Regulated firms giving a “green light” to Russians

Almost one in five (17 per cent) regulated firms admit to not checking new customers against sanctions or Politically Exposed Person (PEP) lists, a new survey has revealed.

The disclosures come as Putin’s war with Ukraine passes its sixth month and the Government imposes stricter, “eye-watering” penalties on firms who breach the sanctions regulations.

One anti-money laundering (AML) expert has described the admissions as a “green light to Russians looking to circumvent sanctions and help Putin to fund his invasion of Ukraine”.

The comprehensive survey of 500 decision-makers across the property, legal and finance and banking sectors was carried out in May by SmartSearch, the UK’s leading provider of AML software.

Martin Cheek, managing director of SmartSearch and a qualified lawyer, said: “The threat of committing a damaging breach of the regulations for these companies is very real. A recent report from the commons foreign affairs committee showed that the government is still failing to tackle Russian kleptocrats who are laundering cash illegally through the UK – some of which is being used to finance Putin’s invasion of Ukraine.

“Not only are these firms potentially putting Ukrainians at risk by giving a green light to Russians looking to circumvent sanctions, but they are also risking the eye-watering fines and reputational damage which come with breaches of the regulations. Unintentionally breaching the rules is not a defence.”

More than 2,500 sanctions were already in place against Putin and Russia when the invasion of Ukraine took place at the end of February.

The Government reacted quickly to place new restrictions on individuals, entities and their subsidiaries, and brought in legislation to limit deposits held by Russians in UK banks.

Within weeks, the number of sanctions had been doubled and an unprecedented 7,200 individuals and 1,250 entities have since been added to the sanctions list.

The survey is part of SmartSearch’s continuing Electronic Verification Uncovered campaign, which is calling on regulated businesses to switch to electronic verification (EV). Digital onboarding is more reliable and can be done in as little as a few seconds.

Mr Cheek added: “It’s almost incredible that in this climate of a heightened awareness and increased penalties around sanctions that so many regulated companies are failing to do any checks at all.

“These firms should invest in robust sanctions checking procedures as quickly as possible. Electronic verification (EV) is recommended in the 2020 Money Laundering and Terrorist Finance Act as a way to make customer due diligence as effective as possible.

“From verifying the identity of new clients to sanction list checking and monitoring – even retrospectively – EV is the most robust way for regulated firms to fulfil their compliance responsibilities.”

SmartSearch comments on arrest of Europe’s biggest money launderer

As Europol announce the arrest of one of Europe’s biggest money launderers, we have a comment from Martin Cheek, managing director of SmartSearch, a leading UK provider of anti-money laundering software.

Martin said: “The high-profile arrest of one of Europe’s biggest money launderers – responsible for laundering over 200 million euros, clearly demonstrates the determination of authorities all across Europe to crack down on serious fraud and financial crime.

“But while this is a huge win, there’s still plenty of work to do and businesses need to remain vigilant to this very real threat. The UK’s National Crime Agency (NCA) estimates as much as £90 billion is being laundered in the UK, so in order to protect themselves, firms must respond and increase the levels of their checks and procedures.

“As the landscape continues to change and criminals find more innovative ways to filter money, that means ditching the manual paper checks of the past. As few people can spot fake documents, manual checks of passports and driving licences just aren’t robust enough, so it’s imperative that companies switch to digital onboarding and electronic verification (EV).

“EV checks are not only more thorough, but they take only minutes to do. Then with enhanced due diligence, detailed monitoring, robust checks and sanction screening, businesses can best protect themselves from fraud and serious financial crime while clearly demonstrating a compliant culture – a key requirement of many regulators.”

Regulated firms waste hours on manual identity checks

Regulated firms using manual methods of verification to onboard new individual customers are wasting hours of business time in the process, new data shows.

And many of them also acknowledge that those manual checks are less secure.

A quarter of 500 decision-makers at firms in the finance and banking, property and legal sectors who took part in a survey by leading anti-money laundering (AML) software provider SmartSearch, said they verified new customers using manual checks with hard-copy documents such as passports and utility bills.

But they also admitted that those documents took them days or even weeks to process – depending on transit and response times. And only a third (33 per cent) said they felt confident about being able to identify a fake document such as a passport, driving licence or utility bill.

More than half said the process could take from two days to a week. And one in eight of them (12 per cent) said checking the documents took more than a week.

The findings come as forged documents are becoming increasingly sophisticated and harder to identify. The Home Office’s own guidance on checking for forgeries of official documentation lists 24 potential failure points, many of which require expert knowledge to identify.

