Over 90% of regulated firms don’t conduct daily client monitoring

More than nine in 10 (92%) regulated firms do not carry out daily monitoring on clients, which potentially exposes them to sanction breaches and financial crime, SmartSearch has found.

Under UK law, regulated firms must identify and verify anyone they work with, to ensure they don’t unknowingly become involved with a person or business under sanctions or with a history of financial crime, such as money laundering.

SmartSearch said that this "alarmingly high figure" of 92%, which is newly released from its September 2023 survey of more than 500 compliance decision-makers, is up by 8% compared to the 2022 annual survey.

Of the regulated firms surveyed, which include financial, legal, property and accountancy businesses, the property sector was found to be at greatest risk, with 95% of firms not conducting daily checks.

This was followed by 94% of finance forms, which could be exposed to a breach of financial sanctions by not conducting daily customer due diligence, up by 6% from 88% in 2022.

In joint third place are accountancy and legal firms, of which 88% are elevating their risk to financial crime by not performing checks on their clients.

Managing director at SmartSearch, Martin Cheek, said: "The rising sophistication of financial crime coupled with increasing regulatory pressure can be overwhelming for firms. Everyone is so busy that it can be a real challenge for firms to comply with the law while mitigating financial and reputational risk for them and their clients.

"People in regulated businesses are genuinely worried that a breach of financial sanctions could be considered a criminal offence worth seven years in prison. A simple solution is to switch to electronic verification and adopt a perpetual KYC (know your customer) model to support daily customer due diligence.

"A KYC approach utilises real-time data and intelligence, including robust sanctions and politically exposed person screenings to build a complete picture of client, which is constantly updated. This way, the risk level that an individual client or business might pose to a firm is continuously assessed, with any anomalies flagged. These advancements have been a key driver in the shift by many firms to a digital compliance strategy."

Share Story:

Recent Stories

Helping landlords make their cash work harder
MoneyAge Editor, Adam Cadle, talks to Family Building Society BDMs, Arif Kara and Nathan Waller, about the resilient BTL market, the wide variety of landlords that Family Building Society caters for, and how niche products like an Offset mortgage can help improve cashflow.

An outlook on the BTL market
MoneyAge Editor, Adam Cadle, talks to Landbay senior regional account manager, Alex Witham, about current market sentiment within the BTL space and Landbay’s success in this area

Empowering advisers: A decade of education in Later Life Lending with Air Academy
Michael Griffiths is joined by chairman of Air Club and former founder and CEO of Air, Stuart Wilson, and head of the Air Academy, Daniel Holden, to look back on a decade of business focused learning at the Air Academy.


Subscribe to our newsletter to receive breaking news and other industry announcements by email.

  Please tick here to confirm you are happy to receive third party promotions from carefully selected partners.