Our AML review plan for the year ahead

The IFA has published its annual report on its anti-money laundering (AML) supervisory activity for the year to 5 April 2022. The report meets our obligations under regulation 46A of the Money Laundering Regulations (MLRs).

We pride ourselves on our approach to AML supervision, which is riskbased, proportionate, collaborative, educational and robust. An important part of our supervisory approach is the provision of guidance and support to firms to help them understand their money laundering obligations. Recently, this has included guidance to make firms alert to the possibility of clients (and others) breaching financial sanctions.

The IFA’s compliance, monitoring and disciplinary teams collaborate to ensure a robust and coordinated approach. Information and intelligence may also be shared with oversight regulators, professional bodies, government, law enforcement and others. This enables supervisory authorities to provide information to fi rms on emerging money laundering and terrorist financing risks relevant to the accountancy sector.

AML reviews

All monitoring reviews during 2021/22 were conducted online. Such reviews have the same scope and breadth of assessment as an onsite visit. Nevertheless, there will be some on-site reviews in 2022/23 for the IFA’s highest-risk fi rms. An AML review includes a review of the firm’s documentation and discussions with key personnel to gain an understanding of the firm’s awareness of money laundering risks and its responsibilities.

Following an AML review, the findings are discussed with the firm and then set out in a letter, together with action points. The fi rm must address the findings in a timely manner and continue to co-operate with the IFA to become fully compliant with the MLRs. During 2021/22, IFA fi rms tended to achieve more timely remediation of the weaknesses identified than in previous years. The IFA’s risk-based approach means that the frequency of reviews for a firm depends on our risk assessment of that firm. For example, a medium-risk firm has, in the past, been reviewed approximately every seven years.

Since July 2022, the cycle has been reduced to five years in response to the requirements of the Office for Professional Body Anti-Money Laundering Supervision (OPBAS). As of 5 April 2022, the IFA supervised 1,983 fi rms, including sole practitioners. Some 62% of firms reviewed in 2021/22 were either compliant or generally compliant with the MLRs. The remaining firms were issued an action plan highlighting the areas to be addressed.

Common findings

Firm-wide risk assessments (regulation 18)

71% of non-compliant fi rms failed to have an up-to-date documented firm-wide risk assessment to the required standard. The MLRs require a risk assessment to identify money laundering and terrorist financing risks faced by the fi rm and how those risks may be mitigated. 

Adequate written policies, controls and procedures (regulation 19)

78% of noncompliant firms did not have adequate written policies, controls and procedures in place. These must be proportionate to the size and nature of the firm and communicated effectively within the firm.

Training (regulation 24)

87% of non-compliant firms could not demonstrate that they had provided sufficient AML training to relevant employees.

Criminal record checks of BOOMs (regulation 26)

65% of non-compliant firms had not obtained criminal record certificates for all beneficial owners, officers or managers (BOOMs). An individual may not be a BOOM in a firm supervised by the IFA without our approval, which can only be given if the individual has no relevant convictions.

Client risk assessments and client due diligence (regulations 27 and 28)

46% of noncompliant firms had not documented adequate risk assessments for all clients. Firms must also perform client due diligence procedures that reflect the client risk assessment.

Enforcement action

Of the 173 reviews undertaken during 2021/22, 38% required follow-up action by the IFA to ensure compliance with the MLRs. The failure of a firm to engage with this process is likely to lead to disciplinary action. We will take measures to secure fi rms’ compliance, and so maintain high professional and ethical standards among IFA members. The disciplinary process is robust, fair, consistent, proportionate, dissuasive and transparent (the findings of the IFA’s conduct committees are published). The conduct committees have a range of sanctions and orders available to them under the Disciplinary Regulations, including financial penalties and (if a case progresses to a disciplinary committee) suspension of a member’s practising certificate or removal from the register of members.

Looking ahead

During 2022, we expanded our AML review team and progressed a project to enhance our IT systems. These measures will facilitate an increase in the number of monitoring reviews to be performed annually. A revised OPBAS sourcebook is expected early in 2023, and the government is continuing its Review of the UK’s AML/CFT regulatory and supervisory regime. The IFA continues to engage with other AML supervisors, OPBAS and HM Treasury. Members in practice are encouraged to review the AML section on the website at ifa.org.uk/aml.