What the AML regulations mean in practice

The National Crime Agency estimates that money laundering operations within the UK economy reach into the hundreds of billions of pounds. To aid accountants in navigating and advancing their compliance with anti-money laundering (AML) requirements, Tim Pinkney, the IFA’s Director of Professional Standards, explores key AML concerns. AML regulations accountants must comply with UK money laundering laws apply to specific entities needing supervision, including accountants, who must evidence their adherence to AML regulations to their supervisor. This requirement is directed at accountants in practice, offering services such as tax compliance, bookkeeping, payroll, accounting, and assurance to the general public. Additionally, services related to trust and company management, like company formation and registered office services, fall under these regulations. “Remember, there's no such thing as a victimless crime, be it from tax evasion to HM Treasury or offences with proceeds of crime, such as modern slavery, human trafficking or fraud,” Pinkney stresses. “Broadly speaking, firms should ensure they have in place tailored policies and procedures which reflect their services and clients; a firm risk assessment that reflects their risks and mitigation; and clear, documented customer due diligence, including client and risk assessment details - all should be fully documented. It's also essential that staff receive annual AML training. Both agents and firms shouldn’t forget that they need to have clear reporting lines to ensure they're ready to submit suspicious activity reports (SARs) to the National Crime Agency.” How the IFA conduct AML supervision The IFA is recognised as an AML supervisor by HM Treasury and included in the money laundering regulations. It oversees a diverse array of businesses, including sole practitioners, partnerships, and incorporated entities. Under its AML supervision contract, the IFA manages member firms and those supervised under an AML contract, by employing a risk-based strategy in its oversight activities. This encompasses conducting AML reviews, providing training, and taking appropriate enforcement action. Pinkney outlines: “In practice, this really just means that we engage with our firms and practitioners to look at policies and procedures to make sure that they meet the requirements of the regulations and meet all requirements as a practitioner. This also helps keep firms safe from professional money launderers or criminals who are looking to exploit the vulnerabilities of firms that may not have adequate policies and procedures in place to protect them.” He states: “One of the roles of a professional accountancy membership body is to support its firms and help them to demonstrate compliance with the regulations so that everyone can play their part in tackling economic crime.” The challenges for practitioners Pinkney understands that keeping on top of AML regulation is a challenge for small firms and while it may appear that it’s just another administrative burden, he emphasises that it needn't be too difficult with the right support: “When you meet a client for the first time, you almost certainly perform even just a subconscious risk assessment. You're looking at potential pitfalls and challenges of what is needed to support that client. The risk assessment is an extension of that process; it's a way that you just need to take those observations and document them. Remember, from a law enforcement and supervisors’ point of view, if it's not written down, it didn't happen.” Pinkney advises firms to foster a culture of compliance and suggests that they adopt a certain level of professional scepticism: “Ask yourself: why does a client want you to provide services that you may have less experience in providing? When I worked in public practice, the firm preferred to offer a full range of services rather than a standalone service such as payroll. This allowed the firm to develop its knowledge and understanding of the client and to be able to provide the client with expertise and advice as a trusted business advisor, because we have the full knowledge of what the client was wanting to achieve.” How can accountants be helped to meet their AML obligations? “The IFA has a team of experienced and knowledgeable AML reviewers and compliance officers who are on hand to guide members through their AML responsibilities, queries and AML reviews. This includes approved accountancy sector guidance, a risk outlook put together in conjunction with other accountancy professional bodies, as well as content and alerts from the National Crime Agency.” Pinkney advises accountants to assess their policies and procedures proactively rather than postponing until they are selected for an AML review: “A membership body is there to provide ongoing support to keep firms and their staff in the best possible shape to face future challenges in the changing AML landscape. Utilise the support and guidance provided to you.” For more information on AML regulations, please visit the IFA website or watch this video on anti-money laundering in 5 key questions.