Hundreds of UK businesses are facing data problems following extensions to anti-money laundering regulations.

Until now, the rules have only applied to financial services firms, but from this week auction houses, car dealers, estate agents and other cash-intensive companies are obliged to report any suspicious transactions to the National Criminal Intelligence Service (NCIS).

Firms of all sizes must now introduce adequate processes for reporting dubious cash-based transactions or risk substantial fines for non-compliance.

The rules extend the remit of the Proceeds of Crime Act 2002, part of the UK's efforts to clamp down on the finances of terror groups and other organised crime syndicates.

'These regulations represent an important new development in our strategy to tackle both money-laundering and terrorist-financing, and ensuring our systems meet international standards,' said Ruth Kelly, financial secretary to the Treasury.

But there are serious problems with the new rules that will affect the firms seeking to bring themselves in line with the law, and the NCIS.

Seeking out money laundering activity adds a financial burden for firms, with no incentive to do anything more than the legal minimum, says Peter Dorrington, head of fraud solutions at SAS.

'Money laundering doesn't directly cost firms any money, but hunting for money laundering does cost money,' he said.

Data will have to be managed more effectively and companies will need systems that can automatically flag-up potentially dubious transactions.

The FSA has been sending clear signals to firms that are not working hard enough on complying with the law. In January, the Bank of Scotland was fined £1.25m for failing to keep sufficient customer records, while High Street bank Abbey received a £2.3m fine last year (Computing, January 29).

The second issue lies with the NCIS, which is in danger of being overwhelmed with reports. It received 94,000 reports in 2003, and it expects that number to double this year.

But it says it is working to prepare for this, announcing a new anti-money laundering taskforce last July to streamline and modernise its reporting system.

'We're now taking a more risk-based approach that is allowing us to deal with reports more efficiently,' said an NCIS spokesman.