On July 14, U.K.-based anti-money laundering (AML) firm SmartSearch announced its arrival to the U.S. marketplace.
“With AML experts and counter-terrorism watchdogs warning of an increased risk of money-laundering in the current [COVID-19] crisis, firms need to be more vigilant than ever,” the company said in a press release announcing the launch.
The solution looks pretty sweet: During the onboarding process for new customers, SmartSearch provides a complete Customer Information Program (CIP) check, something required by all financial institutions as a provision of the USA Patriot Act, while meeting the compliance demands of the Bank Secrecy Act as well. Checks can be performed remotely or through an app and are followed up by ongoing daily monitoring in case a customer’s status changes.
In light of SmartSearch’s launch in the U.S., Mortgage Professional America asked company CEO John Dobson a few questions about money-laundering in the mortgage space and if the platform has been effective in rooting out unfit borrowers in the U.K.
Mortgage Professional America: Why now for the launch? What needed to take place before SmartSearch could be brought to the US market?
John Dobson: Once SmartSearch was firmly established in our home United Kingdom market and on a steady growth path, the United States was a logical choice for further expansion. The problems with money-laundering are much the same, and the sectors targeted by criminals, and subject to regulation, are also similar. It is a market we have been looking to enter for some time and feel we have a good understanding of.
We wanted to be absolutely sure that we could bring a product to the US market that meets the same high specifications and standards while reflecting these differences, so that US clients can have the same absolute confidence that their processes remain up-to-date and fully compliant at all times.
MPA: Why is getting the onboarding process right so important in the fight against money-laundering?
JD: Identity verification is the first step in combating money-laundering, and from a business perspective it is also vital to be absolutely sure that the person you’re dealing with is who they say they are.
MPA: How big a problem is money-laundering in the U.S. real estate space? Who winds up being the victims?
JD: The real estate sector is a huge and growing target for money-launderers, as it enables them to ‘wash’ a large quantity of cash through the system in one transaction. The truth is that nobody knows how much money is laundered through real estate – not least because much of it currently goes undetected.
There is a requirement, however, that firms raise a ‘Suspicious Activity Report’ (SAR) when they suspect a transaction may be fraudulent, and the number of these SARs filed by loan and finance companies has been growing steadily, from just 1,500 in 2015 to nearly 26,000 in 2019. This reflects growing awareness of the problem, but also indicates that money-laundering is a growing threat.
The U.S. Treasury Department and the Financial Crimes Enforcement Network have recently identified loopholes in the current AML regime pertaining to real estate and are committed to remedying that, so it is to be expected that tighter regulation is on the way.
Money-laundering helps to fund a wide variety of criminal activity, from small-time drug-dealing right up to global people-trafficking and terrorist-financing outfits. As well as the organizations targeted by money-launderers, the real victims are the people who suffer as a result of this wider criminal activity. Who are the victims of money-laundering? In short, it’s all of us.
MPA: How will SmartSearch help US mortgage professionals and consumers? What’s the benefit to individual lenders and borrowers?
SmartSearch is all about making it easy for firms to onboard customers and remain compliant with relevant regulations at all times. Because our system is fully digital and automated, prospective customers do not need to present ID documents, so everything can be done remotely.
This is particularly valuable with the current need to observe social distancing where possible but is in any case much more convenient for customers themselves.
MPA: How effective has the solution been in rooting out money-launderers in other countries?
JD: Overall, we have around 5,000 client firms and 50,000 individual users at all levels – and those clients tend to stay with us. We have a 98% client retention rate.
MPA: How does the process work for mortgage professionals?
JD: The system is very simple to use and can be operated by team members at any level of the organization. All that is needed is a name, address, date-of-birth and Social Security number. SmartSearch will automatically verify the identity of that individual, using multiple data sources, and conduct sanctions and PEP screening. The SmartSearch platform can be accessed via the internet or integrated into a firm’s existing system. (There is also a fully functional mobile app to enable checks to be performed on the go.) Clients also get a dedicated account manager.
MPA: How long does a typical SmartSearch check take?
JD: These automated processes verify individuals in less than two seconds and businesses in around two minutes, all without the need to see client documentation.