Half of Regulated Firms See Pandemic Spike in Financial Crime

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Around half of firms in the financial services, property and legal sectors have reported rising levels of financial crime over the past 12 months, according to new data from SmartSearch.

The anti-money laundering (AML) specialist polled 500 regulated businesses in the UK to better understand the levels of risk facing players in each vertical.

Overall, 48% of respondents said they’d seen a rise in financial crime, and a quarter (26%) admitted they’d been a victim of attacks.

Legal firms, including conveyancers, experienced the most significant number of compromises, with a third (33%) saying they had been a victim of financial crime.

The sector is an increasingly attractive target for both state-backed and financially motivated cyber-criminals, given the wealth of sensitive client information that legal practices typically hold.

However, while the threat from external actors is certainly acute, separate research earlier this year revealed that most breaches reported to regulator the Information Commissioner’s Office (ICO) come from negligent insiders.

The SmartSearch study also revealed variations across different regions of the UK. For example, almost two-thirds (64%) of regulated businesses in the East Midlands reported a rise in fraud attempts, versus 55% in London.

SmartSearch CEO John Dobson argued that the rush to adapt to new business practices during the pandemic may have exposed some organizations to a rise in financial crime and money laundering.

In particular, crucial Know Your Customer (KYC) checks and other due diligence processes required by AML regulations became harder as face-to-face meetings were banned.

The Money Laundering and Terrorist Finance Act introduced in September gave the green light for firms to streamline these processes via digital verification. Yet 13% of those SmartSearch spoke to aren’t even aware of the changes.

“There’s no doubt the conditions since the outbreak of coronavirus have been ripe for criminals to seize the opportunity for money laundering and other fraudulent activities in the property market,” argued Dobson.

“The message for regulated business that comes out of these findings is that switching to electronic verification is the smart thing to do, providing confidence through automated perpetual KYC processes. If the country is on the brink of another lockdown this winter, it is vital that businesses are not caught out by not having the right tools to avoid business disruption.”

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