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Regulated firms lag in adopting open banking

Regulated firms lag in adopting open banking


SmartSearch survey reveals 73% of regulated firms neglect open banking for fund verification, risking AML law violation

A SmartSearch survey reveals that a significant 73% of regulated firms, spanning accountancy, property, finance, and legal services, have yet to adopt open banking for verifying the sources of funds when onboarding new clients. The survey of 501 compliance decision-makers unveils concerning figures, with more than one in five (21%) not verifying the source of funds at all.

In the financial sector, 74% of compliance decision-makers do not use open banking services for source verification, posing potential risks for anti-money laundering (AML) compliance. Overall, only 80% verify the source of funds, with 30% opting for manual review of bank statements.

Accountants (70%), property industry professionals (72%), and legal sector compliance decision-makers (75%) also show a reluctance to embrace open banking for source verification, further highlighting the industry-wide lag in leveraging this technology.

Fraser Mitchell, technical director of SmartSearch, expresses surprise at the slow adoption of open banking by regulated firms, emphasizing its potential to streamline compliance processes and enhance business security. Mitchell underscores the seamless integration of source of funds checks into digital compliance platforms like SmartSearch, reducing the client onboarding process to just 60 seconds.

Collette Allen, Chief Operating Officer at SmartSearch, expresses concern over firms neglecting manual checks, labeling it a high-risk approach that could potentially violate UK anti-money laundering laws. The Proceeds of Crime Act mandates regulated firms to submit Suspicious Activity Reports (SAR) to the National Crime Agency if there are suspicions of attempts to launder illicit funds.

The study advocates for a shift towards open banking technology, enabling firms to conduct thorough checks for source of funds, proof of funds, source of wealth, and source of income. By embracing open banking, regulated firms can not only enhance compliance but also safeguard against potential AML violations in an ever-evolving financial landscape.