Many UK financial services firms are using outdated methods to onboard new customers, according to a recent report from anti-money laundering (AML) specialist.

SmartSearch found that 33% of companies were using manual checks for onboarding, while 51% reported seeing a rise in financial crime over the last year.

The report, which analysed due diligence undertaken by 500 regulated firms during on-boarding, revealed companies across the board were seeing an increase in fraudulent activity, but continued to use outdated procedures to check client identities.

Over a third, or 35%, of firms said using hard copy documents was the more dependable approach for establishing identification, though just 25% said there were ‘highly confident’ they could recognise a fake document.

“The increasing complexity of fraudulent documents means anyone reliant on just the naked eye will be leaving their business open to deceit. With record fines being handed out for money laundering failures, regulated businesses need to ensure they are doing everything they can to prevent fraud,” says SmartSearch managing director Martin Cheek.

“To prevent money laundering, businesses need to fight fire with fire. As criminals are embracing technology, those aiming to prevent criminal activity need to embrace electronic verification,” he adds.

Approximately a third, or 29%, of firms also said that it took them up to a week to process hard copy documents.

According to SmartSearch, The Know Your Customer process became an increased area of focus as industries moved to remote working during the pandemic.

The specialist recommends businesses use digital methods to onboard and screen clients:

“The findings of our whitepaper demonstrate a worrying amount of faith in traditional methods. This trust in manually identifying fraudulent documents is particularly concerning, as criminals are using sophisticated methods to try and deceive,” he says.