New data from SmartSearch has revealed that more than half of identity verification checks are still carried out manually, even as the Financial Ombudsman Service reports a sharp rise in online investment and employment scams.
The Financial Ombudsman Service has warned of a surge in complaints linked to online scams, with 31,300 complaints recorded in 2025. Of those, 20,000 involved authorised payments, highlighting the growing scale of fraud facilitated through seemingly legitimate platforms and accounts. According to compliance specialists at SmartSearch, these figures point to a structural weakness in how businesses verify the identities of customers and counterparties.
Collette Smith, chief customer officer at SmartSearch, said that behind each successful scam is a breakdown in identity controls at some stage of the process.
“The criminal opened an account. They passed basic checks. They looked legitimate. And then they used that legitimacy to defraud victims,” she said, “The question isn’t whether these platforms had verification processes. It’s whether those processes could catch what criminals are deploying in 2026: AI-generated identities, deepfake documents, and synthetic profiles that pass traditional checks without triggering any alarms.”
SmartSearch surveyed 1,000 senior decision-makers across the finance, property, legal and accounting sectors. The findings show that 54% of identity verification checks are still conducted manually, with only 46% relying on digital processes. For a sector facing increasingly sophisticated AI-enabled fraud, this reliance on manual review presents a significant risk exposure.
“Manual processes can’t scale to catch the volume and sophistication of modern fraud. Visual inspection doesn’t detect pixel-level document forgery,” Smith warned.
“Static database checks don’t identify synthetic identities built from stolen data fragments. And checks performed once at onboarding miss the evolving risk signals that emerge over time.”
The Financial Ombudsman Service has urged consumers to pause, research and verify before transferring funds, but SmartSearch argues that responsibility cannot sit solely with victims. Smith stressed that firms have both a duty and a regulatory obligation to prevent fraudulent accounts from being established in the first place.
“Businesses have a responsibility, and a regulatory obligation, to ensure that the accounts facilitating these scams don’t exist in the first place.”
SmartSearch maintains that prevention requires a shift towards automated biometric verification capable of identifying deepfakes and synthetic identities, real-time sanctions and PEP screening against global watchlists updated daily, and multi-source identity triangulation to flag inconsistencies across datasets. It also highlights the importance of ongoing monitoring beyond initial onboarding, as well as enhanced due diligence for higher-risk profiles, including accounts linked to cryptocurrency activity.
The company also pointed to the Payment Systems Regulator’s reimbursement rules introduced in October 2024, which increased accountability for financial providers in cases of authorised push payment (APP) scams. While reimbursement offers redress, SmartSearch argues it does not address root causes.
“The PSR’s reimbursement rules introduced in October 2024 place more responsibility on financial providers to protect customers from APP scams. That’s appropriate. But reimbursement is reactive, it happens after the harm is done.
“The real solution is prevention: ensuring that criminals can’t open the accounts, register the platforms, or establish the credibility they need to defraud victims in the first place.
“As Patrick Hurley, Ombudsman Director, said: “If it sounds too good to be true, it probably is a scam.” But businesses shouldn’t rely on consumers being sceptical. They should build systems that make it impossible for “too good to be true” offers to establish legitimacy in the first place.
“That’s not checkbox compliance. It’s defence.”
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