You’re three months into working with a property client. Turnover looks good, margins are healthy, they pay on time. Then you notice something odd in the bank statements. Multiple round-sum transfers to offshore accounts. Cash deposits that don’t match the rent roll. A lifestyle that doesn’t fit the declared income.
You know something’s wrong. But here’s the question: do you know what you’re legally required to do about it? Not what feels right or what seems sensible. What the law actually requires.
That’s where most accountants get unstuck. Not understanding what AML is, but knowing exactly what to do when they spot it. This guide covers what AML means in practice, what the regulations actually require, and how to build compliance that works without drowning in paperwork.
Key Points Summarised for Busy Readers
- AML stands for Anti-Money Laundering, the legal framework preventing criminals from legitimising illegal funds through professional services
- Money Laundering Regulations 2017 requires all UK accountants providing regulated services to comply, regardless of practice size
- Five core obligations: customer due diligence, risk assessment, ongoing monitoring, suspicious activity reporting, and record keeping
- Non-compliance carries unlimited fines, up to 14 years imprisonment for facilitation, and practice closure
- Criminals specifically target accountants because you provide credibility and access to the financial system
- Proper AML compliance integrates with normal service delivery rather than existing as separate bureaucracy
What Does AML Actually Mean?
AML stands for Anti-Money Laundering. It’s the regulatory framework designed to prevent criminals from disguising the origins of illegally obtained money.
Money laundering operates in three stages:
- placement (getting illegal cash into the financial system)
- layering (moving it around to obscure the source)
- Integration (making it appear legitimate for open use)
Your role as an accountant makes you a primary target. Criminals need professionals with credibility to legitimise their funds. You handle money, prepare accounts, form companies, and provide the veneer of respectability that criminals can’t manufacture themselves. A property portfolio looks legitimate when a chartered accountant prepares the accounts. The same portfolio raises immediate suspicion when the owner files their own returns with obvious inconsistencies.
The regulations exist because money laundering funds serious organised crime. Drug trafficking, human trafficking, terrorism, large-scale fraud. When accountants unknowingly (or worse, knowingly) help clean this money, they enable the underlying crimes to continue and expand. The £100 million you help legitimise funds the next operation. That’s why penalties are severe and why “I didn’t know” isn’t a defence if proper procedures would have revealed the issue.
📚 Need the complete regulatory framework?
AML sits within a broader compliance landscape. For comprehensive coverage of all AML and identity verification requirements, read our 2025 Guide to AML & Identity Verification Rules for Accountants.
AML Regulations: What the Law Actually Requires
Money Laundering Regulations 2017 governs AML compliance for UK accountants. It’s not guidance or best practice recommendations. It’s law with criminal penalties for breach.
The regulations apply when you provide specific services. These include:
- Audit and assurance services
- Tax advisory, accountants preparation and bookkeeping
- Forming companies or setting up trusts
- Buying or selling businesses or property on behalf of clients
- Managing client money or assets
HMRC supervises most accountants for AML compliance, though professional bodies (ICAEW, ACCA, CIOT, ATT) supervise their members. They conduct inspections, investigate complaints, and impose penalties. You must register with your supervisor and pay annual fees. Operating without registration is itself an offense.
Your five core obligations under MLR 2017:
- Customer Due Diligence (CDD): Verify client identity and understand their business before providing services. This means obtaining and verifying documents proving identity and address, understanding the nature and purpose of the business relationship, and identifying beneficial owners where relevant.
- Risk Assessment: Conduct firm-wide and client-level risk assessments to determine money laundering exposure. Document your methodology, classify each client by risk level, and apply proportionate measures based on that classification.
- Ongoing Monitoring: Scrutinise client transactions throughout the relationship to detect unusual or suspicious activity. Frequency depends on risk level but must occur for all clients with reviews documented systematically.
- Suspicious Activity Reporting (SAR): File reports with the National Crime Agency when you know or suspect money laundering or terrorist financing. The threshold is “knowledge or suspicion,” not certainty. Failing to report when you should have is a criminal offense.
- Record Keeping: Maintain documentation of due diligence, risk assessments, monitoring, and decisions for at least five years. HMRC’s position is simple: if it’s not documented, it didn’t happen.
📋 Want the comprehensive list of AML rules?
These five core obligations form the foundation. For the complete breakdown of all AML rules accountants must follow in 2025, see our List of 2025 AML Rules for Accountants in the UK.
What AML Compliance Actually Looks Like in Practice
Consider Sarah, a sole practitioner taking on James, a new client running a property development business. James approaches Sarah needing accounts prepared for three limited companies holding 15 properties between them. Standard work, decent fees.
Before Taking James On
Sarah can’t just send an engagement letter and start work. She requests James’s passport and utility bill, verifies them in person, and checks he’s listed on Companies House as director. She screens him against PEP and sanctions databases.
Then she asks questions. Where did the property deposit money come from? How does he fund developments? What’s his business model? She documents everything because these answers become her monitoring baseline.
She assesses the risk. Property development, multiple companies, cash involved. She verifies the properties exist and checks planning applications. Everything checks out. She classifies him standard-risk and documents why.
