Over two thirds of firms don’t carry out customer identity checks

More than two thirds (70%) of regulated firms do not always complete essential identity checks when taking on new individual customers, data from SmartSearch has revealed.

In a survey of 500 UK compliance decision-makers by Censuswide, SmartSearch also found that 46% of regulated firms ‘often’ complete verification checks, while 21% of regulated firms only ‘sometimes’ complete verification checks, either manually or electronically.

Compliance experts have warned that without proper identity checks of all customers, organisations are leaving themselves exposed to financial crime, regulatory action and reputational damage.

Despite the clear mandate for conveyancers and estate agents to complete identity checks on property buyers, three quarters (75%) of property firms and 70% of legal firms admitted they do not always complete these checks.

Furthermore, 3% of legal professionals and 1% of estate agents said they never verify the identity of their clients. Accountancy firms are the most likely to ask for proof of identity or run a check, but only 32% of firms said they always carry out the checks.

It comes as the latest report from Cifas found that cases of identity fraud rose by almost a quarter last year, and now accounts for nearly 70% of all cases filed to its national fraud database.

Managing director at SmartSearch, Martin Cheek, said: "When a regulated firm is asked how often they verify the identity of customers, the answer should be always. Not only is it a clear regulatory requirement to complete such checks, it is critical in protecting the business from financial crime. Rather than a worrying reduction in checks, regulated firms should be increasing checks in line with the rising threat level.

"Just as important is the shift to electronic verification (EV) as criminals continue to find new ways to falsify official identity documents. Such is the risk of forged documentation, a switch to EV is even recommended by the 2020 Money Laundering and Terrorist Financing Act. Rather than flawed and time-consuming manual processes, EV presents a robust, efficient and cost-effective way to screen both new and existing clients – all while avoiding intervention from regulators."

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