The importance of annual AML risk assessments for accountants.

In recent years, the anti-money laundering regulations have tightened significantly, as authorities work to combat financial crime, terrorist and proliferation financing. Accountants are often in possession of sensitive financial information, giving them a key role in ensuring compliance. Failing to undertake an annual firm-wide AML risk assessment can lead to serious penalties and reputational damage that could threaten the viability of the firm.

The Case for Annual Assessments

The requirement to prepare a risk assessment is set out within Regulation 18 of the Money Laundering Regulations 2017.

Accountancy practices are also subject to investigation by HMRC, who will want to see that the firm-wide risk assessment has been undertaken and is up to date. Failure to do so can have very serious consequences.

Conducting annual firm-wide AML risk assessments also enables accountants to pinpoint weaknesses in their financial practices and in-house procedures. For example, if a firm works with clients in high-risk countries, an assessment can expose vulnerabilities that need to be addressed. Similarly, if a company has spikes in cash transactions, it may warrant further investigation. These proactive steps help prevent money laundering activities which could damage the firm and its clients.

Key Components of an AML Risk Assessment

• Client Due Diligence: Verifying identities and monitoring transactions for irregularities is essential. For instance, accountants should analyse client backgrounds to confirm they are not listed in any sanction lists.

  
  

• Transaction Monitoring: Continuous evaluation of transactions aids in spotting patterns indicative of money laundering. For example, a sudden influx of large transactions from a single client could raise concerns.

  
  

• Staff Training: Education about money laundering is a vital requirement of the regulations. Firms that invest in employee training should see an improvement in detection of suspicious activities.

  
  

• Policy Review: Regularly updating AML policies ensures compliance with the latest regulations. This step can involve a periodic review of all internal policies against current standards.

The Money Laundering Regulations Specific Areas to Consider

The regulations also set specific areas to consider when conducting the risk assessment. They should take account information made available by HM Treasury and also:

• the firm's customers;

• the countries or geographic areas in which the firm operates;

• the firm's products or services;

• the firm's transactions; and

• its delivery channels.

Benefits Beyond Compliance

The benefits of annual AML risk assessments go beyond meeting legal requirements. A strong AML program boosts credibility and can attract clients who value ethical practices. Additionally, accountants positioned as trusted advisors should enjoy stronger client relationships, which may lead to an increase in business opportunities.

A close-up look at financial data analysis for AML compliance.

Challenges in Implementation

While the advantages are clear, many accountants encounter challenges in conducting annual AML risk assessments. Common obstacles include limited resources, insufficient knowledge and competing priorities. To overcome these challenges, firms may need to invest in targeted training and external assistance to simplify the assessment process.

A Crucial Necessity for Accountants

As the regulatory landscape evolves, conducting annual firm-wide risk assessments is essential for accountants. By grasping the regulations, establishing thorough assessment processes and utilising expert advisors, accountants can effectively tackle compliance challenges while maintaining their clients' financial integrity. In doing so, they not only shield their firms from risks but also foster a transparent and reliable financial environment.

An informative regulatory compliance guide for AML best practices.

At Andrew Swan Law, we regularly advise accountancy practices on compliance with the AML regulations to ensure they are fully compliant and not at risk from HMRC intervention. We ensure a firm's policies and procedures are up to date with the regulatory changes. We also help to prepare the firm-wide risk assessment, so that is is fit for purpose and effective.

We also provide bespoke staff training to firms, which includes reference to their own policies, procedures and risk assessments. One senior member of staff described the AML training as "the best training course I have ever done".

Alternatively, we provide online training, which is also being very well received. People seem to enjoy the real cases referred to, some of which Andrew has dealt with in the criminal courts. It is only £55 plus VAT person and successful completion results in a Certificate of Competence, which is helpful to show to the HMRC inspectors, if they ever come calling: Anti-money Laundering Training Course | Andrew Swan Law

If you wish to discuss any of the matters raised within this article or your training needs, just drop Andrew a line at: andrew@andrewswanlaw.co.uk