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Fraudsters will target workarounds avoiding original documents – Dobson

by: John Dobson, chief executive, SmartSearch
  • 30/04/2020
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Fraudsters will target workarounds avoiding original documents – Dobson
The spread of Covid-19 poses a huge threat to people’s health, and that of course has to be the main priority in dealing with the virus.


But the measures put in place to combat it are also having a damaging effect on the economy, not least the property sector.

It might be tempting under the circumstances to think that it’s okay to take some shortcuts in order to get business over the line.

But when it comes to combating financial crime and money laundering, it would be a mistake to give in to the temptation.


‘Originals’ are outdated

The risk of being targeted by money launderers is no lower in lockdown: criminals will be on the lookout for any weaknesses and will exploit them ruthlessly. If anything, heightened vigilance is called for.

More than half the firms covered by anti-money-laundering (AML) regulations across a range of professional services such as law, accountancy and estate agency continue to rely on documents provided to them by clients to perform all the necessary onboarding tasks.

The social distancing restrictions currently in place make this approach increasingly unsustainable. With most people working from home, how can clients be confident that original documents will be appropriately processed and not fall into the wrong hands?

There is also a risk that the documents themselves may be a source of contamination. This may seem a small risk but it is not one business owners should be asking their employees – or themselves – to take.

We don’t yet know exactly how the virus spreads and advice is changing constantly. Without reliable identity checks and due diligence, firms cannot carry on business as usual: they will simply be unable to onboard new clients or engage in meaningful transactions while continuing to comply with regulations.


‘Sticking plaster solutions’

This has led some, including the Financial Conduct Authority (FCA), to suggest that firms employ a variety of workarounds to avoid the need for clients to produce original documents.

The suggestion seems to be that scanned PDFs and ‘selfies’ can be treated as reliable until fuller checks can be performed.

This is dangerous advice. Even at the best of times, fraudsters and money-launderers are adept at producing highly convincing fake or falsified documents.

How much easier is it to disguise their trickery if a scanned document is being used?

It is also unnecessary: there are fully digital AML solutions available that can reliably verify client ID and carry out all the necessary screening, against global sanctions and politically exposed persons (PEP) lists for example.

It takes seconds to perform these checks and there is no need for any physical documents or scanned PDFs to change hands.

There is talk of the current outbreak lasting many months, possibly into next year, with the lockdown being applied in waves in an attempt to reduce pressure on the NHS while also allowing businesses to keep trading.

It is clear that business continuity plans are going to have to address how key processes are impacted by an increase in remote working.

When it comes to financial crime, the sort of sticking plaster solutions the FCA seems content to apply, will not pass muster in the long run.

Already the Financial Action Task Force (FATF), the international body charged with setting the strategy for the global fight against financial crime, has issued guidance urging countries and firms to make maximum use of digital solutions.

In future, it is clear that only a fully digital solution will do.


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