West Midlands firms among the best at identity checks

New data has highlighted concern about regional differences in approach to customer verification.

Regulated businesses in the North East and East Anglia, including financial services and property firms, are least likely to verify the identity of new customers as part of their onboarding process – according to new research by leading registration technology firm SmartSearch.

Despite Financial Conduct Authority regulations stipulating all new customers in transactions such as property purchases need to have their identities verified, (to prevent financial fraud and money laundering), around 10 per cent of firms in these regions said they didn’t - and a further six per cent were unsure.

For the West Midlands it was 4.7 per cent.

Firms in the North East were also the least likely to verify the identities of people running companies when taking on business clients, with 21 per cent admitting to carrying out no checks. Although it was slightly higher in the South West at 21.7 per cent. The West Midlands was at 18.6 per cent.

The findings have been revealed as SmartSearch launches its Electronic Verification Uncovered campaign to highlight the dangers of relying on outdated, manual methods of ID checks. This includes reviewing hard copy documents such as driving licences and passports, which are so easily forged.

The survey of 500 regulated businesses in the UK highlighted some concerning issues around how they verify customer ID for individuals and businesses, which is the frontline in the fight against global money laundering.

But by carrying out checks via a digital online system the process becomes much quicker and ensures businesses comply with FCA regulations. In addition, electronic verification has been endorsed by the Government as a secure method to be adopted by regulated businesses.

Despite this, attitudes towards ID checks appear to vary considerably around the country with more than half (54 percent) of businesses in both the East and West Midlands saying they check ID manually, way above the national average of 34 per cent.

For businesses using manual verification methods, the most popular reason cited was that it was ‘a straight-forward process for the customer’ and that hard copy documents ‘provide reassurance that the customer is genuine’.

However, SmartSearch chief executive John Dobson said that far from providing reassurance, manual methods of verification are actually wide open for fraud and exploitation by organised crime.

“The property market has always been a prime target for criminals looking to launder dirty cash through legitimate channels, and since the outbreak of the coronavirus pandemic they have been looking to take advantage of many of the processes involved, which were previously done face-to-face.

“With the switch to sending scans of documents into firms such conveyancers, estate agents, brokers and banks, criminals have been able to create much more effective forgeries which are not being picked up.

“With electronic verification all that is required is a name, date of birth and an address, and the identity can be verified across global databases with a fully compliant report in a matter of seconds," explained Mr Dobson.