More than half of challenger banks falling behind with CDD

Only a quarter (24%) say they always verify new customers, while more than half (54%) also freely admit to performing such checks only on occasions. 

The survey sheds light on various aspects of compliance practices within high-street and challenger banks, crypto platforms, property developers and gambling firms.

After over a year of Russian sanctions, the survey indicates that firms are failing to take their onboarding procedures seriously.

Just over a third of challenger banks (36%) have made changes to their compliance procedures since sanctions.

Incumbent banks display a little more urgency with 60% of high-street banks taking additional measures. 

An FCA review last year raised concerns over the weaknesses in customer due diligence (CDD) declaring that most challenger banks did not obtain details about customer income and occupation.

The FCA concluded that this resulted in an incomplete assessment of the purpose and intended nature of a customer’s relationship with the bank.

To mitigate the risks of breaches, SmartSearch is urging firms to adopt robust digital compliance solutions that can efficiently flag PEPs and provide the necessary data to make informed decisions.

By implementing these solutions, banks can effectively minimise compliance risks and enhance their due diligence processes.

Martin Cheek, MD at SmartSearch (pictured above), commented: "The figures reveal a larger problem with challenger banks and their unwise complacency towards compliance.

“These firms face the arduous task of keeping up with ever-changing compliance requirements, but simply screening new customers on occasions is not enough.

"The truth about PEPs is that they are not all easily recognisable; many of them are faceless names on a bank account.

“Banks need the ability to not only flag PEPs, but also make informed decisions on who they choose to do business with."