The survey is part of SmartSearch’s continuing Electronic Verification Uncovered campaign, which is calling on regulated businesses to switch to electronic verification (EV). Digital onboarding is more reliable and can be done in as little as a few seconds.

Martin Cheek, SmartSearch managing director said of the survey’s results: “These figures underline the inefficiency and unreliability of using manual processes to verify new customers.

“They also show that while regulated firms persist with these time-consuming, flawed processes, “dirty” money will continue to be washed through the UK economy.

“EV combines credit reference data with other reliable sources and is almost impossible to fake.

“The 2020 Money Laundering and Terrorist Finance Act even recommends that regulated firms use electronic verification (EV) as part of their due diligence to make it as effective as possible.

“Using EV doesn’t just minimise the risk of breaching AML rules, it also makes the firms’ own customer journeys more efficient, helping those who use it to stand out from their competitors.”

Regulated firms running gauntlet with hard copy identification

Almost two thirds of regulated firms believe hard copy documents provide reassurance a customer is genuine, latest anti-money laundering data has revealed.

Despite questions of validity, nearly half of all firms questioned still use hard documents like passports, IDs and utility bills in some way to verify new business customers, despite more than 83% being aware of digital systems for electronic verification (EV).

The data also highlights the North East and the East of England as hotspots with more than 40% of firms relying on manual verification alone.

Meanwhile, the same number of regulated firms in the South East believe manual verification is the only way to truly guarantee a person’s ID.

All is revealed in a wide-spanning survey of 500 regulated businesses across the UK, conducted by leading anti-money laundering (AML) software specialists SmartSearch.

The survey covers businesses across legal, property, banking and finance sectors and forms part of SmartSearch’s Electronic Verification Uncovered campaign.

The shocking findings come as passports continue to be the most attacked form of identification. 2020 saw a 41% increase in ID fraud, generating losses of $712bn and fresh opportunities for money laundering and serious organised crime.

“With the number of fakes and forged documents rising – no doubt helped by criminals looking to circumvent growing sanctions, the latest data should sound alarm bells to businesses who wrongly believe hard copies are secure,” comments Martin Cheek, managing director of SmartSearch.

“This reliance on flawed manual checks is even more worrying as our data reveals many businesses aren’t confident enough to spot a fake. If there’s ever been a case for switching to a digital system and adopting electronic verification, now is certainly the time.”

Automated AML systems offer the certainty of EV, allowing users to complete thorough checks in just a matter of seconds. These can be completed as part of onboarding or while retro-screening existing customers, meeting the necessary Know Your Customer (KYC) requirements.

As global sanctions increase, a system like SmartSearch can even offer automatic monitoring and high-risk country reporting. This allows users to immediately identify both new and existing clients who are now subject to sanctions or even regarded as a politically exposed person (PEP).

“Going digital and improving compliance must move higher up the agenda for businesses, especially in the current climate,” Martin adds. “Even if it’s not for sake of efficiency but as regulators continue their crackdown and the number of hefty fines increase.”

Regulated firms planning a big technology switch

More than 80 per cent of regulated firms in the legal, property and finance and banking sectors are considering a switch to electronic verification of their customers, new data shows.

The “big switch” to technology comes as firms feel the growing weight of compliance around anti-money laundering (AML) and sanctions regulations – amid a sharp increase in the number of companies fined by regulators for breaches of the rules.

The most recent figures from HMRC show 85 firms fined and named last year for breaches of compliance regulations. And a freedom of information request revealed a sixfold increase in the number of legal firms fined by the Solicitor’s Regulation Authority since 2017.

Meanwhile, the Financial Conduct Authority recorded financial penalties totalling an eye-watering £568m for firms in the financial sector in 2021.

The findings come from a comprehensive, multi-sector survey of decision-makers in 500 regulated UK businesses in the legal, property and banking and finance sectors by leading AML software provider SmartSearch.

The businesses were questioned during May as part of SmartSearch’s continuing Electronic Verification Uncovered campaign, which argues that regulated businesses should use digital onboarding to ensure they effectively identify and screen clients.

More than 90 per cent of firms in the financing and banking sector are considering the switch to electronic verification (EV), with two thirds of them “actively” doing so.

However, almost a quarter (23 per cent) of all the firms persisted with the misconception that using hard-copy documents was more reliable than electronic checks.