During the Relationship
Six months in, Sarah spots something during year-end prep. One property shows £2,500 monthly rent when market rate is £1,800. Another shows zero income despite being listed as let.
She documents her concerns and asks James to explain. He provides tenancy agreements showing the premium rent is a corporate let and the zero-income property had an eviction. Sarah verifies the tenancy agreements match bank deposits. Satisfied, she documents the explanation.
Twelve months later, she notices large round-sum transfers to a British Virgin Islands account. £50,000, then £75,000, then £100,000. James says he’s invested in an overseas development opportunity.
The explanation is vague, the sums are large, and BVI is high-risk for money laundering. Sarah files a Suspicious Activity Report with the National Crime Agency. She doesn’t tell James. She continues normal service while NCA reviews her report.
💰 Looks like a lot of hassle and cost for Sarah!
But it doesn’t have to be. Discover practical, budget-friendly approaches that work for small practices: How Small Firms Can Affordably Stay Compliant with 2025 AML Rules.
Common AML Misconceptions
The dangerous misconception isn’t misunderstanding what AML means. It’s assuming you’d spot suspicious activity through intuition rather than systematic procedures. You won’t. Criminals specifically target professionals who rely on gut feeling rather than documented checks.
What Happens If You Don't Comply
The penalties for AML failures aren’t theoretical risks mentioned in guidance documents. They’re real consequences HMRC imposes regularly after inspections uncover systematic failings.
HMRC conducts thousands of AML inspections annually and finds failures in significant percentages of practices reviewed. Being small, busy, or well-intentioned doesn’t protect you. Documented systematic procedures do.
📢 Staying compliant means staying informed
One of the major reasons for non-compliance is not being aware of latest regulatory changes. Keep up to date: Latest Changes in UK AML Rules Every Accountant Should Be Aware Of.
How to Get AML Compliance Right
Getting AML compliance right sounds complicated. Honestly, it is. But we accountants always have our ways. For AML, we use the RIMMED process.
R – Register and Set Up
Register with your AML supervisor if you haven’t already. Appoint an MLRO (yourself if you’re a sole practitioner). Write a basic policy covering your five obligations. Create templates for risk assessments and due diligence checks. Foundation sorted.
I – Integrate into Workflow
Stop treating AML as separate compliance work. Check identity before engagement letters. Assess risk during onboarding. Monitor during accounts preparation. Schedule annual reviews for all clients, quarterly for high-risk. When it’s part of normal workflow, it actually happens.
M – Monitor for Red Flags
Train everyone who touches client work to recognise warning signs: unexplained cash, circular transactions, lifestyle mismatches, unusual structures, reluctance to provide information. Create a culture where staff escalate concerns without fear of looking foolish.
M – Make Documentation Systematic
Use templates consistently for every client. HMRC wants evidence of systematic compliance applied to everyone, not individual heroics applied selectively. Store everything accessibly for five years minimum.
E – Employ Technology Appropriately
Electronic verification speeds up identity checks. PEP databases flag high-risk individuals automatically. Practice management software schedules reviews. Technology makes compliance efficient, but suspicious activity judgment stays human.
D – Do Annual Reviews
Review procedures every December. Regulations change, money laundering typologies evolve, inspection findings reveal common failures. Update templates and train your team. What worked last year might not satisfy inspectors this year.
🚀 Get AML Compliance Right the First Time, On Budget
FigsFlow automates risk assessment, schedules monitoring reviews, conducts systematic PEP and sanctions screening, and creates complete audit trails automatically.
Additional Resources
- Money Laundering Regulations 2017 – Primary legislation governing AML compliance for UK accountants
- HMRC AML Supervision Guidance – Official guidance on responsibilities and supervisory expectations
- National Crime Agency: Suspicious Activity Reports – How to submit SARs and what triggers the requirement
- Complete Guide to AML Software for Accountants – Comparison of compliance tools and when you need them
- 2025 Guide to AML & Identity Verification Rules – Comprehensive overview of all AML requirements
- Top 6 AML Software for Accountants in 2025 – Learn about the top-rated AML solutions that can help you manage compliance and client verification with ease
Conclusion
AML isn’t paperwork for regulators. It’s protection against criminals who specifically target accountants to clean dirty money.
You already do some of this work. You just don’t document it systematically. That’s the gap HMRC finds during inspections.
Follow the RIMMED process. Build it into your workflow. Train your team. Document everything. Get this right and AML becomes routine practice management. Get it wrong and you face unlimited fines, criminal prosecution, and practice closure.
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Frequently Asked Questions
Money laundering is any process used to conceal the origins of criminal funds, including transferring, converting, or possessing money gained from illegal activity to make it appear legitimate.
The Financial Conduct Authority (FCA) oversees AML compliance for financial institutions, while HMRC regulates accountants, estate agents, and other businesses under the Money Laundering Regulations 2017.
AML checks typically take a few minutes to a few days, depending on the client’s risk level, the complexity of ownership structures, and whether additional verification is required.
Suspicious activity should be reported to the National Crime Agency (NCA) through a Suspicious Activity Report (SAR). Accountants must submit reports promptly under legal obligation.
Common red flags include large or unusual cash transactions, complex ownership structures, reluctance to share information, or activity inconsistent with a client’s normal business pattern.
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