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 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.