Criminal activities such as money laundering can often be hiding in plain sight as observed in the case of a UK finance head who stole nearly £869,000 from her employer which was uncovered only when the bank’s adherence to the AML requirement of ongoing monitoring flagged 104 transactions that were inconsistent with the customer’s known profile. This dramatic reality clearly shows why AML (Anti-Money Laundering) verification is the primary mechanism that regulated businesses use to safeguard the financial system. In the United Kingdom, AML verification is not merely an administrative exercise, but it is a statutory legal requirement and an essential component of Customer Due Diligence (CDD).
This year heavy fines were also levied on UK law firms for their non-adherence with AML which includes a £300,000 fine for Simpson Thacher & Bartlett LLP for control weaknesses and a penalty of £172,934 for Taylor Vinters for compliance failures related to a Politically Exposed Person (PEP). As the Solicitors Regulation Authority (SRA) implemented a severe crackdown, understanding and correctly implementing AML verification has become ever more critical for any firm that provides “defined services” such as auditing, accountancy, tax advising, or insolvency practice.
What is AML Verification in the Context of UK?
AML verification is the core measure used to prevent Money Laundering, Terrorist Financing, and Proliferation Financing (MLTPF).
What is AML Verification?
AML verification is the process through which a regulated business confirms that the information that are provided by a client is genuine and belongs to the claimed individual or entity. This process is a mandatory component of Customer Due Diligence (CDD), which ensures that a firm not only knows who the client claims to be (identification) but also possesses the objective evidence to validate those claims (verification).
The purpose of AML verification: While the fundamental purpose of AML verification is to manage MLTPF risks effectively and legally, it also serves several key purposes:
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Fraud Reduction
By asking for identification and verification documents, it makes it difficult for criminals to operate anonymously.
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Risk Management
It ensures that the client’s risk profile informs the required policies, controls, and procedures, which must be approved by senior management.
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Ongoing Monitoring
It provides the necessary baseline information to scrutinise client activities over the course of the relationship, ensuring transactions remain consistent with the firm's knowledge of the client's business and risk profile.
What Are the Core Stages of AML
AML verification is closely linked to the continuous process of CDD. As shown in the diagram, CDD typically consists of three continuous steps:
The risk assessment stage in the above-mentioned steeps is critical and crucial as it dictates the required depth of the verification measures. This analysis must consider five core areas: client base, geographic exposure, services offered, types of transactions, and delivery channels.
What Triggers AML Checks?
AML checks can be triggered by numerous things and at numerous stages, from the initial stage of establishing a relationship with the client to until such relationship lasts. To breakdown:
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Establishment of new relationship with the client
CDD must generally be conducted before establishing a new relationship with the client.
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Transactions
As per, The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, Verifications are mandatory when carrying out a transaction not part of an ongoing relationship where the value is €15,000 or more.
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Interacting with High Value Dealers
High value dealers (traders in goods) must apply for the CDD when making or receiving payments in cash of €10,000 or more.
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In case of suspicion or doubt
If a relevant authority suspects of any money laundering or terrorist financing or has doubts about the credibility and reliability of previously obtained identity information, CDD measures must be reapplied immediately.
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Changing Circumstances
Reviews are mandatory in case any significant changes occur in the client’s circumstances, such as a change in ownership structure or any transaction that is inconsistent with the relevant authority’s existing knowledge of the client.
Requirements for the AML Verification
The AML verification requires using evidence provided by reliable sources independent of the person whose identity is being verified. However, the documents issued by official bodies such as government departments and agencies, court, local authorities and so on are considered independent even if they are submitted by the client.
Documents required for the verification in case of individuals:
To verify the identity of an individual, the relevant authority must obtain original or certified copies and verify the full name, date of birth, and residential address from the client via:
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Primary Identity: Valid passport.
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Other Identification
Valid driving licence (full or provisional), or a National Identity card (for non-UK nationals).
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Supplementary Evidence (Address/Financial)
Current council tax demand letters or statements, current bank statements, or utility bills.
Documents required for the verification in case of Corporate Entities and Beneficial Owners (BOs)
The verification of bodies corporate (such as private companies and Limited Liability Partnerships or LLPs), involves confirming key structural and ownership details:
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Details of the Entity
Full name, registered number, and the registered office address.
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Details of the beneficial owners
The relevant authority must identify those who ultimately own or control more than 25% of the shares or voting rights either directly or indirectly. However, if the relevant authority fails to identify the beneficial owner even after exhausting all possible means, then they must record all actions taken and should treat the identity of the senior person responsible for managing the body corporate as the ultimate beneficial owner.
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Details of the key personnel
Full names of the board of directors (or equivalent management body members) and the senior persons responsible for operations.
The Use of Electronic Data in AML Verification
The relevant authority may use electronic identification processes, either alone or alongside paper evidence provided that it is secured and capable of providing an appropriate level of assurance.
