Regulated firms risk serious red flags by skipping business verification checks

According to data from SmartSearch, over half of regulated firms surveyed (59%) admitted to not consistently conducting critical checks on the individuals behind the businesses they engage with, despite regulatory mandates dictating otherwise.

Of particular concern is the property sector, including estate agents, where a staggering 65% of firms confessed to regularly bypassing verification checks on new business clients. Similarly, firms in the legal, finance, and accountancy sectors also displayed lax practices, with approximately 58% failing to consistently verify identities.

Alarmingly, the survey uncovered a decline in the identification of ultimate beneficial owners (UBOs), dropping from 53% in the previous year to a mere 37%. This decline is worrisome considering the UK's status as the world leader in shell company-related risks, as highlighted by recent research from Moody's Analytics.

Martin Cheek, Managing Director of SmartSearch, emphasized the critical importance of Know Your Business (KYB) procedures, particularly in light of the heightened risks posed by sophisticated financial crime tactics. Cheek stressed the need for regulated firms to leverage technological advancements to streamline KYB processes and ensure compliance with regulatory standards.

SmartSearch offers a comprehensive digital compliance solution designed to mitigate risks associated with business engagements. Through its UK business check, which includes Companies House checks and enhanced due diligence on corporate structures and individuals, firms can swiftly identify potential red flags. Additionally, their international business check covers over 90 countries, providing firms with the necessary intelligence to make informed decisions while mitigating financial crime risks.

In light of the survey findings and the escalating threats posed by financial criminals, Cheek urged regulated firms to take proactive measures to protect their businesses and avoid regulatory intervention. By embracing digital compliance strategies, firms can enhance their due diligence processes and safeguard against illicit activities, ultimately safeguarding their reputation and financial integrity.

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