The tradition of making New Year’s resolutions dates back to the days of the early Romans who made annual pledges to Janus, the two-faced god of chaos, transition, and change. But despite millennia of pledges, we have far from perfected this custom.
Time to take a stand
The United Nations has reported that the dirty money circulating in the UK economy now equates to around five per cent of our annual gross domestic product (GDP). This is unacceptable, and why I ask decision-makers at regulated firms to take a stand, and make anti-money laundering (AML) a priority in their new year’s resolution.
The victims of crime
Money laundering is far from a victimless crime. Those caught up in drug trafficking, fraud, human trafficking, and cybercrime are left in wake of suffering. The proceeds of crime are flowing through regulated firms across the country and regulated firms must be more vigilant as criminal gangs become more sophisticated.
We surveyed 500 decision-makers in the property, legal and finance, and banking sectors in June 2021 and again in May 2022 and, in many key areas, regulated firms had improved their understanding of and commitment to AML compliance.
Improvements to know-your-client
For example, in 2021, nearly one in ten (nine per cent) of the firms surveyed admitted to not verifying the identity of new individual customers. By May 2022, that figure had dropped to just one per cent. And, in 2021, 13 per cent of those surveyed said they either didn’t or weren’t sure if they had performed adequate know-your-client (KYC) checks on the owners or directors of new business customers. In 2022, that figure had more than halved to six per cent.
Meanwhile, the reliance on hard copy – and easily forged – documentation like passports or driving licences to identify new customers dropped from more than a quarter (28 per cent) of companies in 2021 to a less than a quarter (22 per cent) this year.
In general, AML compliance, and more recently the 2022 Russian sanctions, are weighing heavily on many regulated firms. I would like to see more firms make positive compliance moves in 2023 and make AML a top priority.
Electronic verification is key
One of the biggest data shifts was around the use of electronic verification (EV) to onboard and monitor customers. Using EV is the quickest and most effective way for regulated firms to reduce their risk of a compliance breach and its use is recommended in the 2020 Money Laundering and Terrorist Act.
In 2021, less than two-thirds (63 per cent) of the firms surveyed said they would consider switching to electronic verification. In 2022, 83 per cent of firms were considering the switch – an increase of more than 30 per cent.
As AML and sanctions compliance become more complex, and the government hands out an increasing number of fines for breaches, it’s encouraging to see a significant increase in the number of firms identifying EV as the quickest and most effective way to navigate the compliance minefield.
EV can carry out identity and sanctions checks on new and existing customers without the need for manual verification. EV solutions will save regulated firms time and money and help them to minimise the risk of breaking the rules.
Regulated firms must make compliance, AML and EV their 2023 new year’s resolution. Learning how to spot money laundering is one of the most effective ways to protect your company and its assets from illegal activity.