Property firms were least likely to turn to EV, with 40 per cent saying they wouldn’t consider it and more than one in ten (12.5 per cent) saying they didn’t trust the technology. In fact, the 2020 Money Laundering and Terrorist Finance Act recommends that regulated firms use EV in order to make their due diligence as effective as possible.

Speaking about the findings, Martin Cheek, managing director of SmartSearch said: “In a digital age, it’s disconcerting to see that some of the firms on the frontline in the fight against money laundering still don’t trust the technology of electronic verification over manual processes around hard copy documents.

“In fact, using EV is by far the most reliable way to carry out know your customer and know your business checks on new clients.

“And, as criminals produce ever-more sophisticated fraudulent versions of documents like passports and driving licences, EV can also verify official documentation quickly and reliably.

“EV also makes the firms’ own customer journeys more efficient and cost-effective. In short, as regulated firms start to buckle under the weight of compliance, investment in EV is a no-brainer.”

Partnership will protect boat sales from money launderers

Boat sales in the UK will be protected from money-laundering criminals after a major technology deal has been secured for brokers and agents.

The Association of Yacht Brokers and Agents (ABYA) has entered into a strategic partnership with SmartSearch, the UK’s leading provider of anti-money laundering (AML) software.

The deal will provide ABYA members with a streamlined, user-friendly platform to verify the identity of boat sellers and buyers, irrespective of where they are in the world.

The UK’s leading anti-corruption organisation Transparency International has identified boat sales as a conduit for money-laundering and ABYA has been working with HM Treasury and UK Finance to ensure all yacht brokers in the UK and Europe meet the highest AML and sanctions check standards.

The partnership with SmartSearch will provide ABYA members with a product suite of Know Your Business and Know Your Customer services in one user journey, allowing them to conduct verification checks quickly and effectively on customers anywhere in the world.

Peter Norris, ABYA chairman, said, “ABYA takes the subject of AML extremely seriously. It is our mission to set and uphold the highest standards for marine professionals, as well as to increase our relevance to our members, affiliates, and their clients.

“Our partnership with SmartSearch will put ABYA at the forefront of the marine sector’s ever-changing compliance landscape. It will allow us to deliver an affordable, cost-effective, and streamlined compliance solution to our members, ensuring their AML and sanctions procedures meet HM Treasury and Financial Conduct Authority regulations.”

Jade Kirk, enterprise business development manager at SmartSearch added: “We are delighted to be partnering with ABYA to give their members peace of mind knowing that their compliance obligations will be taken care of.

“SmartSearch already works closely with the marine industry and, with potential new regulations looming, we take pride in being able to lessen the burden that comes with compliance, especially for smaller broker firms.

“ABYA is a forward-thinking organisation which understands the importance of compliance and wants to ensure its members are properly protected.

“We are looking forward to a great partnership.”

SmartSearch technology keeps crypto car sales safe

Europe’s biggest cryptocurrency automotive marketplace has combined with the UK’s leading anti-money laundering (AML) software provider to offer the quickest and most secure car purchase process on the market., which has an inventory of more than 42,000 vehicles from more than 800 dealers in a range of cryptocurrencies, is using SmartSearch’s know your customer and know your business technology to ensure its crypto customers – and dealers – are legitimate.

AutoCoinCars founder Mustansar Iqbal argues that crypto’s much-publicised links to cybercriminals should not prevent it from being used properly by valid holders of the currency: “We have created the largest marketplace in crypto space and it is vital that we take a lead in being fully compliant and legal so that our customers and dealers can have confidence in their transactions.

“There are so many barriers for cryptocurrency holders who are trying to spend what is a legitimate monetary asset.

“SmartSearch’s innovative technology helps us to remove all those barriers, provide the reassurance that our customers and dealers need – and to settle balances faster than a debit or credit card transaction.”

The confluence of the two pioneering technologies allows AutoCoinCars to accept a range of genuine cryptocurrencies, mainly from virtual asset service providers but also from unhosted wallets.

Mustansar added: “We have registered users all over the world but won’t work with anonymous currencies. Combined with the SmartSearch API, our platform verifies the identity of both the customer and the dealer, as well as establishing the ultimate beneficiary of the transaction. Then, regardless of the volatility of cryptocurrency, our machine learning software ensures that the dealer receives the exact invoice price paid.”

Without the intervention of the AutoCoinCars platform, the constantly changing rates of cryptocurrencies could see dealers potentially losing money if the value of the currency decreases between the time of the transaction and the payment.

James Langrick, enterprise business development manager at SmartSearch, said: “It’s amazing to see our two pioneering technologies working together to ensure this cutting-edge marketplace is AML compliant.

