By: 21 November 2023
SmartSearch survey exposes risk

500 decision makers in regulated UK businesses, spanning legal, property, finance, and accountancy sectors, recently participated in a survey. It has revealed that 70% of regulated firms do not consistently complete essential identity checks for new individual customers.  

Only 46% of these firms often perform verification checks, while 21% only do so sometimes, either manually or electronically. Failure to conduct proper identity checks exposes organisations to financial crime, regulatory action, and reputational damage, warns compliance experts. 

Commissioned by SmartSearch, a leading UK provider of anti-money laundering (AML) and digital compliance solutions, the survey highlights a concerning trend.  

Despite regulatory mandates for conveyancers and estate agents to complete identity checks on property buyers, 75% of property firms and 70% of legal firms admit to not consistently performing such checks. Even with the obligation to check all clients’ identities, 3% of legal professionals and 1% of estate agents admit to never verifying identities.  

Among the sectors surveyed, accountancy firms are relatively more diligent. 32% stated that they always ask for proof of identity or run a check. 

The rise in identity fraud cases, reported by Cifas, adds urgency to the situation. Identity fraud has increased by almost a quarter last year. It constitutes nearly 70% of all cases in the National Fraud Database. Major regulators, including the Financial Conduct Authority (FCA) and the Solicitors Regulatory Authority (SRA), consistently take action against firms failing to conduct adequate identity checks. 

Martin Cheek, managing director of SmartSearch, emphasises the critical nature of identity verification. He states, “When a regulated firm is asked how often they verify the identity of customers, the answer should be always.” He advocates for a shift to electronic verification (EV), recommended by the 2020 Money Laundering and Terrorist Financing Act. EV, he argues, offers a robust, efficient, and cost-effective way to screen clients while avoiding regulatory intervention. 

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Emma Cockings
Emma is a content editor for Claims Media.