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18 January 2024

Nearly three quarters (73%) of regulated firms that take on new individual customers and business clients, have yet to start verifying the sources of their clients’ funds using open banking – a system that provides secure third-party access to financial data through an API (application programming interface).

More than one in five (21%) do not verify the source of funds at all, let alone manually, which more than a quarter (28%) do when reviewing bank statements. Nearly a quarter (24%) of respondents said they use a combination of manual review and open banking services.

These concerning figures are from a 2023 SmartSearch survey of 501 compliance decision-makers across regulated firms in accountancy, property, finance and legal services.

Fraser Mitchell, technical director of SmartSearch, said: “It’s surprising that regulated firms aren’t faster to adopt open banking, which would really speed up their compliance processes and help secure their business. Digital compliance platforms such as SmartSearch integrate source of funds checks, enabling firms to identify the origin of funds in just 60 seconds and with minimal input from the client. Rather than a complex, additional procedure, it becomes a standard part of client onboarding.”

Almost three quarters (70%) of accountants said they don’t use open banking for source of funds verification. 19% don’t verify the source of funds at all.

In the property industry, 72% of respondents don’t use open banking for automatic verification, while one in five (20%) fail to verify the source of funds at all.

Figures for 200 compliance decision-makers in financial services are no better, with 74% of people not using open banking services to verify the source of funds when onboarding new individual clients and businesses. Only four out of five (80%) verify the source of funds, with 30% manually reviewing bank statements.

Three quarters (75%) of compliance decision-makers in the legal sector said they do not verify sources of funds using open banking. 26% admitted to not checking the source of funds, even manually – which 28% of people said they did.

Collette Allen, chief operating officer (COO) at SmartSearch, said: “It’s concerning that so many firms aren’t checking bank accounts even manually. This is a high-risk approach, which could potentially put some of them in contravention of UK anti-money laundering laws.”

Through open banking technology, SmartSearch users can run checks for source of funds, proof of funds, source of wealth and source of income - either as part of a wider search or as a standalone check. The Proceeds of Crime Act requires regulated firms to submit a Suspicious Activity Report (SAR) to the National Crime Agency (NCA) if they believe that someone is trying to clean dirty money earned from the proceeds of crime.