Exclusive Insights: ID Checks Dominate Amidst Money Laundering Regulations

Our latest research has identified that ID checks significantly outstrip Politically Exposed Persons (PEPs) and Sanctions checks, despite the stringent Money Laundering Regulations.

The study which analyses the number of checks performed on the Credas platform, which surpassed 2.2 million registration in 2023, show that PEPs and Sanctions checks significant lagged behind ID checks by a ratio of 2:1. Only 50% of IDV checks conducted, were accompanied by a PEPs and Sanctions check despite this being a standard requirement.

In accordance with Money Laundering Regulations, businesses are mandated to conduct thorough customer due diligence to combat money laundering and economic crime. AML checks should include screening customers against PEPs and Sanctions lists as well as verifying claimed identities.

The UK government’s publication of the UK Sanctions List, reflecting individuals and entities subject to sanctions, witnessed a surge of 113 new designations in December 2023 alone. This marked an increase from the total of 800 designations in the 2022-23 financial year.

The lack of compliance when it comes to PEPS and Sanction checks, spans diverse sectors, from estate agents to law firms, where compliance is alarmingly low. A recent report by the Solicitors Regulation Authority (SRA), revealed significant lapses in compliance across law firms, with potentially severe consequences.

The cost of investigations, both in terms of monetary value and lost fee-earning time, poses a considerable risk for firms, particularly given the potential impact on an individual’s practicing certificate. The SRA introduced a new fixed penalty regime as part of broader reforms, enabling more effective and timely handling of lower-level breaches, with penalties of up to £1,500.

One reason for the disparity between ID checks and PEPs & Sanctions checks maybe the varied options available to firms, ranging from manual checks by checking the latest HM treasury list, conducting their own research through Google, or relying on information provided directly by their clients.

These are all valid methods but are time-consuming and hard to prove when asked if audited by the likes of the SRA or HMRC. Digital checks are low-cost, efficient, and help ensure a consistent approach. Firms should also consider relatives and close associates (RCAs) which are harder to identify through traditional manual checks.

How Credas can help

Our platform makes it simple for business to conduct ID and full AML checks at the same time. Our pre-built journeys combine these different components together to ensure indepth due diligence has been conducted without having to rely on manual intervention. In addition to this, we have recently launched Credas+, a new managed compliance service designed to alleviate the burden of manual AML remediation. The service provides a comprehensive solution, delivering pass or fail results, detailed compliance reports, and remediation evidence.

Credas+ enhances our offering by merging managed outsource compliance for PEPs, Sanctions, and IDV with our digital verification services. This innovative solution aims to streamline workload and reduce the administrative burden of compliance for organizations.

As a leading provider of digital compliance solutions, Credas has processed a staggering 2.3 million individuals through its platform in the past 12 months alone, equating to approximately 1 in 20 adults in the UK aged 18-65 within a year.