Regulated firms at breaking point amid increased regulatory and budget pressures

Regulated firms at breaking point amid increased regulatory and budget pressures, according to experts at SmartSearch.

Firms must relinquish outdated and time-consuming compliance processes in light of tighter budgets and increasing regulatory burden, digital compliance experts at SmartSearch have warned.

Collette Allen, a leading compliance expert and COO of SmartSearch, argues that regulated firms need to modernise their approach to compliance to not only relieve growing regulatory pressures, but to maximise available resources. She highlights growing sentiment among regulated firms, who say that they are having to do much more but with less budget.

A report last year from Thomson Reuters found that the majority of financial services firms expected an increase in regulatory activity. Yet at the same, many respondents reported managing cost pressures and balancing compliance demands as key challenges.

Separate to compliance with anti-money laundering (AML) rules, KPMG’s Regulatory Barometer also revealed increasing scrutiny around ESG, sustainable finance and payment systems. The barometer shows growing pressures on financial services firms as rules continue to become more ‘UK-centric’ post-Brexit.           

Collette Allen

Collette Allen, COO of SmartSearch, said:

“There is no question that UK regulated firms continue to face significant pressure.

“Recent findings certainly mirror the feedback we are hearing on the ground – firms are at breaking point as compliance demands only increase, leading to difficulties when it comes to allocating resources effectively and keeping up with the evolving requirements.

“In truth, many firms have been slow to adopt a digital compliance strategy and instead maintain time-consuming and resource-heavy manual checks, particularly in their AML processes.

“Such checks help drive up the cost of doing business, and in the case of these critical compliance checks, expose the business to a higher risk of financial crime.

“Firms that have integrated technology are able to automate and strengthen what were onerous compliance tasks, such as identity verification, sanction screening and source of funds checks.

“Allowing technology to do much of the heavy lifting helps minimise human error and utilise staff and resources much more effectively.”

A recent survey conducted by SmartSearch found that nearly half of regulated firms (48%) across legal, finance, property and accountancy sectors still use manual checks in some way to verify a customer’s identity. More than a third (34%) said they use manual verification methods because it is the only way to “truly guarantee” a person’s identity. This is despite the fact that electronic verification (EV) is recommended by the 2020 Money Laundering and Terrorist Financing Act.

SmartSearch’s next-generation digital compliance platform supports more than 6,500 clients and 60,000 users. It combines EV with robust sanction screening, source of funds and real-time monitoring to complete detailed customer checks in seconds. This enables regulated firms to comply with AML regulations and fulfil Customer Due Diligence and Know Your Customer (KYC) requirements.

Across its client base, SmartSearch directly supports more than 2,000 financial services firms, more than 1,000 property firms, one in three of the UK’s top 200 law firms and one in two of the top 100 accountancy firms.

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