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A truly incredible year

red flag fraud

Martin Cheek is managing director at SmartSearch 

In terms of the anti-money laundering (AML) landscape and digital fraud, it has been a truly incredible year, for all the wrong reasons.

The human cost is what we will all rightly remember from this time. But nobody had experienced the kind of disruption to business we saw practically overnight from the moment Boris Johnson made the announcement on March 23 last year.

Sadly, among the first to respond to the developing global crisis was organised crime and fraudsters who identified an opportunity to increase their activity, due to gaps in security that were opening up.

As the majority of office-based workers were ordered to set up from home, it wasn’t long before it became obvious that some of the due diligence processes for onboarding new customers were just not feasible.

Manually checking a person’s ID up until then had consisted of inviting them into your office with a copy of their passport, or similar, for a face-to-face verification. That was replaced with asking new customers to email a selfie photo with them holding their passport in some cases.

This was wide open for abuse as criminals took advantage of an overwhelmed system and could easily forge documents and manipulate images. As a result, money laundering attempts in the property market, always a key target for criminals, soared.

However, as is often the case in times of crisis, there have been some changes made out of necessity which have been positive for the sector and will stay in place for the better beyond this pandemic.

For example, shifting to electronic methods of customer verification has been the single most positive thing to come out of the past 12 months in terms of AML.

The push towards using digital rather than manual methods of verification was effectively endorsed by the government when it published its amendment to the Money Laundering and Terrorist Finance Regulations in September, clarifying its position.

This is a key step forward for regulated businesses operating in the property sector as the shift to digital has been long overdue, and it means there is no longer any need to handle hard copy documents.

The coronavirus crisis has certainly accelerated that shift to digital. Looking back it may be seen as a turning point for introducing better due diligence, more efficient and secure systems, and a far more effective way of ensuring your customer is who they say they are.

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