Few businesses would boast of having drug dealers, organised crime syndicates and international terrorist rings among their client base. But just such nefarious clientele appear all too often on the customer lists of many of the UK’s major financial institutions, according to new research.

Indeed, UK-based data integrity specialist Datanomic, reports that up to 50% of UK financial institutions are unknowingly involved in financial transactions, the proceeds of which are either intended for terrorists or terrorists groups, or which have originally been funded by ill-gotten criminal gains – effectively putting the institution in violation of the Prevention of Terrorism Act 2005, the Terrorism Act 2000, and the Proceeds of Crime Act 2002.

With no let up in the volumes of regulation hitting City of London firms, it is little wonder that some find it difficult to stay on the right side of the law, says Steve Tuck, CTO at Datanomic. The various blacklists against which firms are now required to check their client bases change daily, he says, requiring compliance teams to review swathes of customer data on a continual basis. The burden this entails is now stretching screening and anti-money laundering systems to the limit.

Even those organisations kitted out with sophisticated watchlist filtering software are becoming bogged down with a glut of false positives, says Neil Katkov of financial services analysts Celent, requiring many firms build enriched databases against which to check their checks.

Overburdened and under resourced, compliance teams are currently on the losing end of the battle to prevent scoundrels and villains from sneaking onto their books. As such, Celent forecasts that the amount of money laundered globally in 2007 will hit $950 billion – effectively making money laundering one of the largest industries in the world, not far behind the IT industry itself.

Information Age analysis: Financial services - Nexus of Innovation?