Be prepared for Anti-Money Laundering (AML)

The new Anti-Money Laundering regulations, introduced in June 2017, bring a number of fundamental changes that will require accountancy practices to review and update their AML policy and procedures in order to stay compliant.

What are the changes? 

There is now a requirement for firms to conduct a written risk assessment that takes into account the risk factors relating to its customers, countries or geographic areas of operation, products or services, transactions and delivery channels. The risk assessment must be readily available to share with the regulators and be kept up to date. When reviewing and updating their AML risk assessments, firms should acknowledge the UK’s National Risk Assessment that will be published every two years.

There is no longer automatic exemption from enhanced customer due diligence (CDD). Prior to applying simplified CDD, firms need to assess the customer risk level and have documented proof that supports this decision. The risk factors listed in the regulation include customers, products, services, transactions, delivery channels and geographical risks. Customer risk assessments are expected to be facing greater scrutiny so it is therefore crucial to keep everything properly documented. 

The regulation also specifically lists the circumstances to apply enhanced due diligence (EDD) measures, which includes any transaction or business relationship involving a person established in high-risk third countries, or involving a Political Exposed Person (PEP), a family member or known associate of a PEP, the transaction is complex and unusually large, or there is an unusual pattern of transactions. 

The threshold to undertake customer due diligence has also been reduced to €10,000 when trading in cash for goods, regardless of whether this takes place over several linked transactions or just a single one.

The definition of a ‘Politically Exposed Person’ has also been extended to include UK domestic PEPs. Firms will be required to make sure domestic PEPs are recognised and categorised accordingly as well as applying enhanced due diligence. If you have a business relationship with a PEP or a family member or known close associate you must as minimum:

1) Have senior management approval for establishing a business relationship or continuing the business relationship.

2) Take adequate measures to establish the source of wealth or the source of funds. 

3) Conduct enhanced ongoing monitoring of the business relationship.

It also goes without saying that any suspicious attempted or completed transactions must be reported. 

What else is new?

There are a number of significant changes to the regulation that will put a strain on the already busy life of an accountant. But the silver lining is that they’ll help you avoid unwitting involvement in money-laundering activities. 

So what are the most important changes?

The new regulation has a much stronger emphasis on a risk-based approach, especially regarding requirements of documented client risk assessments. 

Preparing for AML 

The prospect of keeping up with all the changes to AML can seem daunting. Those looking for a good place to start should follow these steps:

1. Review and revise your  AML policies and procedures

2. Review and revise  your AML written risk assessment

3. Ensure awareness and training of staff on AML

4. Review specific industry guidance 

The Consultative Committee of Accountancy Bodies (CCAB) has prepared draft guidance on the new AML regulation specifically for the accountancy sector, which is waiting HM Treasury approval.  This has already been published on the CCAB website

IRIS also has its own Anti-Money Laundering solution that will help you stay compliant and minimise the impact the new regulation will have on your workload