The UK’s Financial crime crisis: Fintech’s crucial role in digital verification

Financial crime is rising at an alarming rate in the UK, posing a growing threat to businesses, consumers, and the economy.

The scale of financial fraud

Fraud now accounts for over 40% of all reported crimes in England and Wales. Costing the UK an estimated £6.8 billion annually. Despite financial institutions investing around £34.2 billion per year in fraud prevention and compliance, traditional measures remain inadequate against evolving criminal tactics.

However, a powerful solution is emerging. The Digital Company ID initiative, led by the , in collaboration with leading financial institutions, technology firms, and regulators, is pioneering a corporate digital identity framework. The vision being to revolutionize business verification, combat fraud, and enhance economic resilience.

The need for a Digital Company ID

Fraudsters exploit weaknesses in the financial system, particularly fragmented data-sharing practices. When one institution detects suspicious activity, criminals quickly pivot to another, taking advantage of regulatory and technological gaps. At the same time, businesses, especially SMEs, face significant administrative burdens due to cumbersome Know Your Customer (KYC) processes, slowing down operations and hindering access to finance.

A Digital Company ID changes this dynamic. By establishing a unique digital identity for businesses, CFIT’s initiative provides a standardized and verifiable means of authentication, reducing inefficiencies, strengthening data security, and simplifying compliance. The UK government is already considering its adoption for tax filings and annual company statements via Companies House, further reinforcing its potential impact.

How Digital Company ID works

Developed through consultations with over 70 industry, government, and academic experts, the Digital Company ID framework is designed to:

• Streamline business onboarding and verification, reducing friction in banking and financial services
• Enhance security and fraud detection by enabling institutions to verify businesses instantly
• Support compliance with regulatory requirements, including the Economic Crime & Corporate Transparency Act (ECCTA), which mandate’s identity verification for individuals managing companies
• Facilitate seamless data-sharing across banks, regulators, and fintech’s, reducing duplication and improving fraud prevention

A collaborative effort for maximum impact

The success of this framework depends on collective action across the financial ecosystem:

• UK banks with global customers must lead adoption, integrating digital verification into existing processes, improving fraud detection, and ensuring smoother onboarding for businesses.
• Regulators and policymakers must streamline regulatory frameworks, introducing sandboxes to test and refine the system in a controlled environment.
• Fintechs and technology providers must continue driving innovation while ensuring compliance with data privacy regulations.
• Industry-wide standards and governance structures are essential to ensure interoperability and seamless implementation. Groups like FMSB, which focus on development of standards can greatly facilitate adoption.

Linking Digital Company ID with Corporate Digital Identity

The Digital Company ID initiative aligns closely with the concept of Corporate Digital Identity (CDI), introduced by Encompass Corporation both solutions drive efficiency and accuracy in business identity verification. Chartis, together with Encompass conducted research to measure the efficiency gains when adapting a similar Digital Company ID approach. Automation and the implementation of CDI can result in cutting up to two-thirds of the manual cost (59% of total cost), Cutting 21% of total cost is also achievable in the first year of implementation through efficiency gains alone. Up to 57% of total cost can be offset when incorporating the commercial uplift with the efficiency gains.

Furthermore, CFIT’s proof of concept demonstrated that Digital Company ID could improve customer retention by 33%, reinforcing the business case for banks and financial institutions to embrace this transformation. When compared with the CFIT proof of concept efficiencies, the concept of digital company ID automation represents exciting opportunities for real improvements in addressing financial crime.

A future secured

The UK has an opportunity to lead the global fight against financial crime while strengthening its fintech leadership. The need for standardization is vital, led by implementing Digital Company ID which will mean benefits for the financial ecosystem. With agreed to standards, businesses will need only to verify their identity once, ensuring they are recognized everywhere. Banks will benefit from faster, more secure onboarding, while businesses will gain efficiency, security, and trust.

To achieve this, banks, regulators, and fintech’s must work together, integrating CDI, updating regulations, and fostering cross-sector collaboration. CFIT’s leadership, alongside industry-wide commitment, can unlock a frictionless, trusted financial ecosystem – one digital identity at a time.