You can’t ignore AML compliance and expect your practice to survive. Not with HMRC watching every accountancy firm in the UK.
When James started his practice in 2022, a businessman requested services for his “property portfolio.” James needed clients. The client provided documents. James completed identity checks. The fees were excellent.
Then HMRC investigators arrived. The portfolio didn’t exist. The funds came from VAT fraud. This cost him £200,000 in fines and an ICAEW disciplinary hearing.
His story isn’t unique. Over 300 accounting professionals faced AML enforcement actions last year. Most thought they were compliant.
In this guide, you’ll learn what is anti-money laundering, what counts as AML compliance under MLR 2017, who needs to register for AML supervision, and real-world examples of compliance in action.
KEY TAKEAWAYS
- What is anti-money laundering (AML) compliance? AML compliance is mandatory under MLR 2017 for UK accountants, with penalties including unlimited fines and up to 14 years imprisonment
- Verify client identity, assess risk, monitor transactions, maintain five-year records, and report suspicious activity to stay compliant
- Register with HMRC if not supervised by professional bodies like ICAEW, ACCA, CIOT, ATT, ICAS, or Chartered Accountants Ireland
- Enhanced Due Diligence is required for high-risk clients, including PEPs, cash-intensive businesses, and those in high-risk jurisdictions
- Build AML compliance into daily operations now. HMRC doesn’t warn before investigating and professional bodies don’t offer second chances
What is Anti-Money Laundering?
Money laundering transforms dirty money into clean assets.
Think of it as financial camouflage. Criminals earn money through illegal activities like drug trafficking, fraud, corruption, or tax evasion. That money carries evidence of crime. Using it directly would expose the criminal activity. So, they “launder” it through legitimate-looking transactions until the money appears clean.
The process follows three stages:
- Placement- Criminal funds enter the financial system. Someone deposits cash at a bank. Buys property. Purchases high-value goods. This stage creates the biggest risk of detection because large amounts of dirty money concentrate in one place.
- Layering- Multiple transactions obscure the money’s origin. Funds move between accounts. Cross borders. Convert between currencies. Get invested and withdrawn repeatedly. Each transaction adds distance from the criminal source.
- Integration- The cleaned money re-enters legitimate use. Criminals buy businesses. Invest in property. Fund luxury purchases. The money now looks like normal wealth from legal activities.
Anti-money laundering (AML) stops this process.
Anti-money laundering (AML) encompasses the laws, regulations, and procedures that detect and prevent money laundering. In the UK, this means a comprehensive framework requiring businesses to verify clients, monitor transactions, maintain records, and report suspicious activity.
For accountants, AML compliance is a legal obligation under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017). Non-compliance brings unlimited fines, criminal prosecution, and professional sanctions.
What Counts as Anti-Money Laundering in the UK?
AML in the UK means following specific legal requirements under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. These regulations, known as MLR 2017, work alongside the Proceeds of Crime Act 2002 (POCA) to create your compliance obligations.
MLR 2017 applies to specific business sectors. Accountants. Tax advisers. Bookkeepers. Solicitors. Estate agents. Financial institutions. Any business handling transactions that could facilitate money laundering faces regulation.
Here’s what counts as AML compliance for accounting practices:
Failing these requirements carries severe consequences. POCA allows up to 14 years imprisonment for money laundering offences. Businesses face unlimited fines. Professional bodies can suspend or remove members for AML breaches. HMRC can deregister practices entirely.
Beyond penalties, non-compliance destroys reputation. Clients lose trust. Referral sources disappear. Recruitment becomes difficult when your practice carries the stigma of regulatory failure.
Examples of Anti-Money Laundering in Practice
Understanding AML requirements theoretically differs from applying them daily. Here’s how compliance works in real accounting scenarios.
New Client Onboarding
A property development client contacts your practice for tax planning services. During Customer Due Diligence, you request identification documents and check Companies House records.
The client claims sole ownership, but Companies House shows a 30% overseas shareholder. You question this discrepancy. The client explains it’s a family member who provided initial capital and provides supporting documentation.
You assess the situation as medium risk due to the overseas element and flag the account for closer monitoring. This is CDD in action: verify identity, question inconsistencies, document findings, and apply appropriate monitoring.
Suspicious Transaction Monitoring
You’ve served a cafe owner for three years with a consistent £8,000 monthly turnover. Suddenly, turnover jumps to £45,000 with large cash deposits and multiple transactions just under £10,000.
The client claims increased walk-in customers, but can’t explain the cash surge when most customers pay by card. You file a Suspicious Activity Report with the National Crime Agency without telling the client, as “tipping off” is a criminal offence.
Enhanced Due Diligence
A new client wants bookkeeping services for their import/export business. During initial checks, you discover the director previously held a senior government position in a high-risk jurisdiction.
This makes them a Politically Exposed Person, requiring Enhanced Due Diligence. You obtain additional documentation about their wealth source, business relationships, and transaction purposes. You verify their government role ended three years ago and document their current business activities.
You approve the engagement but classify them as high risk, implementing quarterly rather than annual reviews and closer transaction monitoring throughout the relationship.
Who Needs to Register for AML Supervision?
Not everyone needs to register with HMRC for AML supervision.
If you’re already a member of professional bodies like ICAEW, ACCA, CIOT, ATT, ICAS, or Chartered Accountants Ireland, you don’t need to register. These bodies already supervise your AML compliance.
However, if your practice is not supervised by a professional body, you need to register with HMRC. This applies to:
- Accountancy service providers
- Tax advisers
- Bookkeepers
- Business advisers offering financial services
- Trust or company service providers
There are certain activities that trigger AML registration. These include, but are not limited to, preparing or submitting tax returns, providing accountancy services, tax advice, forming companies, acting as company secretary or director, and providing registered office services. Even the occasional provision of these services requires registration. Trading without registration is a criminal offence.
However, if you’re a UK-registered charity (providing free or nominal services), a public authority, or already regulated by the FCA, you don’t need to register.
Conclusion
AML compliance is not just nice to have. It’s mandatory and protects your practice from criminal exploitation, regulatory consequences, and reputational damage that can end your business.
As complex as it may sound, the requirements are simple. Verify client identity, assess money laundering risk, monitor transactions, maintain five-year records, report suspicious activity, and train your staff. This alone can protect you from unlimited fines, professional sanctions, and criminal prosecution for up to 14 years.
HMRC doesn’t warn before investigating. Professional bodies don’t offer second chances.
So, don’t wait. Build your compliance into operations today.
Frequently Asked Questions (FAQs)
Financial institutions, accountants, tax advisers, legal professionals, trust and company service providers, estate agents, high-value dealers (€10,000+ cash transactions), casinos, art market participants (€10,000+ transactions), and letting agents (€10,000+ monthly rents) must register for AML supervision.
Approximately 2% of UK businesses experienced known or suspected money laundering incidents in the past year, affecting around 33,500 businesses. This highlights the ongoing challenge of financial crime prevention across all regulated sectors.
UK AML policy under MLR 2017 requires businesses to conduct customer due diligence, monitor transactions continuously, maintain detailed records, report suspicious activities through SARs, and provide regular employee training to ensure compliance with evolving regulations.
The five pillars are: internal policies, procedures and controls; designation of an AML compliance officer; ongoing employee training programs; independent testing and audits; and comprehensive customer due diligence throughout the business relationship.
AML checks typically take 1 to 2 weeks, depending on complexity and document availability. Simple cases with readily available documentation and straightforward fund sources can be completed in 3 to 5 working days, while complex situations may require longer.
