What does 'high-end' money laundering mean, and are there exemptions?
The UK definition of high-end money laundering is ‘the laundering of funds wittingly or unwittingly through the UK financial sector and related professional services.’
Criminals may use accountants as professional enablers to help their illicit funds gain legitimacy – they need accountants’ skills and expertise to facilitate these methods of money laundering. That’s why it’s called high-end money laundering. It does not refer to the value of the proceeds of crime that are being laundered.
Can you give examples of unnecessarily complex structures?
Criminals may use multi-layered corporate entities across multiple jurisdictions to obscure beneficial ownership and the origin of funds. Firms should ask clients to explain the commercial rationale behind any complex structure and apply professional scepticism where it does not stack up.
If you are concerned about complex structures, what information and evidence should be requested?
You should request a clear explanation of the structure and its commercial rationale, identification and verification of the ultimate beneficial owners, and supporting documentation such as organisational charts or shareholder registers. Apply professional scepticism and assess whether the structure makes commercial sense. Refer to the CCAB guidance for further examples.
How far should we go in investigating lifestyle clues, like a client owning a Ferrari?
You are not expected to investigate lifestyle details, but if there is a clear mismatch between known income and personal spending, it could be a red flag. Ask appropriate questions in line with your professional engagement. If the explanation is not credible, consider whether a SAR is required.
What if we only provide tax and accountancy services to micro entities with no audit?
Even if you are not carrying out audit work, you still have AML responsibilities under the regulations. Many red flags can arise in the normal course of providing tax or accounts services – such as unexplained lifestyle indicators, unusual transactions, or reluctance to provide documentation. You’re not expected to act as a detective, but you should apply professional scepticism to recognise and act on red flags that arise during your work.
As a sole trader with no other staff, what are my requirements for 'Firm-wide procedures' and annual reviews?
Under Regulation 21(1)(c) of the Money Laundering Regulations, sole practitioners with no staff are not required to carry out a formal compliance review. That is the only regulatory exception for sole practitioners. They must still have a documented firm-wide risk assessment, written AML policies and procedures and be compliant with the Money Laundering Regulations.
Do we need to verify right to work for payroll bureau client employees?
No, there is no AML requirement to verify the right to work of payroll bureau client employees. Your AML obligations apply to your own clients, not to their staff. However, if your firm identifies AML red flags in payroll activity, such as unusual employee patterns or payments, you should investigate further as part of your ongoing customer due diligence.
How many SARs would you expect from a small firm (eg, three partners, 15 staff)?
This is a very tricky question to answer as it will depend on the AML risk in your portfolio. Firms of this size would normally have submitted a small handful of SARs each year. If no SARs are being filed, firms should consider whether staff are identifying and reporting red flags effectively.
When an insolvency practitioner arranges an IVA with a ‘white knight’ settlement, how far must they go to ensure the funds are clean?
Insolvency practitioners should perform customer due diligence on their client and understand the source of funds. While there is no legal requirement to perform CDD on the third party (‘white knight’), they must be alert to red flags and consider submitting a SAR if the source is suspicious or unverifiable.
Is there an ICAEW client checklist that we could complete annually?
ICAEW does not provide a generic client checklist, as these can become too formulaic and risk being misused. However, the ICAEW AML Service (provided in partnership with Mercia) offers CDD checklists and documentation tailored to client complexity. ICAEW provides free templates for firm-wide risk assessments and compliance reviews, available at icaew.com/amlresources.
Is there any guidance from ICAEW on how to discuss AML with nervous clients when asking them for documents?
There is currently no specific ICAEW guidance, but it’s good practice to explain that the request is a legal requirement under the Money Laundering Regulations and applies to all clients. Reassure clients that the process is standard and their information is treated confidentially.
Can AML updates be simplified for junior staff?
ICAEW provides AMLbites. These are short, free videos designed to be accessible for all staff, including those in junior roles. Several episodes focus on risks and red flags. MLROs may wish to consider providing regular summaries of ICAEW updates to staff as part of the requirement to ensure staff receive sufficient training.
Are admin staff required to do AML CPD or training?
If admin staff are involved in AML-relevant activities (such as onboarding, ID checks, or handling clients’ money) they must receive training under Regulation 24. Even if their role is indirect, a basic level of awareness training is recommended so they know how and when to escalate concerns.
Formal CPD requirements are slightly different, and specifically relate to ICAEW regulated individuals and firms.
Where can we find the ICAEW ethics/AML film?
The ICAEW film 'All Too Familiar' illustrates how accountants can become unwitting enablers. It is available to all ICAEW-supervised firms.
Our next film, 'Crossing the Line', launches on 20 May and will include AML content.