A recent survey by SmartSearch, a leader in UK digital compliance solutions, has unveiled a startling trend among regulated firms.
According to IFA Magazine, the data indicates a drastic reduction in sanctions screening, with only 25% of firms consistently checking new customers against sanctions or Politically Exposed Person (PEP) lists. This figure represents a significant decline from last year’s 73%, highlighting a worrying trend of complacency in compliance practices.
The survey, which involved 500 compliance decision-makers from various sectors including financial services, estate agents, and legal firms, suggests that many firms are underprepared for swift compliance actions. The declining diligence in screening practices is particularly concerning given the recent global geopolitical tensions and the dynamic nature of sanctions.
The UK government and the International Monetary Fund (IMF) have underscored the severe economic impact of money laundering and financial crime, with the UK economy suffering over £100bn in losses annually. The IMF estimates global losses due to financial crime to be between 2-5% of the global GDP.
A notable decline has been observed in the legal sector, previously leading with an 84% commitment to consistent checks, now reduced to 24% in 2023. The financial services sector has seen a decline from 66% to 22%, and estate agents from 37% to 24%.
Martin Cheek, Managing Director of SmartSearch, commented on the findings, saying, “The backslide in this year’s data underlines a worrying theme of complacency on compliance. Sanctions are not a static list, they are a dynamic and rapidly evolving tool of foreign policy. Firms that think occasional checks are sufficient are not just naïve, they’re risking severe penalties, including substantial fines.”
Colette Allen, COO, emphasized the need for robust digital compliance, stating, “The speed at which sanctions can be imposed can catch firms off guard. It is crucial that regulated firms are proactive rather than reactive when it comes to their digital compliance.”
The survey findings serve as a call to action for regulated firms to enhance their compliance processes. The adoption of Electronic Verification (EV), as recommended by the 2020 Money Laundering and Terrorist Finance Act, is a step towards more effective and reliable risk assessments.
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