Is AML regulation good for business?

No accountant is a stranger to the multitude of compliance measures that govern the financial world, including the regulations surrounding money laundering, terrorist financing and proliferation financing.

Money laundering is renowned for its global reach and insidious grip on the financial industry. Anti-money laundering (AML) regulation is a direct reaction to this activity and, while its intention is to protect our economy from criminals, it’s seen as a chore by many firms that I speak to.

However, there’s no doubt that complying with AML regulations isn’t just obligatory but beneficial. It protects you, your business and your employees.

Staying on top of your AML plays an instrumental role in mitigating the risks that non-compliance poses to your business, allowing for better business growth and sustainability. Compliance also shows your clients that you take your role as a regulated professional seriously.

A benefit to the accountancy sector

The issue of financial crime, particularly money laundering, terrorist financing and proliferation financing, has heightened in recent years. With an evolving global economy and enhanced technology, the traditional barriers that obstructed these illicit activities have been mostly removed.

Transparency International told the Home Affairs Committee of £100 billion being laundered through the City of London.

If left unchecked, this massive scale of money laundering impacts the economy, contributes to social inequality and finances other criminal activities.

Ensuring that your firm adheres to the AML regulations means you’re best placed to prevent and detect financial crimes. It also cultivates your reputation for integrity and reliability. This in itself makes you less vulnerable.

Criminals seek out firms with lax AML policies, controls and procedures so that their activities are more likely to be able to proceed unchecked. If your AML isn’t up to scratch, you could easily become unwittingly involved in this activity – and are less likely to spot it when it happens.

Challenges in AML compliance

The journey towards ensuring AML compliance may seem long. But you have no choice. It’s your legal obligation. Ultimately, you’ll need to do the AML work, either voluntarily or under the threat of disciplinary procedures. Failure to comply could even result in the loss of your livelihood.

IFA’s Anti-Money Laundering Supervision and Monitoring 2022/23 report reveals that three IFA members were removed due to AML failings and nine were subject to disciplinary measures. Of all firms reviewed, almost a third had an action plan put in place to improve their compliance.

Integrating AML regulations into your day-to-day work may require time and resources. But using a platform like AMLCC, which enables you to complete all your AML obligations in one online place, can make it much easier.

And the rewards far outweigh the challenges. AML compliance is also a strategic investment, securing your credibility, enhancing your competitive advantage and fostering a culture of integrity and due diligence.

Creating a robust AML environment

Comprehensive AML policies, controls, and procedures (PCPs) are the backbone of your firm's activity. They set out how you assess risk for your business and clients, carry out due diligence and report any suspicious activity.

Your PCPs also put in place education processes that equip all employees with the knowledge to detect, prevent and report illicit activity or a suspicion of it.

Risk assessments of your whole business, departments and services lines will show you where your higher risks lie. And client risk assessments show you which clients present the higher risk.

Carrying out Client Due Diligence (CDD), part of your client risk assessment, is vital during the onboarding stage but must also be updated as your relationship with the client evolves.

It's also legally necessary to accurately pinpoint the ultimate beneficial owner (UBO) of a business as part of this process, as is a sanctions and PEP check. Only by truly understanding who your client is, and their financial dealings, can you accurately gauge their risk.

The recently passed Economic Crime and Corporate Transparency Bill 2023 has further bolstered Companies House with additional authority to scrutinise and oppose information provided to it. This makes the validation of the information held by your clients on the companies register increasingly important.

Finally, maintaining complete records of your AML is a legal must. Preserving transparent records and documentation allows your supervisor and law enforcement to confirm that you’ve taken a thorough approach.

About Richard Simms: Richard Simms, MD of F A Simms and AMLCC is a licensed insolvency practitioner, chartered accountant and a leading authority on anti-money laundering. He is a sought-after guest at accountancy and AML conferences worldwide due to his position at the pulse of changes in guidance and legislation that impact DNFBPs.