The accounting industry landscape in the UK has been continuously changing, and the latest no doubt, most important is the new anti-money-laundering regime due by 2024. In this quest for transparency against financial crime and a resilient financial system, it becomes extremely necessary for accounting firms to know and stay within regulations—both to avoid penalties and to continue earning client trust. In this blog we will give an overview of the new AML regime, focusing on key areas of reform and bringing practical compliance guidance.

What are new AML regulations in 2024?

The new laws on AML for 2024 introduce many changes in the existing rules and mainly work to bring better prevention, detection, and reporting of money laundering operations. The new-fangled regulations now require accounting firms to tighten internal controls, make improvements to the client due-diligence process, and increase staff training. Major changes include:

EDD (Enhanced Due Diligence) requirementsː There shall be detailed scrutiny on clients, in particular those of a high-risk nature, and evidence that it has been carried out.

Beneficial Ownership Transparency: The trend nowadays is specifically the identification and verification of the ultimate beneficial owners.

Continuing monitoring obligations: Organisations must monitor their customer databases and report suspicions of activities to the National Crime Agency (NCA)

More Accountability: Senior management and compliance officers are now accountable for increased, severe potential sanctions for non-compliance.

How should accounting firms prepare to be compliant?

The secret to this lies in getting ready for the new AML regulations. This is what needs to be taken by accounting firms:

Conduct a Risk Assessment: Evaluate the firm’s existing AML policies and procedures to identify any gaps. Consider factors such as client base, geographical exposure, and types of services offered.

Amend AML policies and procedures:  Concerning all the amendments incorporated in the new regulation, and specifically, provide guidelines on Enhanced Due Diligence, verification of beneficial ownership, and continuous monitoring.

Implement robust client due diligence processes: Implement procedures at your firm for KYC to ensure that clients are properly vetted. This includes verifying the client’s identity, understanding their business model, and identification of beneficial owners.

Enhance Staff Training Programs: Ensure that all members of the firm’s staff are appropriately trained on AML compliance. The training shall be regular, comprehensive, and firm-specific with respect to certain needs and risks.

Invest in Technology: Buy AML compliance software that can automatically do client screening, transaction monitoring, and report preparation for regulatory affairs.

What are the penalties for non-compliance?

Heavy fines, long term in prison, and reputation is at stake with this failure to comply with provisions of the law on AML. For accounting firms, loss of licence to practise the profession and barring certain services are some other penalties. The 2024 regulation holds the firm and employees liable, especially the senior employee responsible, for failure to put in place an AML control environment or proper implementation.

Why is client due diligence now a higher priority?

The provisions by 2024 are strongly headed toward due diligence, with a good urge to high-risk clients. The prerequisites depict the process of identifying the clients as well as understanding the nature of the business and probable risks for money laundering. In addition, the firms have an obligation of permanent UBO identification and control relationship, with the problematic signalling concern over suspicious activities.

How will technology assist in ensuring AML compliance?

Technology is at the heart of compliance with the new AML regulations. Automated systems can help firms quickly conduct client screening, monitor transactions for suspicious activity, and ultimately generate reports to the authorities. Some of the key technologies to consider include:

AML Compliance Software: Client due diligence, transaction monitoring, and regulatory reporting were automatically performed.

AI and ML: AI and ML will be able to identify the regularity of abnormalities within a customer’s transactions and raise an alert in any suspected money laundering case.

Blockchain Technology: Provides a safe and transparent way to track customer identities and verify transactions.

What are the best practices for ongoing monitoring?

Ongoing monitoring is a critical part of AML compliance; it refers to the regular scrutinisation of customer data and transaction activity to detect and respond to any anomalies. Leading practices for ongoing monitoring include:

Regular Customer Profile Reviews: Review customer profiles on a regular basis, verifying all information is up-to-date and accurate.

Transaction Monitoring: Employ automated systems to track transactions for anomalies or red flags.

Suspicious Activity Reports (SARs): Submit promptly any SARs demonstrating suspicious activity to the NCA.

Internal Audits: Regularly perform internal audits of the AML policies and procedures to ensure conformity and unearth areas where improvements can be made.

How do firms keep up with changing legislation? 

Stay current with regulatory changes to remain in compliance. Accounting firms must: 

Subscribe for Regulatory Updates: Subscribe to newsletters issued by the HM Revenue and Customs and the Financial conduct authority. 

Industry Associations: Attend forums and webinars made by professional institutions that hold industry leadership, for example, ICAEW (Institute of Chartered Accountants in England and Wales) and AAT (Association of Accounting Technicians). 

Training: Regular scheduled training programs and workshops enable staff to update themselves on any different changes in the regulations and even best practices. 

Conclusion: Key takeaways for accounting firms

With only the current acts of proactiveness, compliance with the new AML will be possible only in 2024. Accounting firms will need strict AML policy, more CDD on the clients, investments in technology, and instilling a compliance culture.

Informed and preparing firms will ensure threats regarding money laundering are countered and compliance to the law is assured. 

The 2024 AML regulations establish a new legal obligation for your firm; moreover, they allow the protection of the firm’s reputation and its name value by customers and the public. Compliance with this scenario in the way of taking steps connected with the following accommodation allows accounting firms in the UK to continue to thrive in a complex and ever-evolving regulatory setting.