Tech series: Taking the pain out of money laundering compliance

Tech series: Taking the pain out of money laundering compliance

SmartSearch CEO John Dobson explains how his platform can make compliance with money laundering regulations more efficient, less costly and more accurate - and it is already winning recognition

Tech series: Taking the pain out of money laundering compliance

Can you tell us a bit about SmartSearch, and how it came about?

Compliance with the Money Laundering Regulations can be hugely burdensome, and most regulated firms do not have the skills, knowledge or resources to develop their own solutions in-house.

This means they were being forced to rely on a mixture of external resources and internal processes to meet all their AML obligations. Not only is this approach time consuming, but it is also inefficient, open to errors and costly.

We could see there was a desperate need for a simple and affordable ‘single’ solution, so we developed an electronic AML platform that could offer a one-stop-solution for identity checks, AML compliance and due diligence, as well as full sanction and PEP screening.

We also developed a unique ongoing monitoring service which means that our customers only have to enter their clients’ details once, and then not think about it again, because they will be alerted if that individual or business’s status changes.

We have also developed several apps which allow clients to undertake checks remotely, particularly useful for accountants who will often be off-site with customers.

What is your background in business before SmartSearch?

I have been a founding shareholder and director of four businesses to date – the previous business Callcredit became the largest and this was sold to Trans Union last year for £1 billion.

I have always had a deep involvement with data, databases and the intelligence they can provide, and this has been applied to applications that have covered sales and marketing, credit referencing and most recently anti-money laundering compliance and sanction & PEP due diligence.

Can you explain a bit about how it works?

SmartSearch uses the best data sources to create a system that can cross-check and verify the identities of individuals, companies, international businesses, beneficial owners, directors, PLCs, and a whole range of other entities, all in a single platform. It takes a matter of seconds to perform a search and the results appear in a single report.

Our principal data partners are Experian, Equifax, Dow Jones and Companies House; these top-quality data partners fuel our platform ensuring we have the best “match and pass rate” in the market.

In the past, regulated firms would have had to use documents such as passports, driving licenses and utility bills and multiple software platforms to verify the identity of their individual clients. Then they would have to undertake separate sanction and PEP screening.

With SmartSearch, they can verify their clients electronically in a matter of seconds.  We also provide ongoing monitoring, which means that if a firm’s client’s status changes, they will be automatically alerted.

Firms only need to enter their client’s details into the system once – they will then be monitored. Most clients use SmartSearch as a standalone platform, but we can also integrate SmartSearch with their existing systems.

How have you made it easy to use?

We wanted our customers to be able to perform AML checks as quickly and easily as possible, so the platform has been developed with user-friendliness and ease of use at the top of the agenda. Its simple interface means all levels of staff can run AML checks successfully. Our clients’ customers no longer need to provide identity documents, as all checks can be done with their name, address, and date of birth. This saves considerable time.

And, once this information is entered, it takes just a few seconds to deliver an outcome while a complete business check is equally impressive at two minutes.  SmartAML – our fully integrated app – also makes it easy for our customers to do real-time identity checks when they are out and about without having to worry about taking copies of clients’ documents.

Do you have any competitors on the market yet? How does your product stand apart?

Most of our competitors operate their AML services as an ‘add-on’ to their existing main service offerings, typically giving them less time for innovation and customer care.  As a result, we’ve fast become the electronic AML solution of choice. We have more than 3,500 clients including one in three of the UK’s top accountancy practices. In the past five years alone, staff numbers at SmartSearch have more than doubled while turnover has increased ten-fold.

But despite our rapid growth, we only work with a small proportion of the market and that is because most regulated businesses are still taking a traditional approach to AML and relying on manual checks.

But fraudulent documents, such as passports and driving licences used by money launderers are now so sophisticated, manual checks are failing to spot the fakes.  The 5th money laundering directive already stipulates electronic checks should be used where possible and will most likely make electronic checks compulsory by 2020.

What are the advantages of using it?

It takes a minimum of 15 minutes to complete a manual individual check and around an hour for a business check once you have all the customer documents in your possession. SmartSearch can complete a business check in under two minutes and an individual check in two seconds, so not only offers clients peace of mind that they’re meeting all their AML and compliance obligations but saves them a significant amount of time and money.

Plus, these checks only need to be done once, as our ongoing monitoring and highly intelligent algorithms identify any changes. This also significantly reduces false positives.

The other unique advantage is that all customers have access to the same system, which is constantly being improved and updated to ensure it complies with all the latest anti-money laundering regulations and Proceeds of Crime Act. This means that all users always have access to the very latest version of the platform, making legacy systems a thing of the past.

When manual document checks are performed, it is not practical and very unlikely that similar manual sanction & PEP checks are performed at all or on a regular basis.

How do accountants fit into the picture with SmartSearch?

“Some practices cut corners, but it is a dangerous game to play.”

As they work in a regulated sector, accountants must comply with anti-money laundering regulations – non-compliance is not an option. HMRC recently clamped down on estate agents, hitting Countrywide with a record fine of £215,000 for failing to ensure its money laundering procedures and record-keeping were in line with regulations, and accountants could be the next target. Between June and July 2018, Bradford-based Delta Tax Agents Ltd was hit with a £5,991.85 penalty after HMRC found breaches in carrying out risk assessments and EZI Tax Ltd received a £500 fine for failing to provide requested information. Plus, the accountancy sector recently came under the spotlight after a report from the Office for Professional Body Anti-Money Laundering Supervision (OPBAS) found that professional accountancy bodies are failing to ensure that their members are doing all they can to prevent money laundering.

According to the report, accountancy associations are worried that if they take enforcement action against their members for money-laundering failings, they might leave.

Manual anti-money laundering procedures are time consuming and expensive so some practices cut corners, particularly if they don’t think money laundering is an issue, or they don’t want to upset their clients. But it is a dangerous game to play and now, with complete solutions like SmartSearch, there is no reason not to comply.

Who are your clients?

We work with all regulated businesses, which includes accountancy firms, law firms, property firms and estate agents, IFAs, banks, building societies, stockbrokers and Money Services Businesses.

We currently work with one in three of the top UK accountancy firms and our customer base is growing all the time.

What other innovations can we expect to see in the future in this technology space?

Technology is changing all the time, AI and facial recognition are two of the buzz words floating around many industries at the moment, based on our research to date we believe these types of solutions are still several years away from providing a reliable and consistent outcome.

My advice is invest in a system that continually keeps pace with both changes in regulation and developments in technology, and if you can, select a provider that funds such future developments like SmartSearch.

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