Protecting your practice against dirty money as AML checks tighten

Is anti-money laundering (AML) compliance still front of mind in your practice? It should be!

Although there are no exact figures, there is a realistic possibility that the scale of money laundering impacting the UK annually is hundreds of billions of pounds.

This is a huge problem, and in 2022 alone, the global fines for AML breaches totalled £3.8bn.

We’ve also already seen a swathe of UK accountants getting fined this year for insufficient AML compliance.

Only last month, ACCA expelled a member for lying about their AML policy and in December, they excluded another accountant for failing to keep up with AML procedures.

The pressure is very much on.

Toughening up AML compliance

These fines and exclusions come as no surprise following the Government’s plans to toughen up AML supervision.

Recently unveiled, the Economic Crime Plan 2 aims to improve money laundering regulations, focusing firstly on AML and suspicious activity reports.

The 3-year plan is backed by £400 million in additional investment to tackle economic crime over the Spending Review Period.

Graeme Biggar, Director General, NCA, says: “The reforms are crucial to move us to the next level in our fight against the dirty money that fuels serious and organised crime. They will enhance our capabilities to identify illicit finance and drive it out of the UK, targeting corrupt elites and the money launderers criminal gangs rely on.”

What does the drive to make AML compliance more rigorous mean for accountants? Well, there’s little room for error when it comes to combatting money laundering.

Protecting yourself: 6 client red flags

We understand a lot of the required AML due diligence isn’t a day-to-day responsibility and can often be put on the back burner while you deal with a hectic workload.

To make life easier, here are six client red flags to keep an eye out for which may signal AML risks (store and use them as a checklist, or even write them down on a sticky note and keep it on your desk).

1) Secretive clients

Avoid clients who are unwilling to provide personal verification like the plague. Those unwilling to reveal their identities typically have something to hide, and without identification, you can't conduct a thorough ID check. Ideally, before taking any client on board, get to know them and understand their business so you can move forward with added confidence.

2) Unusual transactions                                                          

Noticed any unexplained or inconsistent transactions? You have full visibility of client outgoings and incomings, so if you’re seeing transactions out of the ordinary, investigate. Alarm bells should start ringing if you notice large amounts of cash or private funding.

3) Transactions with unexplained urgency

Does a client need a financial transaction handled now? We’re all busy, and matters can require last-minute support; however, if a client is unwilling or unable to explain their urgency, there could be a devious reason.

4) Geographical concerns                                                        

Noticed any transactions coming from abroad? Let’s say your client owns a fish & chips shop – if you’re seeing transactions come from across the world, it’s safe to say they’re not buying a chip butty.

5) Politically exposed person (PEP)

Those individuals and their families in high positions are at greater risk of corruption, posing a risk of money laundering. This isn’t to say that every person in a high position is a risk, but it’s worth carrying out enhanced checks before taking them on – ultimately, it’s your decision.

6) Unknown beneficial owner

Is the beneficial owner clear? If a client asks you to create a complex ownership structure, it could be to disguise criminal activity.

Tackling onerous compliance tasks with software

A recent AccountingWeb poll found that AML regulation compliance now takes up more of accountants’ time than ever before.

For some, the stricter AML regulations are becoming “anti-new client processes”, as extra capacity within many firms doesn’t exist in part due to the current talent shortage.

What can be done? Firms can’t magic up capacity but also can’t stomach such large fines.

Anti-money laundering software is available to help accountants manage their AML requirements, streamlining their onerous compliance tasks.

At IRIS, we provide an AML module for our IRIS Elements software, integrating directly into the solution for added ease.

With our IRIS Elements Anti-Money Laundering, compliance is streamlined with:

• An AML dashboard to easily manage your responsibility
• Risk assessment reminders
• Flags for suspicious activity, which a Money Laundering Reporting Officer (MLRO) can easily follow-up
• Pre-populated questions and templates
• Enhanced client checks

We hope you found our AML article useful and if you'd like more information take a look at our Anti-Money Laundering guide for accountants where we cover the topic in more detail.