“It is becoming generally accepted that cryptocurrency transactions will be part of the future but the size and popularity of AutoCoinCars shows that future is already here.

“We are proud to see our technology play a part in it.”

Finance and banking firms failing to detect criminal “ghosts”

Almost half (45 per cent) of finance and banking firms are failing to carry out crucial “ghost-buster” checks on new business clients, newly released data shows.

“Ghost” firms are false entities created as part of a corporate infrastructure to hide the connection of a criminal beneficiary. They are often used by sophisticated criminals to obscure the real recipients of money laundering activity.

And they can escape detection if regulated firms fail to carry out ultimate beneficial owner (UBO) checks as part of their due diligence on new business customers.

This worrying breach in business checks comes as organised criminals are believed to be responsible for laundering £88bn of money every year in the UK, the second-highest amount in the world.

The admissions came from a comprehensive survey of 500 regulated businesses in the property, finance and banking and legal sectors, commissioned by SmartSearch, the UK’s leading anti-money laundering platform.

Failing to verify UBOs can often lead to firms unwittingly approving Politically Exposed Persons (PEPs) or those on sanction lists.

Meanwhile, many of the firms surveyed admitted to even more basic breaches of the AML compliance rules – a quarter (25 per cent) said they did not always carry out ANY verification checks on the owners or directors of new business customers, with one in five (20 per cent) saying they did so “some of the time”, four per cent saying they did so “occasionally” and four per cent saying they never did so.

Martin Cheek, managing director of SmartSearch, said: “Not only are these omissions risking fines and reputational damage to the firms involved, but they are also creating an open invitation to criminals to dirty the UK’s economy with the financial proceeds of their miserable crimes.

“Regulated firms are legally obliged to identify UBOs as part of their compliance responsibilities and being able to check for them is a vital part of crime risk management and prevention for compliant businesses.

“However, without the right tools to do so, UBO checks can also seem like an impossibly complex procedure, which is probably why so many of the firms are not able to carry them out. But that is also a huge risk.

“This is yet another indication that electronic verification – which, in SmartSearch’s case, includes fast, robust UBO checks – is the most effective way for regulated firms to meet the AML regulations.”

The 500 businesses were questioned during May as part of SmartSearch’s continuing Electronic Verification Uncovered campaign, which argues that regulated businesses should use digital onboarding to ensure they effectively identify and screen clients.

Awards applications are open

Applications for the Credit Excellence Award have been opened, as the industry looks to a more diverse future.

This year, the awards scheme and virtal ceremony will be sponsored by Arvato Financial

Stephen Kiely, editor of CCRMagazine, said: “The awards have always shone a spotlight on the very best in the credit, collections, and enforcement industry, and, in these unique times, they will continue to do so.

“As we all look forward to an improving future, we hope the awards will give a positive focus for our industry, showcasing what makes us excellent. Now is the time to apply, so please contact me for an Application Pack.”

The Credit Excellence Awards are unique because applications for each category are open to the whole range of the industry in those sectors. So you can apply if you are an individual credit professional, a team, a consumer or commercial creditor, or a supplier company, or a product.

Previously, the judges have looked for a range of key characteristics from winning
entries, including:

► Truly exceptional behaviour – the judges are eager to see behaviour that is genuinely exceptional within the sector.
► Business leadership – has the candidate shown an ability to drive the business forward and inspire others, in areas such as thought-leadership and talent development?
► Professional excellence and processes – has the candidate shown true professionalism, carrying out their work in a way that is likely to inspire others in the profession and to reflect well on the industry as a whole?
► Real results – do the results show that the candidate has been able to improve the revenues or profitability of their own company or the customers they work with?
► Industry innovation – has the candidate been truly innovative in their thinking?
► Customer focus – has the candidate shown a genuine desire to ‘go the extra mile’ to benefit customers?
► Social responsibility – has the candidate shown true social responsibility, always thinking what is right for their customers and for the wider economy, community, and society?

To claim your Application Pack, and to apply for this year’s awards, please contact Stephen Kiely at

How buy now, pay later is growing the credit market

Examining the growth in buy now, pay later and how this type of point-of-sale finance is reshaping the credit ecosystem

Satrajit “Satty” Saha
CEO of TransUnion in the UK

There’s no doubt that the pandemic has propelled digital acceleration in the credit market, alongside a shift in consumer spending habits, with buy now, pay later (BNPL) experiencing unprecedented growth.

