Just over a third (37%) of regulated firms have said they identify the ultimate beneficial owners (UBOs) at companies, a drop from more than half (53%) in 2023, SmartSearch has found/

The provider of anti-money laundering (AML) and digital compliance solutions said that this is despite the fact that all regulated firms are required under the UK’s AML regulations to determine the UBO of any business they have dealings with.

SmartSearch’s latest survey of 500 decision-makers across the legal, property, finance and accountancy sectors comes as criminals continue to hide behind complex corporate structures and shell companies to clean illegitimate funds through a seemingly legitimate business.

Without such checks, businesses face the risk of enabling this activity and the regulatory action and significant fines that comes with it.

The importance of UBO checks and know your business procedures has been amplified recently, as new research from Moody’s Analytics revealed that the UK is first in the world for shell company-related risks, with nearly five million red flags. This is considerably higher than China and the US in second and third respectively.

The survey also revealed that more than half (59%) of regulated firms questioned by SmartSearch said they do not always carry out these essential checks, despite the regulatory requirement to do so.

Among those firms, 40% said they 'often' identify the owners and directors of the business, rather than in every case.

Managing director at SmartSearch, Martin Cheek, said: "There’s no question that KYB processes can be the most complex part of compliance, but given the significant red flags businesses are exposed to, it is also one of the most critical.

"Given the clear requirements of regulators, advancements in technology can help streamline this process considerably and help firms complete such checks. Now is the time to take action to not only protect the business from serious financial crime, but prevent any intervention from the regulator.

"By implementing a digital compliance strategy, regulated firms can start to build a proper picture of the businesses they are working with and truly assess any risks posed."

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