The verification mandate as stated by the Companies House
In contrast to the CDD responsibilities assigned to the relevant authorities, the UK implemented mandatory identity verification regulations through Companies House, which went into effect in February 2025. Directors, Persons with Significant Control (PSCs), and Authorised Corporate Service Providers (ACSPs) are all subject to this regulatory requirement. They can verify online using the GOV.UK One Login or in person at a Post Office. If this criterion is not met, the individual may not be able to register as an ACSP, make filings, or launch a new business. Directors that continue to act without verification may be in violation of the law and be subject to disqualification or a monetary fine.
How Long Does AML Verification Take?
Although there isn’t any hard and fast rule on exact time frame that AML verification procedures must take, typically it should be completed before the establishment of a new business relationship or the carrying out of the transaction. However, The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, 30 (3) allows for verification to even be completed during the establishment of a relationship only if:
- It is strictly necessary not to interrupt the normal conduct of business; and
- There is little risk of MLTPF.
When Should the Cessation of Work Occur?
When a potential or existing client refuses to provide information necessary to conduct CDD and verification, the relevant authority must not proceed with the work, must not establish the relationship, and must terminate any existing business relationship. The relevant authority must further also consider whether a Suspicious Activity Report (SAR) must be made to the National Crime Agency (NCA).
What Should Be Done in the Situation of Heightened Scrutiny?
For situations presenting a high risk of MLTPF, Enhanced Customer Due Diligence (ECDD) measures are mandated. ECCD is an additional step taken by firms when they identify a high-risk client which entails additional documentation and thorough investigation of clients and their transactions. The key triggers for the ECDD are:
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Politically Exposed Persons (PEPs)
PEPs are individuals entrusted with prominent public functions and it also includes their family members and known close associates excluding middle-ranking or junior officials.
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High-Risk Third Countries
Clients from countries that have been identified as such by a source determined to be reliable and credible, which have inadequate MLTF controls or are non-cooperative with international organisations, are subject to sanctions or where upper tier risk-based due diligence cannot be applied.
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Complex or Unusual Transactions
These are transactions with no logical economic or legal purpose, whether unusually large and complex transactions.
Required ECDD Measures
While verifying all ECDD cases, it must include examining the background and purpose of the engagement. For PEPs specifically, the relevant authority must perform additional steps:
- Obtain senior management (Money Laundering Reporting Officer) approval for establishing or continuing the business relationship.
- Take adequate measures to establish the source of wealth and source of funds involved.
- Conduct enhanced ongoing monitoring of the relationship.
What Happens in the Case of Verification Failure?
If a new or existing client refuses to provide information required for CDD, the relevant authority must not establish the new relationship and terminate any existing business relationship with the client. The relevant authority must also consider whether they are required to make a disclosure under Part 3 of the Terrorism Act 2000 or Part 7 of the Proceeds of Crime Act 2002 (POCA) and do so accordingly.
Mandatory Screening Against Financial Sanctions
During CDD and ongoing monitoring, relevant authorities have a separate, mandatory obligation to screen against financial sanctions lists. Failure in this area carries distinct and serious consequences such as:
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Compliance Obligation
Relevant authorities must comply with any sanctions, embargoes, or restrictions imposed by the United Nations (UN) or the UK in respect of any person or state.
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Authority and Reporting
The official list of persons subject to financial sanctions is published by HM Treasury. Relevant authorities have an obligation to report sanctions breaches directly to HM Treasury’s Office of Financial Sanctions Implementation (OFSI), which is distinct from submitting a Suspicious Activity Report (SAR) to the NCA.
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Penalties
Failure to comply with sanctions reporting obligations is an offence that may result in a criminal prosecution or a monetary penalty. Financial sanctions are highly complex, and businesses should use the guidance published by OFSI.
High Costs & Regulatory Penalties
Failures in meeting baseline AML obligations, including verification and CDD, expose firms to substantial financial and criminal risk from regulatory authorities such as the SRA and HM Revenue and Customs (HMRC).
Enforcement cases demonstrating the severity of penalties include:
- The fact that major law firms faced fines up to £300,000 demonstrates that size and reputation offer no protection against fines for deficient AML policies or failure to properly identify high-risk individuals like PEPs.
- The case involving Harvey Nichols, fined £175,701 by HM Revenue and Customs, illustrates that any business accepting €10,000 or more in cash for goods (making them a high value dealer) is subject to the full spectrum of AML requirements, including risk assessments, CDD, policies, and training.
- The Curve Theatre theft, where nearly £869,000 was stolen, showcases the role of ongoing monitoring. The money laundering was flagged because the perpetrator’s bank noticed an inconsistent pattern of 104 transactions flowing into her husband’s account, proving that effective CDD, maintained throughout the relationship, is the critical line of defence.
Conclusion
AML verification serves as the critical security checkpoint for the UK’s financial system. Much like a customs officer inspecting documentation to verify the traveller’s origin and destination, AML verification requires rigorous evidence and ongoing scrutiny to ensure that the identity and financial activity being presented match the verified background, preventing illicit proceeds from flowing into the legitimate economy.
