothing, blankets, toiletries and travel equipment.

Bob Hunt, CEO at Paradigm Mortgage Services, commented: “To witness what is happening in Ukraine right now is truly devastating. We’ve been looking at different ways we can support the Ukrainian people whose lives have been turned upside down by this illegal war perpetrated upon them by Russia. We’ve therefore teamed up with AMI to set up this Just Giving page to accept donations to the British Red Cross appeal for Ukraine which will directly support their incredibly important work right across the country. We’re also pleased to say that Tatton Asset Management will be matching these donations, helping to raise more valuable funds for these individuals. Many people will already have donated in a number of ways, but if you’ve yet to do this, we’re asking all those associated with our industry to show their support for the Ukrainian people whose lives have been turned upside down by these events.”

Robert Sinclair, Chief Executive of AMI, said: “The humanitarian disaster being created by the conflict in Ukraine should be of concern to us all. The movement of millions of women and children across Europe is going to create a need for aid at levels not seen in Europe since WW2. The British Red Cross has the expertise, capability and capacity to provide direct assistance to those most in need, where hopefully they can operate under a flag of safety. AMI is supportive of initiatives promoted by firms such as Paradigm for those who want to express their support in a tangible way. We will be sharing this solution with all our membership.”

Opportunities for landlords and EPC changes

Seven out of 10 buy-to-let landlords (70%) are aware of government proposals that all rental properties must have an Energy Performance Certificate (EPC) rating of A, B or C.

This is according to research undertaken by Landbay, which found that awareness is much higher among portfolio landlords than non-portfolio landlords.

The research also revealed that 68% of the landlords surveyed had properties with an EPC rating of D or lower. However, the majority of those (80%) intend to make changes to bring their properties up to at least a C rating.

Currently, the proposals are that new tenancies must be C rated by 2025 and for existing tenancies it is 2028.

Some landlords are viewing these changes as an opportunity, especially those with larger portfolios of 10 properties or more. In our survey, 53% of these landlords said they would consider buying homes that were D rated or lower and bring them up to at least a C rating.

This compares to 32% of portfolio landlords with four to 10 properties who would do the same but only 20% of non-portfolio landlords would choose to buy and upgrade.

For those landlords who know about the proposed EPC changes and are also aware of green mortgages, 84% of them like the incentive of a discounted interest rate.

Paul Brett, managing director, intermediaries at Landbay, said: “Our survey shows that most landlords are aware of the potential new EPC rulings by 2025 and many will have to upgrade their properties to a C rating. Some of them, especially the larger portfolio landlords with 10 or more properties, are looking at how they can turn this to their advantage.

“Buying properties and making them more energy efficient will raise the value of the property and the rental income landlords can charge, as well as reducing tenant’s energy bills. A few extra thousand pounds spent at the buying stage will be an investment for the longer term.

“As awareness of EPC requirements and green mortgages improves, I expect to see many more landlords taking advantage of the lower rates offered by the green mortgage.”

Sanctions on Russia – monitoring newly sanctioned people and entities – Comment

Following the announcement by the prime minister, Boris Johnson, that Britain will implement the “largest and most severe package of economic sanctions that Russia has ever seen” following the invasion of the Ukraine, Martin Cheek, managing director at SmartSearch says: “These sanctions are far-reaching, and the government clearly intends that Russia should suffer financially as a result of its invasion of Ukraine.

“However, if these sanctions are to be fully effective then it is essential that all regulated sectors in the UK play their part by undertaking effective due diligence to ensure that anyone on a sanctions or politically exposed person’s (PEP) list is highlighted.

“Unfortunately, it will be impossible for companies that still use old-fashioned manual checking methods to do this. By contrast, those companies that have invested in electronic verification will be able to ensure within seconds that they are accurately identifying their clients and screening them against global sanctions and PEP lists.

“As new sanctions are introduced against Russia, the SmartSearch platform is able to provide immediate updates to the sanction and PEP screening lists when there are changes. Also, monitoring means any existing relationships on sanction or PEP lists can be flagged via alerts without a new search being required, and new clients screened through the system will be flagged if they are among the newly sanctioned people and entities.

“The current situation illustrates vividly the importance of electronic verification, and underlines why it should be made mandatory for regulated sectors instead of being optional.”

New whitepaper calls for effective AML due diligence

Industry leading anti-money laundering specialist SmartSearch has launched a whitepaper analysing due diligence undertaken by financial services firms when on-boarding clients.

