With fines for failures in anti-money laundering have been increasing, firms need to move from manual to digital ID verification to help keep themselves compliant, says John Dobson, CEO, SmartSearch.
If there needed to be a wake-up call for regulated businesses on the importance of anti-money laundering procedures, the $1 billion worth of fines levied in the first-half of 2021 should focus the mind.
These fines are from global regulators which are continuing to fine companies for anti-money laundering failings at an alarmingly high rate, particularly in the UK and EU. Watchdogs are heaping pressure on the financial industry to strengthen its defences against fraud and money-laundering.
The huge fines suggests that financial watchdogs are baring their teeth when it comes to the issue of money-laundering and regulated businesses need to take note. The fact that the Financial Conduct Authority (FCA) is pursuing a criminal case against NatWest in the UK is evidence that these failings will no longer be tolerated.
But it also suggests there are still a significant number of businesses that, for whatever reason, simply do not understand their role in the fight against fraud and global money laundering, particularly in the property sector and related financial services.
The fines mainly relate to shortcomings in AML management, inadequate suspicious activity monitoring and customer due diligence when onboarding new customers.
What this suggests is that too many businesses are still relying on ineffective, manual methods of ID verification, which are prone to these kinds of failings.
Outdated methods leaving businesses exposed
The level of sophistication of forgeries now makes them almost impossible to detect with the naked eye. It takes a trained expert to even know the signs to look for, and even then, there are some forgeries that are indistinguishable from the real thing.
These forgeries are no longer the work of master criminals, anyone with rudimentary photo-editing skills can digitally alter a photo of ID, bank statement, payslip or utility bill that will easily by-pass the eye-test.
Therefore, those relying on just a visual examination are leaving themselves woefully exposed.
Using manual documents not only runs the risk of a forgery slipping through the net, but it is also incredibly time consuming. Having to request a client to send a selfie, wait for them to share it, then analyse the image against the ID is all time that is wasted for the business.
Electronic verification negates the need for requesting a physical document, or an image of the document. With just a name, address and date of birth, the latest technology can combine credit reference data, biometric facial recognition, and digital fraud checks as well as electoral roll data and other reliable public sources to establish identity.
By triple checking these different sources of information a unique ‘composite digital identity’ is produced. This digital identity is virtually impossible to fake. All this can be done online, with no need for in-person meetings or hard copies of documents.
Regulating authorities, here and around the world, are putting more pressure on financial services firms to bolster their defences against the surge in financial crime since the outbreak of the pandemic. Realistically the only way to do that is to switch to a digital ID verification system where tasks like suspicious activity reporting and due diligence are automated and carried out in seconds across global data bases.
Businesses need to make that switch to a digital smartsearch if they want to see an end to spiralling fines and the threat of prosecution.