Revealed: Rising threat of financial crime

Almost half (45 per cent) of regulated firms have seen a rise in criminals attempting to launder money or commit financial crime through their businesses in the last year, a new survey has revealed.

And more than one in ten (12 per cent) says it has been the victim of money laundering or financial crime in the past six months.

The findings sound a stark warning to regulated firms that organised criminals are increasingly active, and that the threat of financial crime is tangible.

They are revealed in a survey of 500 regulated UK businesses in the legal, property and banking and finance sectors by leading anti-money laundering (AML) software provider SmartSearch.

The warning comes as “dirty” money continues to flow into the UK economy. A damning report from the commons foreign affairs committee revealed that the government was still failing to tackle Russian kleptocrats who were laundering cash illegally through the UK – some of which was being used to finance Vladimir Putin’s invasion of Ukraine.

Meanwhile, the compliance fallout of the war – thousands of new sanctions against Putin, his associates and the Russian finance system - remain a stark reality.

Businesses in the East Midlands and Northern Ireland were the most likely to come under increased attacks from financial criminals – where 63 per cent and 71 per cent respectively of firms had seen a rise in illegal activity. But other regions were only slightly less vulnerable - up to or more than half of the regulated firms in Wales (56 per cent), Yorkshire (53 per cent) and the West Midlands (50 per cent) also had to deal with increased attempts at money laundering and financial crime.

Meanwhile, even in areas where firms were apparently least likely to find themselves under increased attack - the North East (33 per cent) and Scotland (37 per cent) – the issue still affected more than a third of those surveyed.

The size of companies was also a factor in their likelihood of being targeted. Firms of more than 500 employees were almost twice as likely (55 per cent) to see an increase in criminal activity compared to those with less than 50 people (28 per cent).

The businesses were questioned during May as part of SmartSearch’s continuing Electronic Verification Uncovered campaign, which argues that regulated businesses should use digital onboarding to ensure they effectively identify and screen clients.

Martin Cheek, managing director of SmartSearch, said of the findings: “Governments can warn about financial crime, but these results show the reality of its threat. Not only is it very real, but the criminals behind it are increasingly active. These statistics should ring alarm bells for all regulated businesses – especially those which continue to rely on manual checks to onboard new individual customers and businesses.”

Despite the increased threat of financial crime, up to a quarter of the surveyed firms admitted that they still carried out manual checks on hard-copy documents such as passports and utility bills. And a worrying 16 per cent of them were unaware of digital ID and digital AML solutions, despite electronic solutions being recommended in the 2020 Money Laundering and Terrorist Finance Act.

Mr Cheek added: “We know that organised crime gangs can easily make convincing forgeries of ID documents. Digital solutions remain the most effective way for regulated firms to remain compliant, as well as avoiding the fines and reputational damage which breaches of the regulations can bring.

“Money laundering often involves the proceeds of the misery caused by some of the world’s worst crimes. These findings clearly show that investing in robust and ongoing electronic verification is the smartest way to help to prevent those crimes - and to keep regulated firms compliant.”

For more information please visit: www.smartsearch.com