There has been a proliferation of companies promoting services under the label ‘electronic ID’ (e-ID), promising a one-stop shop for 'all your AML and compliance needs’. These solutions will match your client’s name and address to information in credit reporting databases and flag if they are a Politically Exposed Person (PEP). However, when it comes to conveyancing, where ID sits alongside more nuanced AML verification (source of funds/wealth), e-ID covers a fraction of what is actually needed to reliably confirm your client is who they say they are and provide enough information to satisfy true AML compliance.
Conveyancing is notoriously high risk - a mid-sized firm completing 150 transactions a month could have as much as £400 million passing through its client account annually. It is widely accepted that property has too often been a safe harbour for criminal organisations, described by security minister Ben Wallace as the ‘weak link’ in the UK’s money laundering defences. Hence regulators are ratcheting up the pressure with both the Solicitors Regulation Authority (SRA) and Council for Licensed Conveyancers (CLC) firing a pre-5MLD warning shot and carrying out nationwide investigations with conclusive findings. The CLC reported two-thirds of firms as non-compliant and over 20% of SRA firms failed to have sufficient AML processes in place.
How do e-ID providers help with AML checks? They confirm that a client’s name and address matches that held in a credit reference agent’s database (Experian/Equifax/CallCredit) and flag if a client has been identified as a possible PEP. They also enable you to see beneficial ownership via Companies House plugins. Yet, this can be done for free by searching Companies House directly. So while purchases through companies do occur, these residential transactions make up the minority of cases and most of the heavy lifting done by conveyancers involves gathering ID documents and running source of funds checks on beneficial owners, akin to if you were checking clients purchasing through personal bank accounts.
In conveyancing, these e-ID providers get you 5% of the way to carrying out sufficient ID and AML checks on your client. However, you are still left with the time-consuming task of obtaining identity documents, bank statements and supporting evidence, and then use this to corroborate answers to a laborious, paper-based source of funds questionnaire.
In other words, conveyancers have no alternative other than to use ever more manual processes and waste valuable resources on preventing money-laundering because existing e-ID solutions, despite promising to be wholesome, don’t go nearly far enough. With existing e-ID providers, conveyancers are still vulnerable to ID fraud (can youreallyguarantee the client is who they say they are?).
To truly enhance manual AML checks, a holistic approach must be adopted. While name and address checks are vital, solutions which can verify document authenticity and who it belongs to provide a much more robust and reliable approach. The increase in Open Banking technology, which can retrieve digital bank statements, removes the need for conveyancers to collect paper statements and the risk of tampering. I would love to say that Thirdfort has the solution to all these challenges. While we can significantly reduce time spent carrying out AML checks, any new approach will fall flat unless it provides a tailor-made solution for conveyancers, which is one of the biggest challenges of all.
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