AML Essential Kit

AML compliance for UK accounting firms involves adhering to the Money Laundering Regulations 2017 and Proceeds of Crime Act 2002 to prevent and report money laundering.

Non-compliance can result in severe penalties, including fines, imprisonment, and loss of licenses. Key elements include customer due diligence, risk assessment, firm-wide controls, staff training, transaction monitoring, and record-keeping, all managed through a risk-based approach tailored to the client or service's risk level. The AML Essentials Kit is designed to give you a simple and clear understanding of your compliance requirements, how to manage the operations of AML, and specific challenges that may arise.

Minimum requirements

Client ID verifications

Proof of identity in AML compliance involves collecting and verifying documents to confirm a client’s identity and ensure it matches the provided evidence. Accurate identification allows you to assess the client's risk and apply the appropriate compliance measures. Typically, this includes government-issued IDs (e.g., driver’s license or passport), proof of address (e.g., utility bill), and additional documents like company registration, PSCs, and business director lists. The process should follow the firm’s policies and procedures, with requirements varying by client risk profile and professional body. Clear, up-to-date records of this process must be maintained.

Client risk assessment

Risk assessments are a cornerstone of AML compliance, helping firms identify and manage potential money laundering risks. Under the Money Laundering Regulations 2017, firms must evaluate client-specific and geographic risk factors, including business complexity, ownership transparency, cooperation levels, transaction patterns, and geographic exposure. These assessments analyse organisational structures, transaction behaviours, and regional risks to ensure compliance and mitigate vulnerabilities. Effective risk assessment requires regular updates, thorough documentation, and proactive monitoring to adapt to changing circumstances and regulatory requirements.

Client due diligence

Client due diligence (CDD) is much talked about among practising accountants, who look for the simplest way of demonstrating AML compliance. While ID verification is often automated, and it is easy to put the evidence on file, CDD is more than that. If you would like to explore CDD in more detail than this guidance permits, AMLGAS (produced by the Consultative Committee of Accountancy Bodies) breaks it down into three components: Identification (and information gathering), Risk assessment and Verification (evidence gathering). The three components of CDD impact each other. In other words, when assessing the AML risk attaching to the client, you might feel you need to go back to gathering more information, or perform more rigorous verification work (as part of enhanced CDD). We say more about client risk assessments is a separate section of this guidance.

Firm-wide risk assessments

A Firm-wide Risk Assessment (FWRA) is a critical element of AML compliance, examining every aspect of your firm’s operations to identify vulnerabilities related to money laundering and terrorist financing. Recent supervisory reports indicate that inadequate FWRAs are a leading cause of non-compliance, underscoring the importance of understanding and implementing them correctly. Your FWRA is unique to your firm. It is reflected in your client risk assessments and the policies, controls and procedures that provide the framework for your firm’s AML compliance across its day-to-day activities.

Firm policies, controls, and procedures

Policies, controls, and procedures define your firm's actions to establish its AML compliance measures. These documents outline the firm’s planned approach to preventing, detecting, and responding to potential money laundering activities, ensuring consistency and regulation alignment. Policies explain what needs to be done and why, controls ensure these policies are implemented correctly, and procedures provide step-by-step instructions for execution. To be effective, this documentation must be clear, practical, and easily accessible for staff to understand and follow.

Firm AML education

Staff training in AML equips your team with the knowledge and skills to protect your firm from money laundering risks. It goes beyond simple regulatory box-ticking, helping staff understand why AML matters and how to apply compliance requirements in their daily work. Practical training ensures everyone in your firm can spot potential red flags, know how to respond appropriately and understand their role in maintaining compliance. This isn't a one-time exercise but an ongoing program that evolves with changing regulations, emerging risks, and lessons learned from real situations. The goal is to create a culture where AML compliance becomes a natural part of your team's work rather than being seen as an extra burden or afterthought.

Ongoing monitoring

Ongoing monitoring is vital for AML compliance in UK accounting firms, ensuring client relationships and transactions align with expectations while adapting to risks. It includes risk-based reviews (high-risk every 6-12 months, medium-risk annually, low-risk less often), updating documentation, monitoring transactions for unusual patterns, and revising risk assessments. Enhanced due diligence applies to high-risk clients, with extra verification and scrutiny. Firms must track beneficial ownership changes, identify red flags like PEPs or high-risk industries, train staff to handle suspicious activity and document all actions, including filing suspicious activity reports (SARs). AML software can streamline monitoring and compliance.

