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Regulated Firms Neglecting Critical Business Verification Checks, Finds SmartSearch

The latest survey from digital compliance specialists SmartSearch has revealed that firms do not always complete verification checks when taking on new business clients. Over half of the firms questioned admitted to skipping this critical step despite the clear regulatory requirement to do so.

Property firms, including estate agents are most likely to skip this critical step, with 65 per cent of firms admitting they do not always carry out verification checks on new business clients. The remaining firms across the legal, finance and accountancy sectors all reported similar results, with around 58 per cent of respondents not always verifying identities.

The same survey also found that as part of checks, only 37 per cent of regulated firms actually identify the ultimate beneficial owners (UBOs) – a drop from more than half (53 per cent) in the previous year’s survey. This is despite the fact that all regulated firms are required under the UK’s anti-money laundering (AML) regulations to determine the ultimate beneficial owner of any business they have dealings with.

Time to take action

Martin Cheek, managing director of SmartSearch and a qualified lawyer, 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.”

The importance of UBO checks and robust Know Your Business (KYB) procedures has been amplified recently, as new research from Moody’s Analytics revealed that the UK is number one in the world for shell company-related risks, with nearly five million red flags. This is considerably higher than China, in second place, and the United States in third.


  • Polly is a journalist, content creator and general opinion holder from North Wales. She has written for a number of publications, usually hovering around the topics of fintech, tech, lifestyle and body positivity.

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