The report, based upon a survey of 500 regulated firms in the UK, reveals that financial services firms are witnessing increased fraudulent activity, yet many are still using outdated procedures to confirm client identities. Key findings include:

  • Over half (51%) of financial services firms in the UK reported seeing a rise in financial crime attempts in the past 12 months.
  • A third (33%) of financial services firms use manual checks when onboarding new customers.
  • Over a third (35%) of financial services firms claimed that using hard copy documents was a more reliable method for establishing ID.
  • A quarter (25%) of financial services firms claimed they were ‘highly confident’ they could spot a fake document.
  • A third (29%) of financial services firms stated that it takes them up to a week to process hard copy documents.

The whitepaper is part of SmartSearch’s Electronic Verification Uncovered campaign, which aims to raise awareness of the dangers of relying on old-fashioned methods of identity verification for regulated businesses.

The Know Your Customer (KYC) process has come under increased scrutiny recently as businesses across industries adjusted to working remotely. To ensure regulated businesses can accurately identify and screen clients, SmartSearch is recommending businesses use digital onboarding.

Martin Cheek, managing director at SmartSearch said the increase in fraudulent attempts should drive businesses to move away from manual methods. He explained: “The findings of our whitepaper demonstrate a worrying amount of faith in traditional methods. This trust in manually identifying fraudulent documents is particularly concerning, as criminals are using sophisticated methods to try and deceive.

“The increasing complexity of fraudulent documents means anyone reliant on just the naked eye will be leaving their business open to deceit. With record fines being handed out for money laundering failures, regulated businesses need to ensure they are doing everything they can to prevent fraud.

“To prevent money laundering, businesses need to fight fire with fire. As criminals are embracing technology, those aiming to prevent criminal activity need to embrace electronic verification.

“Electronic verification works by using credit reference data, combined with other reliable sources, creating a unique ‘composite digital identity’ which is virtually impossible to fake. SmartSearch’ssystem can complete a check in just two seconds.

“With the wave of fraud not going anywhere anytime soon, regulated businesses should make the switch to electronic verification as soon as possible.”

It’s a hat-trick of Gold Awards for Lantern

Lantern, one of the UK’s market leading debt purchase and recovery companies focusing particularly on vulnerability, has received its third consecutive ‘gold’ award from customer experience experts, Investor in Customers (IIC).

This is no small feat, particularly from an industry that can often have notoriously bad press, nor after the last couple of years we have experienced, with more consumers than ever having to reach out because of financial or mental health problems.

The ‘gold’ award means Lantern excelled at all four principle themes – understanding customer needs, meeting customer needs, delighting customers and engendering loyalty. The Lantern team took on board feedback from its first IIC assessment in 2018, where it achieved a Silver Award, and put in place some of the recommendations that IIC suggested to further improve their service delivery.

Comments made by customers to the IIC’s assessor included:

  • “Lantern were extremely helpful when repaying my debt, they were understanding and sympathetic to my situations, treated me like an actual human being! They kept me in the loop.”
  • “The service has been excellent; no-one likes to be contacted by a debt collection agency, but they made the process easy and not at all embarrassing if you get in touch to speak about something.”
  • “It’s hard enough being in debt. I felt embarrassed. Lantern assured me they were here to help and not judge and made it easier to deal with.”

Employees also overwhelmingly voted Lantern a great place to work, with staff saying that Lantern treat staff as well as customers fairly; that they’re always thinking of the customer first; training is good and that ‘it’s the best company I have ever worked for’.

Danny Pickering Director of Smile Customer Experience Ltd who facilitated the Assessment commented ” This is another outstanding Assessment for Lantern.  It is a pleasure to work with a business where the culture is to put customers and employees at the heart of the organisation. I am very impressed by the level of detail that the Senior Management Team of Lantern go into when considering the feedback and insights from both Customers and Staff from which a culture of continuous improvement in the business is nurtured.”

Tony Barritt, Managing Director of Investor in Customers also added: “Another great result for Lantern, clearly demonstrating the hard work that Denise and her team put in to delight their customers at every opportunity.  In a challenging working environment, where IIC have seen average experience scores slip back during the pandemic, Lantern’s achievement is exceptional.”

Denise Crossley, CEO of Lantern: “Once again, I am over the moon that the Lantern team have enabled this wonderful business to achieve yet another GOLD award from IIC!  Customer surveys are important, but an independent view across staff and randomly selected customers is clear evidence of our commitment to do the right thing for our customers and colleagues.”