Record keeping

Record-keeping is crucial for AML compliance in UK accounting firms, ensuring regulatory adherence, supporting investigations, and mitigating risks. Firms must retain client records, transaction details, and risk assessments for at least five years, ensuring accessibility and security. Best practices include leveraging technology, maintaining accurate records, and training staff. Effective record-keeping safeguards firms from penalties and reinforces ethical business practices.

AML operations

AML roles and responsibilities

The Money Laundering Reporting Officer (MLRO) and supporting AML roles form the firm's AML compliance team. The MLRO holds clear responsibility and accountability within the firm, often bearing personal liability for compliance failures. Their role involves building and maintaining the firm's AML framework while overseeing the review and management of AML risks. Depending on the firm's size, the MLRO may work with a staff team or take sole responsibility for compliance activities. Some key responsibilities include but aren’t limited to overseeing firm compliance, conducting risk assessments, monitoring suspicious activity and reporting, undertaking firm training and education initiatives and maintaining accurate and up-to-date records.

Project managing your AML work

With the many overlapping elements in AML compliance, it is crucial to have measures in place to implement and maintain your firm’s compliance framework effectively. This involves balancing technology solutions with manual processes, ensuring the consistent application of policies, and adapting to changing risks and requirements. As the threat of money laundering evolves, the firm must remain systematic yet flexible to address emerging risks. Assigning the right people, establishing clear processes and tools, and maintaining strong internal communication is key to creating a compliance procedure that is both robust and practical for daily operations.

Understanding and optimising AML costs

Understanding and optimising AML costs involves balancing effective compliance and efficient resource use in your firm’s anti-money laundering efforts. The cost of AML compliance is closely tied to the size of your client base and the firm’s resource allocation. This often requires weighing the cost of staff time to manually handle AML tasks against the investment in software that can automate much of the compliance process. Taking a strategic view of direct costs (like systems and training) and indirect costs (such as staff time and business impact) ensures your compliance program remains robust. The goal is to maximise the effectiveness of your AML measures while minimising unnecessary expenses, creating a sustainable approach that protects your firm without creating undue financial burden.

How to evaluate an AML system

Evaluating your AML system, whether new or existing, involves assessing its effectiveness in achieving compliance while understanding the burden it places on your firm. This can include conducting an internal audit or review to ensure your processes align with relevant legislation and supervisory body guidance. For existing systems, it’s essential to examine the time and resources spent on compliance and identify opportunities for greater efficiency. Regular evaluations are recommended to keep up with technological advancements and evolving approaches to AML compliance, ensuring your system remains effective, efficient, and aligned with best practices.

AML operations in Firmcheck

Specific challenges

AML consequences and misconceptions

Non-compliance with AML regulations can lead to legal penalties, reputational damage, and professional sanctions, even for minor oversights. Robust compliance is essential to avoid these risks. Common misconceptions, such as believing smaller firms face lower risks or compliance is a one-time task, increase vulnerabilities. Effective AML requires ongoing monitoring and comprehensive risk assessments. Addressing these myths is critical for compliance.

Prepare for an AML audit

Audits in AML compliance involve the systematic review of your firm's anti-money laundering measures by regulatory authorities or external reviewers. Understanding how to prepare for these audits and what they entail helps reduce stress and ensure better outcomes for your firm. This isn't just about passing an inspection - it's about demonstrating that your AML system is robust, effective, and consistently applied across your operations. Good preparation and understanding of what auditors look for help turn the audit process from a potentially stressful event into an opportunity to validate and improve your compliance program.

Reporting SARs immediately

Immediate reporting of Suspicious Activity Reports (SARs) is vital for AML compliance in UK accounting firms. It meets legal obligations under the Proceeds of Crime Act 2002 and Money Laundering Regulations 2017, helping detect and prevent financial crimes. Timely SARs protect firms from penalties, support investigations, and demonstrate a proactive approach to combating money laundering and terrorist financing.

Motivate your team to do AML tasks

Motivating your team to complete AML tasks requires clear communication of their importance, regular training, and fostering a compliance-focused culture. Recognise and reward diligence, provide user-friendly tools, and clarify how AML efforts protect the firm and clients. Empowering staff with knowledge and emphasising their role in preventing financial crime encourages accountability and commitment to AML responsibilities.

Challenges removed in Firmcheck

Try Firmcheck for free

Start your compliance journey for free. Try Firmcheck's beautifully designed self-service platform and see why firms trust us with their AML compliance.