Half of regulated firms still rely on manual verification

This is despite a growing number of identity fraud

Half of regulated firms still rely on manual verification

Nearly one in every two regulated firms still use hard documents like passports, IDs, and utility bills to verify new business customers despite more than 83% being aware of digital systems for electronic verification (EV).

This was revealed in the latest survey of 500 regulated businesses across the UK, conducted by anti-money laundering (AML) software provider SmartSearch, as part of its Electronic Verification Uncovered campaign.

It was found that around two in three regulated firms believe hard copy documents provide reassurance a customer is genuine.

The survey, which covered businesses across legal, property, banking, and finance sectors, identified the North East and the East of England as hotspots with more than 40% of firms relying on manual verification alone.

SmartSearch said the same number of regulated firms in the South East believe manual verification is the only way to truly guarantee a person’s identification, despite concerns of authenticity.

In 2020, there was a 41% increase in ID fraud, generating losses of almost £610 billion.

The AML software provider also previously reported that firms are starting to feel the growing weight of compliance around anti-money laundering and sanction regulations amid a sharp increase in the number of companies fined by regulators for breaches of the rules.

Read more: Majority of regulated firms planning switch to electronic verification – report.

“With the number of fakes and forged documents rising, no doubt helped by criminals looking to circumvent growing sanctions, the latest data should sound alarm bells to businesses who wrongly believe hard copies are secure,” Martin Cheek (pictured), managing director of SmartSearch, commented. “This reliance on flawed manual checks is even more worrying as our data reveals many businesses are not confident enough to spot a fake.

“If there is ever been a case for switching to a digital system and adopting electronic verification, now is certainly the time.”

SmartSearch stressed that automated AML systems offer the certainty of EV, allowing users to complete thorough checks in just a matter of seconds. These can be completed as part of onboarding or while retro-screening existing customers, meeting the necessary Know Your Customer (KYC) requirements.

As global sanctions increase, these automated systems can even offer automatic monitoring and high-risk country reporting. This allows users to immediately identify both new and existing clients who are now subject to sanctions, or even regarded as a politically exposed person (PEP).

“Going digital and improving compliance must move higher up the agenda for businesses, especially in the current climate,” Cheek added. “Even if it is not for sake of efficiency, but as regulators continue their crackdown and the number of hefty fines increase.”