BNPL reached a total transaction value of £6.4bn in early 2021i and the latest research from our Consumer Credit 2022ii white paper – an in-depth look at the current financial landscape and changing consumer habits – shows two in five (37%) UK adults are now using this form of payment at least some of the time when shopping.

Flexibility is key to this consumer choice, with nearly seven in 10 consumers (68%) saying their top reason for choosing BNPL is spreading payments out over time. The appeal of interest-free payments is another major driving factor for these credit-savvy consumers – over six in 10 (62%) choose BNPL for this reason.

Ease of use at checkout is also important for more than four in 10 (41%) and is markedly most important for younger adults, with 54% of Gen Z listing this as a key reasonii.

Pioneering credit industry changes

Aligning with these changing consumer habits and supporting this growing market, in February 2022, we became the first UK credit reference agency to accept BNPL data into UK consumer credit reportsiii.

This represents a watershed moment for the credit industry. The use of BNPL data will support consumers using this type of point-of-sale finance, who will be able to better demonstrate their ability to make timely payments, and really benefit those with thin credit files by displaying positive payment behaviours that will be visible to other lenders and could support wider access to credit.

For lenders, the addition of the new data and insight will enable a more comprehensive picture of the consumer’s financial position, helping them to make informed decisions and ensure that payment plans are affordable and sustainable. These changes represent a game-changing innovation in the way BNPL products are treated within the credit ecosystem.

Obligations to report data to credit reference agencies form a key part of new guidance being devised between TransUnion, other leading credit reference agencies and industry bodies.

This builds on existing data sharing guidance to protect consumers from over-extending themselves financially.

The HM Treasury consultation on the regulation of this sector closed in January 2022 and, following the findings of that, the Financial Conduct Authority (FCA) is likely to begin developing its own rules to regulate BNPL providers.

Supporting consumers as they navigate financial challenges

People need as much choice as possible when it comes to finding finance that’s right for their needs, and on terms they can afford. Including BNPL data in credit reports will support consumers and help lenders make informed credit decisions.

It’s important to note, however, that BNPL payment behaviour won’t have an immediate effect on TransUnion credit scores.

As the data becomes more widely incorporated, this is likely to evolve and we’ll be working closely with finance providers and industry bodies and updating our scoring mechanisms as needed.

Credit plays a key role in economic recovery and our latest research shows a renewed appetite for borrowing, with desire for mortgages, credit cards and loans up significantly on pre-pandemic levelsii.

However, consumers are seeking alternative ways to pay as they address the cost of living crisis, so it’s important that consumer spending is supported with a broad range of payment solutions.

We’re still seeing a very mixed picture in terms of consumer finances according to our recent research.

More than half (54%) are confident their financial situation will remain stable, yet four in 10 UK consumers are postponing any major spending because they’re worried about their financial future.

By using BNPL, consumers have flexibility and convenience, as well as saving on interest, so it’s clear to see the drivers for the growth which is likely to continue – with forecasts BNPL could increase in size globally by 10 to 15 times by 2025iv.

Driving data-led decisions

At TransUnion, we’re taking a phased approach to introducing BNPL data into our products, to make sure it can be implemented fairly for consumers and to give finance providers the opportunity to understand how it will affect their decision-making processes.

As well as the new search types introduced, BNPL information will soon enhance TransUnion’s TrueVision insights to help bolster lenders’ understanding of customers’ credit behaviours.

This will enable them to respond with agility to changes and continue to conduct comprehensive creditworthiness assessments, make informed credit decisions and stay ahead of the curve.

As the sector braces itself for significant changes ahead, BNPL providers need to be thinking proactively about their role, putting consumer protection at the forefront and adapting their business models accordingly.

We’ve been working with several of the leading BNPL providers that are actively supporting change and starting to educate their customers on the value of credit information and how it can help both protect and empower consumers – something that we call using Information for Good®. CCR

i Bain & Company, Buy Now, Pay Later in the UK Report, 2021
ii Based on a nationally representative survey carried out amongst 2,000 UK consumers by an independent research agency on behalf of TransUnion in January 2022. Unless otherwise stated all figures stated above are based on this research
iii TransUnion Is First UK Credit Reference Agency To Accept Buy Now, Pay Later Data, 9 February 2022
iv A Bank of America analyst note to clients from November 2020 suggests estimated global volume of BNPL transactions could grow to between $650 billion and $1 trillion by 2025, or an estimated 10 to 15 times the current market – as reported by Wall Street Journal