What small accountancy practices need to know about Anti-Money Laundering (AML)

For smaller practices where resources are more limited, understanding and implementing Anti-Money Laundering (AML) best practice can be challenging.

From keeping up with the latest AML legislation to maintaining strict compliance, there’s a lot to consider.

If you're looking for an AML breakdown, top tips and a “must-do” list, look no further – here’s what you need to know.

What is Anti-Money Laundering?

As part of money laundering, criminals funnel illegally attained funds through complex and difficult-to-trace financial transactions.

Afterwards, the money is then invested in legal enterprises or purchases, making the illegally gained cash appear legal or “clean.”

Anti-Money Laundering refers to a set of regulations and best practices, designed to detect and combat this practice.

How does AML impact accountants?

Accountants should have strict AML measures to ensure they don’t inadvertently participate in criminal money laundering activities.

Otherwise, there can be severe consequences.

HMRC has begun issuing fines to firms that fail to demonstrate AML compliance and some accountants have even been excluded from their bodies for not complying with AML.

It doesn’t matter whether you’re an individual providing regulated accounting services or a small practice supporting local clients, you must be AML compliant.

Note: in the UK, AML policy is dictated by the Office for Professional Body Anti-Money Laundering Supervision (OPBAS). OPBAS supervise the 25 industry regulators across the legal and accounting sectors to ensure regulators are monitoring AML compliance amongst their members.

So, what does AML compliance involve for small accounting practices?

Anti-Money Laundering compliance checklist

The actions you must take as an accountancy practitioner are set out by the Office for Professional Body Anti-Money Laundering Supervision (OPBAS) in their 2017 regulations.

As dictated, you need to fulfil the AML compliance actions below:

Customer Due Diligence (CDD)

Verifying the identity of your customers and their business relationships, including the nature of the transactions they’re making.

Know Your Customer (KYC)

An extension of Customer Due Diligence, in which you gather information about customers to assess their risk profile.

Transaction Monitoring

Monitoring transactions for unusual patterns or behaviours; for example, large unexplained transactions or transactions with seemingly random urgency.

Suspicious Activity Reporting (SAR)

If suspected money laundering activity is detected, you must submit a suspicious activity report to the National Crime Agency (NCA).

Record Keeping

You must maintain detailed records of customer transactions, including actions taken as part of Customer Due Diligence and Know Your Customer protocols.

Training and Internal Controls

If you have staff, training and upskilling them to recognise and address AML issues should be a top priority.

International Cooperation

You may be required to share relevant information between international financial institutions and law enforcement to assist with cross-country issues.

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Do small accountancy firms need a Money Laundering Reporting Officer (MLRO)?

As part of a robust and legally compliant AML policy, accountancy practices need both a Money Laundering Reporting Officer (MLRO) and a Money Laundering Compliance Officer (MLCO).

MLROs are responsible for reporting any suspected money laundering to the National Crime Agency (NCA), while MLCOs monitor and uphold AML compliance across the firm.

If you’re a small practice, you will still need to nominate a suitable officer; however, the dual roles can be held by the same person.

However, if you’re an individual providing regulated accounting services, there is no requirement to have a nominated MLRO or MLCO as you are, in effect, fulfilling both roles within your own “one-man band”.

AML compliance software for small accountancy firms

In a busy accountancy practice, your working hours are already a hot commodity.

While there’s a fair amount of work involved in AML compliance, there are plenty of resources out there and AML software for accountants.

Why not check out our AML software to help automate the process and help keep you compliant at all times.

For more information on Anti-Money Laundering and how it impacts accountants, read our comprehensive Anti-Money Laundering guide.