AML roles and responsibilities

The Importance of Defined AML Roles

Clear allocation of AML roles and responsibilities ensures:

1. Regulatory Compliance: Firms and individuals meet legal obligations under the Money Laundering Regulations 2017 (MLR 2017), the Proceeds of Crime Act 2002 (POCA) and the Terrorism Act 2000 (TA).
2. Risk Mitigation: Defined roles enhance accountability and help identify, assess, and mitigate risks effectively through clear channels of communication.
3. Operational Efficiency: Structured roles streamline processes and help to ensure timely action.
4. Fostering a Compliance Culture: Clear responsibilities encourage staff to take ownership of AML tasks, fostering a culture of vigilance.

Key AML Roles in UK Accounting Firms

1. Nominated Officer

‍This role is defined in MLR 2017 as “a person who is nominated to receive disclosures under Part 3 (terrorist property) of the Terrorism Act 2000 or Part 7 (money laundering) of the Proceeds of Crime Act 2002”. They are a central figure in any firm’s AML framework. This role is typically held by a senior member of the firm and is a requirement in all but the smallest firms.Responsibilities:

• Receiving and evaluating internal reports of suspicious activities.
• Submitting (or overseeing the submission of) Suspicious Activity Reports (SARs) to the National Crime Agency (NCA).

Skills and Qualifications:

• Comprehensive understanding of MLR 2017, POCA and TA, as they impact the firm.
• Analytical skills to assess suspicious activities.
• A good understanding of AML risk indicators and red flags.
• Strong communication skills to liaise with internal teams and external authorities.

2. Senior Management

‍Senior management plays a pivotal role in setting the tone for AML compliance across the firm. MLR 2017 defines “senior management” as “an officer or employee of the relevant person with sufficient knowledge of the relevant person's money laundering, terrorist financing and proliferation financing risk exposure, and of sufficient authority, to take decisions affecting its risk exposure”. Respected members of senior management must hold the roles of Nominated Officer and Compliance Officer (see below). These two roles may be held by the same person, in which case the combined role is often referred to as the “Money Laundering Reporting Officer” (MLRO).

‍Responsibilities:

• Approving the firm’s AML policies, controls and procedures.
• Allocating resources for AML compliance.
• Ensuring the Nominated Officer and Compliance Officer have (or has) sufficient authority and independence.
• Regularly reviewing AML risk assessments and compliance reports.
• Sometimes approving the establishment or continuation of business relationships.
• Promoting a compliance-focused culture within the organisation.

3. Compliance Officer

‍Most firms (that are not sole practitioners) will be required to appoint a senior person to be responsible for the firm’s AML compliance (usually referred to as the “Compliance Officer”). They will have developed the necessary knowledge and skills to be able to adopt that responsibility. If they are also performing the role of Nominated Officer, they will often be known as the “Money Laundering Reporting Officer” (MLRO).Responsibilities:

• Implementing and maintaining appropriate AML policies, controls and procedures.
• Coordinating AML training programs for staff.
• Leading periodic reviews and audits of AML processes.
• Supporting the Nominated Officer in assessing internal reports and preparing SARs when necessary.

Skills and Qualifications:

• Comprehensive understanding of AML regulations MLR 2017, POCA and TA, as they impact the firm.
• Analytical skills to assess and evaluate policies, controls and procedures.
• A good understanding of AML risk indicators and red flags.
• Strong communication skills to liaise with internal teams and external authorities.
• Strong organisational skills necessary to ensure the firm undertakes regular, effective compliance reviews.

4. Frontline Staff

‍All employees who interact with clients have a vital role in detecting and reporting suspicious activities. MLR 2017 defines a “relevant employee” as “an employee whose work is (i) relevant to the [firm’s] compliance with any requirement in these Regulations, or (ii) otherwise capable of contributing to the identification or mitigation of the risks of money laundering, terrorist financing and proliferation financing to which the [firm’s] business is subject, or the prevention or detection of money laundering, terrorist financing and proliferation financing in relation to the [firm’s] business”.Responsibilities:All relevant employees must receive the necessary training to be able to:

• Perform customer due diligence (CDD) effectively.
• Monitor transactions and situations to be alert to suspicions of money laundering or terrorist financing.
• Escalate suspicious activities to the Nominated Officer (or MLRO).
• Keep up-to-date with emerging risks relevant to the firm and its clients.

5. IT and Data Teams

‍Technology plays a critical role in AML compliance, and IT teams are essential for implementing and maintaining the necessary systems.Responsibilities:

• Developing and managing transaction monitoring systems.
• Ensuring data security and integrity.
• Supporting the automation of CDD and risk assessment processes.
• Monitoring for system vulnerabilities that could be exploited for financial crime.

