Finance firms failing to detect criminal “ghosts”



Almost half of finance and banking firms are failing to carry out crucial checks on new business customers to detect organised criminals, new research has found.

A survey of 500 regulated companies in the property, finance, banking and legal sectors, commissioned by anti-money laundering platform SmartSearch, found that 45 per cent are failing to undertake “ghost-buster” checks on new clients.

“Ghost” firms are false entities created as part of a corporate infrastructure to hide the real recipients of money laundering activity.

Read more: ComplyAdvantage launches tool to weed out sanctioned customers

SmartSearch said that many of these criminals can escape detection if regulated firms fail to carry out ultimate beneficial owner (UBO) checks as part of their due diligence on new business customers.

Furthermore, 25 per cent of firms surveyed said they did not always carry out any verification checks at all on the owners or directors of new business customers.

Organised criminals are believed to be responsible for laundering £88bn of money every year in the UK, according to SmartSearch, the second-highest amount in the world.

Read more: AML fines drop as regulators turn their attention to crypto

“Not only are these omissions risking fines and reputational damage to the firms involved, but they are also creating an open invitation to criminals to dirty the UK’s economy with the financial proceeds of their miserable crimes,” said Martin Cheek, managing director of SmartSearch.

“Regulated firms are legally obliged to identify UBOs as part of their compliance responsibilities and being able to check for them is a vital part of crime risk management and prevention for compliant businesses.”

Read more: Remote working ‘increasing risk of financial crime’

The 500 firms were surveyed during May as part of SmartSearch’s continuing Electronic Verification Uncovered campaign, which argues that regulated businesses should use digital onboarding to ensure they effectively identify and screen clients.