The digital revolution as envisaged in the late 20th century feels very much in full swing these days with technology playing a part in almost every aspect of our lives.

Sometimes known as the Third Industrial Revolution, this shift from mechanical and analogue technology to digital electronics has been heralded as a way of making life easier, faster and more efficient.

Whether it’s doing one’s banking online, programming one’s washing machine, charging an electric vehicle or ordering a drink in a pub from an app, digital technology is simply now the way we do things.

It’s true of industry as well, where digital technology in construction and design plays an increasingly prominent role, as well as in financial services to enable business and transactions to take place around the clock.

A third of brokers use manual methods to confirm ID

Of course, there are those who prefer pen and paper to an iPad. Some still refuse to have internet banking on their phone and prefer the feel of cash in hand.

However, this reliance on physical analogue methods is holding back some brokers when it comes to anti-money laundering (AML) and fraud checks.

Incidences of fraudulent documents have increased greatly since the beginning of the pandemic, with organised criminals using the lack of face-to-face contact as an opportunity to deceive.

At SmartSearch we recently conducted surveys with regulated businesses that found almost half had seen a rise in attempted fraud through forged documents in the past year.

Incidences of fraudulent documents have increased greatly since the beginning of the pandemic

These forgeries are also increasingly sophisticated. With the vast amount of money that criminals are attempting to launder, the stakes are very high, so the fraudsters are investing in the latest tech to ensure forgeries are almost indistinguishable from the real thing.

However, anyone with rudimentary photo-editing skills can digitally alter a photo of ID, bank statement, payslip or utility bill to easily bypass the eye test.

Fire with fire

That’s why it is crucial brokers fight fire with fire and adopt the best technology. Our research found a third were relying on outdated manual methods to confirm ID and were checking people against sanctions lists.

There is no need for this. There are systems that can identify a person through their credit data in a couple of seconds. These electronic verification systems negate the need for requesting a physical document, or an image of one. With just a name, address and date of birth, the latest technology can combine credit reference data, biometric facial recognition and digital fraud checks as well as electoral roll data and other reliable public sources to establish identity.

There are systems that can identify a person through their credit data in a couple of seconds

By triple checking these various sources of information a unique ‘composite digital identity’ is produced, which is virtually impossible to fake. All this can be done online, with no need for in-person meetings, face coverings or hard copies of documents.

Within the same process the applicant is automatically screened against sanctions and politically exposed persons watchlists, and monitored daily thereafter. The AML onboarding job is then complete and there is no need to worry about those regular changes to watchlists because the system will continually monitor these and update customer details.

Regulatory fines

The shift to electronic verification is not only more efficient, it will prevent brokers from falling foul of fines. It was recently announced that, in the first half of 2021, $1bn (£700m)-worth of fines were levied in the UK and the EU for AML failures.

The fines mainly relate to shortcomings in AML management, monitoring of suspicious activity and customer due diligence when onboarding new customers.

High-profile cases at NatWest and Monzo have hit the headlines, and the Financial Conduct Authority has warned those in the property sector that it will no longer tolerate money-laundering failures.

In the first half of 2021, $1bn (£700m)-worth of fines were levied in the UK and the EU for AML failures

Regulating authorities in the UK and around the world are putting more pressure on financial services firms to bolster their defences against the surge in financial crime since the outbreak of the pandemic. Realistically, the only way to do that is to switch to a digital ID verification system where tasks like suspicious activity reporting and due diligence are automated and carried out in seconds across global databases.

While cinema films were wide of the mark with predictions of flying cars and hoverboards, technology has made our lives easier. Brokers that are still clinging to the past need to make the switch to a digital solution quickly if they want to both avoid the danger of hefty fines and also make their processes more efficient.

John Dobson is chief executive of SmartSearch