Regulated Companies Are Ignoring Important Business Verification Processes, According to SmartSearch

According to the most recent survey conducted by digital compliance experts SmartSearch, businesses don't always carry out verification checks before hiring new clients. Despite the obvious legal obligation to take this crucial step, more than half of the companies surveyed acknowledged omitting it.

Maurine Lind

March 20, 2024

1Min Read

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Wealth

Property companies, which include estate agents, are most likely to omit this crucial step; according to 65% of enterprises, they don't always verify new business clients. Similar findings were reported by the remaining organizations in the accounting, finance, and legal sectors; approximately 58% of respondents did not always check IDs.

According to the same poll, just 37% of regulated firms genuinely identify the ultimate beneficial owners (UBOs) as part of checks; this is a decrease from 53% of regulated firms in the previous year's survey. This is true even though, in order to comply with UK anti-money laundering (AML) legislation, all regulated enterprises must identify the ultimate beneficial owner of each entity with whom they do business.

It's time to act.

"There's no question that KYB processes can be the most complex part of compliance, but given the significant red flags businesses are exposed to, it is also one of the most critical," stated Martin Cheek, managing director of SmartSearch and a licensed attorney. Technological developments can greatly expedite this process and assist businesses in completing these inspections, especially considering the explicit needs of regulators. Now is the moment to act to shield the company from major financial crimes and to keep the regulator from getting involved.

"Regulated firms can begin to build a proper picture of the businesses they are working with and truly assess any risks posed by implementing a digital compliance strategy."

The significance of doing thorough Know Your Business (KYB) procedures and UBO checks has increased recently due to new research from Moody's Analytics showing that the UK has around five million red flags relating to shell companies, ranking first in the world. Compared to the United States in third place and China in second place, this is significantly higher.