Everything you need to know about Anti-Money Laundering (AML)

So, if Anti-Money Laundering (AML) compliance isn’t front of mind in your practice, it should be; however, with accountants so busy, it’s understandably challenging to stay on top of the regulation and everything it entails. 

Fear not! We’ve covered the basics, so read on if you want to up your knowledge.

What is money laundering?

Money laundering is the process of making illegally gained proceeds appear legal or “clean”, aiming to conceal the true origin of the funds and allowing those involved in criminal activities to enjoy the profits without attracting attention from law enforcement or financial authorities. The money laundering process typically involves three stages:​

  • Placement: illicit funds are introduced into the financial system, which could involve breaking down large sums of money into less suspicious amounts
  • Layering: buying/selling securities or using shell companies creates a web of transactions, making it challenging to trace the money back to its illegal source
  • Integration: “cleaned” funds are reintroduced into the economy, appearing as if they come from a legitimate source​
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Featured Guide

Anti-Money Laundering (AML) for accountants: protecting your firm against dirty money

Want to better understand Anti-Money Laundering? ​Look no further.​ ​Our handy guide breaks down everything you need to know about AML, offering a one-stop-shop resource.

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What is Anti-Money Laundering (AML)?​

Anti-Money Laundering (AML) measures are essential for upholding the integrity of the financial system.​ AML encompasses a set of regulations, policies and procedures intended to prevent money laundering.​

The main objective of AML initiatives is to ensure entities don’t inadvertently participate in facilitating criminal money laundering activities.​

Key factors of Anti-Money Laundering (AML) for Accountants

Accountants need Anti-Money Laundering (AML) procedures in place to keep themselves compliant and help prevent money laundering activities from taking place.

  • Customer Due Diligence (CDD)​

    Accounting professionals need to identify and confirm the identity of their clients, gathering details about their identity, business connections, and transaction characteristics. Increased scrutiny may be employed for clients with elevated risk levels, such as politically exposed individuals (PEPs) or clients from regions with heightened risk factors.​

  • Know Your Customer (KYC)​

    Know Your Customer (KYC) processes are a component of Customer Due Diligence (CDD) and encompass the collection of customer information for evaluating their risk profile. These procedures aid accountants in comprehending the nature of the customer’s business and anticipated transactions, facilitating the identification of any atypical or questionable activities.​

  • Transaction Monitoring

    Financial institutions are obligated to oversee transactions for any irregular patterns or behaviours. Unaccounted for large transactions, frequent/swift fund movements or transactions that deviate from the customer’s established profile should raise concerns, prompting a need for additional investigation.​

  • Suspicious Activity Reporting (SAR)

    SARs offer valuable information to facilitate investigation and prompt appropriate actions. If you recognise a transaction or a series of transactions that suggest money laundering, you’re required to submit a Suspicious Activity Report (SAR). ​

  • Record Keeping

    Anti-Money Laundering (AML) regulations mandate accountants to retain comprehensive records of customer transactions and due diligence endeavours. The record-keeping documentation is crucial for audits and investigations.​

  • Training and Internal Controls

    Internal controls and policies must be established to guarantee adherence to AML regulations. Firms bear the responsibility of instructing their employees to identify and manage Anti-Money Laundering (AML) concerns.

  • International Cooperation

    Money laundering frequently encompasses cross-border transactions. As such, the significance of international collaboration and the exchange of information among financial institutions, regulatory bodies, and law enforcement agencies can’t be overstated.​

AML FAQs

Do you have some AML questions? You’re not alone! Here are some frequently asked questions (FAQs):

Not-for-profit organisations often maintain informal records, rendering them vulnerable to money laundering risks.​

Given the heightened risk, a thorough examination is imperative.​

When handling charity clients, the emphasis should be on acquiring information from trustees responsible for financial transactions.​

For personal tax clients, it’s essential to uphold comprehensive firm-wide reviews, policies and procedures.​

Ensuring the possession of personal IDs and conducting thorough risk assessments, along with making informed decisions regarding risk, is generally satisfactory.​

If there are no changes, passport renewal is not obligatory; however, it is crucial to remain vigilant for alterations in names or addresses.​

Yes, uniform laws and regulations apply across all services, irrespective of the specific service offered. ​

The need for a full AML check depends on the nature of the services provided.​

If the service involves accountancy services, tax advice or any other regulated activities, then a full AML check is likely required.

Considering the annual occurrence of the client due diligence process, it’s advisable to review client identification checks during this time.​

Further reading

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