We talk to the CEO of an enterprise solution business for KYC due diligence automation about the UK government's new strategy for combatting dirty money.

The UK government’s three-year AML strategy plan demonstrates the international nature of the money laundering threat, while some of the measures envisaged will only partly resolve the shifting patterns of dirty money, an expert argues.

Under plans unveiled in parliament this week, the UK is to add 500 staff to its roster of people handling anti-money laundering and invest “at least” £550 million ($739.5 million) into these efforts. The strategy will roll out over three years to 2029. In the first year, part of the strategy will be to “further disrupt Russian-speaking professional money laundering networks.”

Part of the strategy involves improving data on beneficial ownership, as affecting the information collected and held at Companies House, and the Register of Overseas Entities.

These measures, while positive, are only a “partial fix,” Dermot Corrigan (main picture), chief executive of smartKYC, an enterprise solution for KYC due diligence automation, told WealthBriefing when asked about the government’s reforms. 

“Registers tell you who owns this asset, not how the individual accumulated their wealth,” Corrigan said. “We see an increased demand for our products that corroborate wealth, quantitatively and qualitatively so that three questions can be answered – can the existence of wealth be confirmed, can its plausibility be assessed and can documentary evidence be produced. So now with AI, much of this can be done faster, better, and as frictionlessly as possible.”

The international dimension remains a major area, Corrigan said, noting that the 101-policy paper set out to parliament this week highlighted a major Russian case, showing the international aspect of these issues.

“The international nature of the threat is apparent in the strategy’s own showcase case. Operation Destabilise was a Russian-speaking professional laundering network,” he said. “The links ran to a bank acquired in Kyrgyzstan to facilitate sanctions evasion, and to a Bulgarian network convicted of spying for Russia. Any organisation would be blindsided to the KYC and screening risk without technology to support, Russian, Kyrgyz and Bulgarian language investigation.”

“The screening ground truth can come from a range of sources: court records, regional news articles, company filings, or parliamentary committee transcripts, and these can be written in a plethora of languages/scripts, including non-Latin ones such as Cyrillic, Arabic, Chinese and Hebrew. This is where legacy systems often struggle and where AI-led ones have the edge,” Corrigan continued. 

Complexities
The government’s statement, presented in parliament this week, explains the challenge that complexity of structures and networks creates for law enforcement and compliance. 

Corrigan commended the administration’s honesty on the matter. 

“It is fair to say that the regulated sector’s tooling has struggled to keep up. Our experience of serving the wealth sector is that structural complexity is a particular challenge. Your counterpart is not the high net worth client alone but their network too – trusts, special purposes vehicles, foundations, family offices, nominees and other legal representatives,” he said. “We stress the importance that any KYC or screening tooling should treat the entity and this entourage of associated parties as one dynamic cluster as it evolves during the relationship.”

smartKYC uses modern technology to help clients, including wealth managers and banks, handle a blizzard of information relevant for know-your-client work, such as media reports in foreign languages. A year ago, we carried this article from the firm explaining the state of play, and one that has also been affected by AI. 

Part of what is at stake is harnessing technology to alleviate frictional costs that bankers and others face in responsibly managing due diligence and onboarding tasks, mindful that onboarding “abandonment” can be a significant challenge.