UK businesses struggle to complete anti-fraud checks promptly

More than 100,000 UK businesses have a corporate structure so complicated it would take over half a day for them to complete anti-fraud checks, according to Experian analysis.

Businesses are required to perform Know Your Customer (KYC) checks on their clients to ensure they are not involved in financial crime or fraud. Fraudsters can use complicated corporate structures to hide illegal activity such as money laundering.

It typically takes about 10 minutes to perform manual checks to identify the Ultimate Beneficial Owner (UBO) of a single-tiered company with one director. However, organisations with parent companies, subsidiaries and multiple directors require more time.

Even single-tier companies can have complex structures, with more than 36,000 of them listed with 10 or more shareholders. The most tiers in a company structure was found to be 29, while the most shareholders in a business is almost 30,000.

Experian’s analysis of Companies House records found 116,000 businesses in the UK have a corporate structure which is so complex that half a day or longer would be needed to carry out manual checks, with decreased confidence in the end decision. The length of time needed to do these checks slows business processes and is an inefficient use of resource.

Lisa Fretwell, Managing Director of Data Services at Experian said: “Money launderers use complicated corporate structures to hide the flow of illicit funds. Funds are often transferred between these businesses and the complex structures are used to frustrate financial crime investigators as they try to identify where the money has come from.

“The task facing companies who want to manually carry out effective anti-fraud checks on their customers is sizeable, and often impossible. It’s a classic case of information overload, so it’s vital businesses use an analytical platform to make the highest quality decisions.”

To help businesses carry out Know Your Customer checks with confidence, Experian has launched a new web-based tool which analyses a company’s business portfolio in seconds. ComplianceIQ helps businesses operating in regulated environments to fulfil their Know Your Customer requirements, which ensure that customers are not involved in financial crime or fraud.

ComplianceIQ’s algorithm takes large amounts of data and allows users to map it on a single page and plug in their own risk models. Organisations can then be confident in who their customers are and the level of risk they pose to the business. The single area for all checks also allows businesses to input their risk appetite across the company, improving consistency and reducing errors.

A more automated approach can improve on-boarding and ongoing monitoring of customers, whilst saving valuable time and resources. In addition, it reduces the need to ask the customer for additional information, creating a positive customer experience.