The Landscape Of AML Compliance

Learn how to progress your accounting firm towards higher levels of AML compliance with our AML maturity frameworks which has been developed using data and insights collected from over 200 UK accounting professionals.

Key Findings

What are AML mature accounting practices doing differently?

1 in 3 don’t have risk assessments in place

Despite AML compliance being recognised as important, a third of firms (30%) don’t follow a standard client risk assessment with their client or don’t have a firm-wide risk assessment (28%) in place leaving them exposed to AML non-compliance, and business risk.

Firms that have been operating longer are 2x more likely to have better processes for risk management

The core components of more mature AML compliance practices are more common in firms that have been trading for longer – suggesting that AML compliance could be an afterthought when setting up a new practice.

Technology is more likely to support better AML risk management

Those firms that are adopting AML compliance software, are 2x more likely to have a standardised means of conducting due diligence, whilst managing risk assessments is one of the most common ways firms are utilising AML software, with 1 in 2 firms indicating this is how they currently use AML software.

Firms are 3.2x more likely to carry out more regular reviews if they have adopted a technology solution for AML compliance

Technology is a leading indicator in AML compliance, those who weren’t using software to manage any aspects of their AML compliance, are a lot less likely to stay on top of their policies, procedures and controls, and perhaps the regular reviews required.

The AML Maturity Framework

The AML maturity framework provides a structure which accounting firms can use to assess their level of AML competence across three core pillars: people, process and technology. Using the insights we've gathered from our extensive research (which you can read more about in the full report).

It also provides a pathway for firms to move to a higher level of competence with their AML compliance, and at the very least moving towards Level 3 and the line of compliance.

People

This relates to the individuals doing the AML compliance work, managing the obligations for the whole firm, and being the advocate or go-to person(s) for AML. It also includes the depth and breadth of AML knowledge and training frequency at the firm.

Process

The polices, tools, and processes that the firm has in place to make sure they are meeting their AML compliance obligations and making it more streamlined.

Technology

The way the firm is using technology to make their AML work more efficient and also hit their AML obligations inline with the legal rules and regulations.

The five stages of AML maturity

Level 1

Undefined

Level 2

Limited

Level 3

Competent

The Line Of
Compliance

Level 4

Systematic

Level 5

Excelling

Applying the AML Maturity Framework

Unfortunately there is no escpaing AML compliance at your firm, but managing the obligations that come along with it, and knowing if you're actually compliant is a little bit more challenging to understand.

With the AML maturity framework we're addressing those challenges head on, by providing you a clear framework, and pathway for improvement, that feels actionable, and obtainable.

For some being compliant might be enough (and the framework will help you get there), for others you might want to build more complexity into your AML compliance, which is excellent, and the framework also identifies opportunities to go above and beyond just being compliant.

Get to grips with each of the levels of the AML maturity framework, and discover ways you can level up your AML compliance.
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Level 1

Undefined

AML compliance is an afterthought, and there is nothing formally in place to demonstrate AML compliance.

Firms have an awareness that they need to do something, and might have plans to bring in a more formal AML process, but don’t know where to start, and whilst may have named their MLRO, limited steps have been taken by that person towards AML compliance. There is a low level of understanding concerning their compliance obligations and the firm is currently not compliant with AML compliance requirements. Due to the almost non-existent AML processes, there is a high level of firm risk, whereby you may be subject to fines, and reputational damage – the chance that a client is engaged in money laundering could be higher due to poor AML controls.

To level up your AML practices, and make steps towards being compliant you should implement the following:

Create a process

you should develop, formalise and document a process for managing AML compliance at your firm

Be more active

ensure your MLRO is an appropriately senior individual in your firm, and ensure that they have done some training to begin to understand exactly what is involved, so they can start taking small steps towards compliance

Understand what to do

get to grips with your AML supervisor's requirements, you’ll find each supervisor has varying levels of templates and guidance available. Your supervisor for AML, if you practice as a member of a professional body e.g. ACCA or ICAEW, will be the professional body you’re registered with, and if you don’t have (or know) who your supervisor is, then by default your supervisor for AML may be HMRC – now is a good time to check this before you start tailoring your AML compliance program

Level 2

Limited

AML compliance is ad hoc, disorganised and there is limited awareness of the requirements – some work is being done to meet some of the compliance requirements but not all.

Firms are doing what they can to tick some AML boxes – but don’t understand their compliance obligations and likely are not compliant with their AML obligations in some areas. Not all of their clients might have an AML record, or determination and therefore some gaps and risk exposure exist within the firm. There is generally a low level of understanding of policies, low technology adoption, or a consistent process to manage AML. Firms might be using some tools to check and verify the identities of clients under the impression that this makes them AML-compliant and is enough to meet their obligations.

To level up your AML practices, and gather confidence that you’re meeting your compliance obligations you can try implementing the following:

Get the foundations in place

a consistent AML process for new and existing clients including a documented risk assessment and due diligence process, beyond just checking and verifying IDs

Upskill all your staff

and get a grasp on the basics of AML, and the requirements for accountants, including those unique requirements for your AML supervisor

Consider how technology might help you

consolidate your AML process into one place, especially your risk assessments, as opposed to perhaps requesting information via email, or storing documents on a hard drive

Level 3

Competent

AML compliance is understood, and enough is being done to meet legal requirements.

