The flow of dirty money into emerging regulated firms is increasing, software firm SmartSearch has warned, with more than a third (36%) reporting a rise in the number of suspicious activity reports (SARs) they have submitted over the past six months.

SmartSearch has reported the figures following a comprehensive new survey of compliance decision-makers in crypto platforms, property developers, gambling firms, banks and challenger banks.

However, despite being targeted by criminals, the SmartSearch research found that many firms also admitted to continuing to rely on flawed manual checks to verify customers. Two in five respondents (40%) said they verified new individual and business clients manually – wrongly believing that taking copies of official documents like passports or driving licences provided “reassurance” that customers were genuine.

The proceeds of Crime Act requires regulated firms to submit a SAR to the National Crime Agency (NCA) if they believe that someone is trying to clean dirty money earned from the proceeds of crime. The number of SARs submitted has doubled in the last five years and the NCA has estimated that it will hit one million for the first time this year.

SmartSearch’s survey, based on 500 decision makers, showed that high-street betting shops are the most likely to have to deal with dirty money, with almost two thirds saying they’ve seen a rise in the number of SARs they have submitted.

Challenger banks were also targeted, with nearly half reporting an increase. An FCA review last year raised concerns over the adequacy of challenger banks’ defences against financial crimes.

“These figures are concerning because they show that there is no abatement in criminal attempts to wash dirty money through the UK economy,” said SmartSearch managing director Martin Cheek.
“Far from it - suspicious activity is clearly increasing.

“But that concern is compounded by the number of firms who also admit to a continued reliance on manual checks to onboard new customers. If these sectors are seeing a rise in suspicious activity, then their customer verification and anti-money laundering procedures should be as robust as possible. But our survey shows that they are not.

“These firms should be investing in a digital compliance solution to limit the risk of breaching compliance rules and having to deal with the considerable fines and reputational damage that come with such a breach.”

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