6. Internal Auditors

‍According to MLR 2017, where appropriate (according to the size of the firm and the nature of its business), a firm must “establish an independent audit function with the responsibility (i) to examine and evaluate the adequacy and effectiveness of the policies, controls and procedures adopted by the [firm] to comply with the requirements of these Regulations; (ii) to make recommendations in relation to those policies, controls and procedures; and (iii) to monitor the [firm’s] compliance with those recommendations”. In this respect, an “independent audit function” does not need to be an external auditor. Therefore, if a firm has an internal audit team, or a team that is led by someone sufficiently senior to be able to exercise independence, that team will be able to conduct an independent review of the firm’s AML framework and its policies, controls and procedures, with the responsibilities set out in MLR 2017.

‍Core AML Responsibilities

‍While specific roles may vary across firms, the following responsibilities are integral to AML compliance:

‍1. Customer Due Diligence (CDD)

‍CDD involves verifying the identity of clients, understanding their business activities, and assessing associated risks.

‍Key Actions:

• Collecting identification documents for individuals and beneficial owners.
• Conducting risk assessments to classify clients as low, medium, or high risk.
• Applying enhanced due diligence (EDD) for high-risk clients.

2. Monitoring and Reporting Suspicious Activities

‍Identifying and reporting suspicious activities is a legal obligation under POCA.

‍Key Actions:

• Monitoring client transactions for unusual patterns or high-risk indicators.
• Escalating suspicions to the MLRO.
• Ensuring timely submission of SARs to the NCA.

3. Risk Assessment and Management

‍Regular risk assessments help firms identify vulnerabilities and adapt to emerging threats.

‍Key Actions:

• Evaluating risks related to clients, services, and geographic exposure.
• Implementing risk-based controls and monitoring measures.
• Updating risk assessments based on changes in client behaviour or regulatory requirements.

4. Training and Awareness

‍Ongoing training ensures staff are equipped to fulfill their AML responsibilities.

‍Key Actions:

• Providing regular training on AML regulations and best practices.
• Using real-world examples to enhance understanding.
• Ensuring all staff, from junior employees to senior management, understand their roles in compliance.

5. Record-Keeping

‍Accurate record-keeping is essential for demonstrating compliance and supporting investigations.

‍Key Actions:

• Maintaining records of client identification, transactions, and risk assessments for at least five years.
• Storing records securely to protect against unauthorized access.
• Ensuring records are easily retrievable for regulatory reviews.

Fostering a Compliance Culture

‍A strong compliance culture is key to achieving efficient and effective AML practices. Senior management must lead by example, demonstrating a commitment to ethical practices and regulatory compliance.

‍Steps to Build a Compliance Culture:

• Clearly communicate the importance of AML compliance, and the firm’s role and responsibilities, to all staff.
• Encourage, and demonstrate, open communication, allowing employees to make suggestions and raise concerns without fear of reprisal.
• Recognise and reward ethical behaviour and adherence to compliance policies.
• Regularly review and update AML practices to reflect evolving risks and regulations, and communicate changes to relevant employees.

Common Challenges and Solutions

1. Resistance to Change

Challenge:

Staff may resist new AML procedures or technologies.

‍Solution:

Provide clear explanations of why changes are necessary (and how they will be effective) and offer training to ease the transition.

‍2. Tension between Compliance and Client Relationships

Challenge:

Achieving AML compliance while maintaining positive client interactions.

‍Solution:

Remember that AML compliance must be risk-based, so ensure you are seen to be using a risk-based approach to your policies and procedures, including client due diligence. In fact, there is no conflict between AML compliance and proportionality. You should also communicate clearly with clients your firm’s compliance obligations.

‍3. Keeping Up with Regulatory Changes

Challenge:

AML requirements and supervision are constantly evolving, making it difficult to stay current.

‍Solution:

Subscribe to updates from supervisory bodies, government, the NCA, etc, and plan relevant staff training and communications. Ensure your AML Compliance Officer (or MLRO) is well supported and resourced in meeting their responsibilities.

‍4. Resource Constraints

Challenge:

Limited resources may hinder AML efforts.

‍Solution:

Leverage technology to automate processes such as client verification;. ensure your policies, controls and procedures are risk-based; take advantage of free AML webinars, and other resources, made available by your supervisory authority; and consider how you may recover compliance costs from clients who have authorised you to perform verification work in respect of client due diligence.

‍Conclusion

‍Defining and assigning AML roles and responsibilities is essential for UK accounting firms to achieve regulatory compliance, including mitigating AML/CTF/PF risks. Whether a relevant employee has a role defined by MLR 2017 (such as Compliance Officer or Nominated Officer) or is simply in a position to prevent or detect money laundering, terrorist financing or proliferation financing, each role contributes to a cohesive and effective AML framework. By fostering a compliance culture, leveraging technology, and addressing challenges proactively, firms can navigate the complexities of AML compliance while protecting their reputation and safeguarding ethical business practices.