Firms are doing enough to be AML compliant – there is an understanding of what they need to do, and do the minimum to avoid harsh penalties or fines from their industry bodies. AML is often still perceived as a burden and just something ‘done’ to maintain integrity as a firm.

At this point process might not be fully refined and might still be spread over multiple tools/places. Still, there is a consistent process for onboarding, ongoing due diligence, document storage and risk assessments, additionally, all staff are trained at least once per year and there is a record.

The 6 fundamental elements to reach AML compliance are:
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having a firm-wide AML risk assessment,
a policies, controls and procedures document,
AML training for relevant staff and a record of that,
clients and their beneficial owners’ ID verified,
AML risk assessment conducted for each client,
and, an annual system of periodic reviews to test and update the firms AML compliance.

Firms can grow in AML maturity by thinking about some of the following ideas:

Ensure that all staff understand your AML process

and how it can be valuable, start reframing the process as less about compliance and more about a way to learn more about any new clients you’re onboarding or building relationships and spotting other opportunities with existing clients, and longer-term helping to reduce financial crime

Implement technology

to help you with the documentation, collection and storage of all AML records beyond just the basics of checking and verifying IDs

Level 4

Systematic

AML is a core part of understanding your clients and a clear process is well understood and documented – you are likely going above and beyond your requirements.

Firms are doing more than just the minimum to be AML compliant – there is a clear and confident AML focus and an emerging understanding that it can be a key part of the business, not just from a compliance perspective. There is a deeper understanding of the ‘why’ behind AML and what role accountants play in helping to reduce financial crime. Technologies are being leveraged to automate key parts of the process and there is a ‘smarter’ way of managing AML.

To reach the next step, firms need to continue to build on the strong foundations:

Search for new values

to extract additional value from your AML processes, this could include adopting additional technology to develop a deeper understanding of your clients, or leveraging automation to make the ongoing management easier

Ensure that all of your staff are well versed

in your firm's policies, controls and procedures and how to use them – empowering anyone to ‘run’ AML should they need to

Dive into the data

and see how you might be able to leverage the information you’ve captured during initial onboarding and AML reviews to expand service offerings and value-added services with clients

Consider implementing a compliance team

or a dedicated compliance officer if the size of your firm warrants it. A dedicated compliance officer in addition to your MLRO, can strengthen your AML compliance, by bringing another layer of responsibility – the compliance offer with particular responsibilities for ensuring the firm’s compliance can complement the MLRO, who can continue to focus on the record-keeping and compliance requirements for managing new and existing clients

Level 5

Excelling

AML is a core component of firm operations, and the value it adds to new and ongoing relationships is widely understoof, from a compliance perspective you're excelling above and beyond your AML requirements

Firms are exceeding the requirements of bodies and their legal obligations and it’s understood how it can be invaluable in helping develop a complete picture of a client, and how components of AML compliance can help prompt other work with clients, and inform engagements.

Proactive, ongoing, technology is a key ingredient as is organisational alignment on AML, and a solid understanding of all areas of the firm. All relevant staff have a high level of AML training and a good understanding of the requirements due to the frequency of training that has been, and continuous reflections on AML policies, controls and procedures.

Reaching this level of AML maturity is the ultimate goal, but maintaining this level requires some commitment:

Continue to provide ongoing training to staff

to ensure they have a current understanding of the latest developments in AML, but also continue to understand any changes to firm policies, controls and procedures

Ensuring you’re constantly updating and assessing your risk assessments

including your firm-wide risk assessment and keeping policies and procedures up to date

Leveraging smart technologies

to create an integrated AML processes that is low touch, easy to maintain, audit ready and makes meeting the ongoing management of clients easy

The survey in numbers

Regions

208

Respondents

All

Regions of the UK represented

Size of companies

Small

1 - 10

Medium

11 - 50

Large

51+

Average revenue of companies

Less than £1 million

57%

£1 million to £5 million

20%

£5 million to £10 million

17%

Over £10 million

Most common services offered by firms

Bookkeeping Services

54%

Tax Planning & Preperation

42%

Auditing & Assurance

37%

Payroll Processing

27%

Management Accounting

26%

Forensic Accounting

16%

Fractional CFO Services

Audience insights

Methodology

Understanding the landscape

We worked closely with industry experts to review and understand other indicators for AML maturity that currently exist and identified key factors that influence AML maturity. Based on this research, we developed a survey to test and define a new framework for measuring where a firm is on the spectrum of AML maturity – from the basic components to be compliant to those running more proactive all-encompassing AML compliance programmes.

The online survey

In December 2023 and January 2024, we surveyed over 200 accounting firms of all sizes, types, and regions throughout the UK. The survey included self-assessment questions focused on feelings towards AML compliance in the industry, how well firms believe they are performing and their current ways of managing AML compliance to test some hypotheses we’ve developed in our research working with accounting firms.

The AML maturity framework

Following the survey results, we designed a theoretical model and framework for describing the journey towards AML maturity.

Our new AML Maturity Model sets out four levels of research maturity, with Level 1 being the lowest and Level 5 the highest, with Level 3 being the 'line of compliance' or the minimum requirement when it comes to meeting your obligations.

Download The Full Maturity Framework & Research Report

If you're looking to learn from 200+ other accounting firms, and understand where room for improvement might exist in how you currently manage AML compliance, this report will give you the insights and framework you need to make actionable progress, starting today.