A SmartSearch survey of regulated firms, including law firms, has found that three-quarters of the law firms surveyed fail to verify the source of funds or adopt open banking practices.
Compliance experts warn that firms that do not verify the source of funds could be in contravention of UK anti-money laundering rules, urging firms to speed up and sure up their compliance processes with developments such as open banking.
The survey results are shown in the media release below –
73% regulated firms failing to adopt open banking – or even verify source of funds manually
Nearly three quarters (73%) of regulated firms that take on new individual customers and business clients, have yet to start verifying the sources of their clients’ funds using open banking – a system that provides secure third-party access to financial data through an API (application programming interface).
More than one in five (21%) do not verify the source of funds at all, let alone manually, which more than a quarter (28%) do when reviewing bank statements. Nearly a quarter (24%) of respondents said they use a combination of manual review and open banking services.
These concerning figures are from a 2023 SmartSearch survey of 501 compliance decision-makers across regulated firms in accountancy, property, finance and legal services.
Fraser Mitchell, technical director of SmartSearch, said: “It’s surprising that regulated firms aren’t faster to adopt open banking, which would really speed up their compliance processes and help secure their business. Digital compliance platforms such as SmartSearch integrate source of funds checks, enabling firms to identify the origin of funds in just 60 seconds and with minimal input from the client. Rather than a complex, additional procedure, it becomes a standard part of client onboarding.”
Almost three quarters (70%) of accountants said they don’t use open banking for source of funds verification. 19% don’t verify the source of funds at all.
In the property industry, 72% of respondents don’t use open banking for automatic verification, while one in five (20%) fail to verify the source of funds at all.
Figures for 200 compliance decision-makers in financial services are no better, with 74% of people not using open banking services to verify the source of funds when onboarding new individual clients and businesses. Only four out of five (80%) verify the source of funds, with 30% manually reviewing bank statements.
Three quarters (75%) of compliance decision-makers in the legal sector said they do not verify sources of funds using open banking. 26% admitted to not checking the source of funds, even manually – which 28% of people said they did.
Collette Allen, chief operating officer (COO) at SmartSearch, said: “It’s concerning that so many firms aren’t checking bank accounts even manually. This is a high-risk approach, which could potentially put some of them in contravention of UK anti-money laundering laws.”
Through open banking technology, SmartSearch users can run checks for source of funds, proof of funds, source of wealth and source of income – either as part of a wider search or as a standalone check. The Proceeds of Crime Act requires regulated firms to submit a Suspicious Activity Report (SAR) to the National Crime Agency (NCA) if they believe that someone is trying to clean dirty money earned from the proceeds of crime.
About the survey
In September 2023, Censuswide surveyed 501 compliance decision-makers who take on new individual customers and new business clients. Censuswide abide by and employ members of the Market Research Society, which is based on the ESOMAR principles. They are members of The British Polling Council.
SmartSearch’s latest annual EV Uncovered campaign follows the launch of SmartSearch’s next-generation technology platform, continuing a decade-long journey supporting regulated firms with their anti-money laundering (AML) compliance.
About SmartSearch
SmartSearch is a leading UK provider of anti-money-laundering (AML) software. Its AML verification platform conducts individual and business searches, both for the UK and international markets with automatic worldwide sanction and PEP screening.
SmartSearch distinguishes itself in the UK with the ability to verify individuals and companies in the UK and internationally all in a single platform via a browser or API, with full Sanction, PEP, UBO, and adverse media screening, and then ongoing monitoring.
Headquartered in Ilkley, West Yorkshire, SmartSearch’s very latest technology delivers an unrivalled user experience to around 6,500 client firms and 60,000 users, enabling them to comply with the latest AML regulations and fulfil their AML, Customer Due Diligence (CDD), and Know Your Customer (KYC) compliance obligations.
With no requirement for clients to provide identity documents, SmartSearch’s automated verification approach is significantly more convenient for both users and their end customers, with individual AML checks taking two seconds from start to finish, while business checks take fewer than three minutes.
