Legal sector compliance plummets, data reveals

Only a quarter of regulated firms always check new customers against sanctions or Politically Exposed Person (PEP) lists. This is according to new survey data from leading anti-money laundering (AML) and digital compliance firm, SmartSearch.

This data reveals a significant retreat from last year, where 73 per cent of firms upheld strict screening procedures. This “backslide” is particularly alarming given the recent global geopolitical tensions between the West and China. They echo the lessons from last year’s sudden raft of sanctions against Russia.

This survey encapsulates 500 compliance decision-makers across various sectors.

The UK government estimates that money laundering costs the UK economy more than £100 billion each year. The International Monetary Fund (IMF) estimate that financial crime equates to a staggering two to five per cent of global gross domestic product.

The legal sector, which previously led with 84 per cent committed to always performing checks, has now plummeted to 24 per cent in 2023. The financial services sector has also seen a stark decline, from 66 per cent to 22 per cent. Commenting on the survey data Martin Cheek, managing director of SmartSearch said: “The backslide in this year’s data underlines a worrying theme of complacency on compliance. Sanctions are not a static list, they are a dynamic and rapidly evolving tool of foreign policy. Firms that think occasional checks are sufficient are not just naïve, they’re risking severe penalties, including substantial fines.

Collette Allen, COO, stresses the importance of robust digital compliance, “The speed at which sanctions can be imposed can catch firms off guard. It is crucial that regulated firms are proactive rather than reactive when it comes to their digital compliance.

“Our recent survey data shows that firms are still not taking adequate steps to ensure they are not dealing with sanctioned individuals or entities. It is simply not enough to have screened a client ‘sometimes’ or ‘often’ and assume the job is done.”

Image: © Towfiqu barbhuiya via Canva

Emma Cockings Emma is a content editor for Claims Media. Emma is a experienced writer with a background in client-centric personal injury for a major firm. She has attended and reported on multiple brokerage events throughout her career.