Anti-money laundering and know your customer compliance represents one of the most significant regulatory obligations facing professional service firms in the United Kingdom today. Whilst many practitioners understand the fundamental principles of AML/KYC frameworks, the specific intersection between industry type and money laundering risk remains an area requiring careful attention and proportionate response.
For accounting firms, tax advisers, and bookkeeping practitioners, the regulatory landscape demands both a clear understanding of the legal framework and practical implementation that reflects the genuine risks posed by their business model.
This article examines how industry-specific factors create distinct compliance challenges and how firms can effectively manage these risks through appropriate governance structures and technology platforms such as Figs Flow.
The guidance is grounded in the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 (MLRs 2017) and reflects established best practice within the professional accountancy sector.Accounting firms must recognize the unique industry-related AML risks they face to ensure compliance with anti-money laundering regulations.
The Role of Accounting Firms in AML Compliance
The regulatory authorities in the United Kingdom have designated accounting professionals as “gatekeepers” to the financial system. This designation carries significant implications for compliance obligations. The Financial Conduct Authority, HM Revenue and Customs, the National Crime Agency, and the professional bodies including ACCA, ICAEW, CIMA, CIOT, ATT and AAT all recognize that accountants occupy a unique position whereby they possess access to sensitive financial information and control engagement processes that could potentially be exploited for illicit purposes.
The basis for this gatekeeper role stems from the reality that accounting firms routinely handle client financial information, manage transactions, advise on tax and commercial structures, and participate in business formation processes. These activities create natural compliance touchpoints where money laundering risk must be identified, assessed and managed appropriately.
Under the MLRs 2017, accounting firms are “relevant persons” when providing specific services. These include trust and company formation services, acting as company secretary or director, providing registered office services, managing client accounts, facilitating transactions concerning real property or business entities, and advising on corporate restructuring.
The breadth of these triggering activities means that many accounting practices fall within the regulatory perimeter and must implement comprehensive AML/KYC frameworks. As gatekeepers, accounting firms must be aware of the industry-related AML risks their clients pose to prevent financial crimes
Understanding Industry-Related AML Risks Factors
Different sectors present various industry-related AML risks, which require accounting firms to tailor their compliance procedures. Regulation 18 of the MLRs 2017 imposes a fundamental obligation on all relevant persons to conduct comprehensive risk assessments of their exposure to financial crime risks.
This obligation requires firms to identify and evaluate the specific money laundering and terrorist financing risks that could affect their operations. The risk assessment must consider multiple dimensions including the customer base, geographical locations of operations, products and services offered, and the delivery channels used.
Industry specific risks arise from the characteristics of the sector in which a firm operates, and the typical client profiles encountered within that sector. For accounting firms, these risks cluster around several distinctive areas.
Identifying the Risk Profile of Clients in Accounting Firms
Accounting firms frequently serve clients whose business models or ownership structures present inherent money laundering risks. Cash-intensive businesses including hospitality, retail, and personal services generate particularly significant compliance challenges because the volume and frequency of cash transactions create opportunities for fund mixing. Similarly, clients operating complex corporate structures, particularly those involving nominee shareholders or bearer shares, warrant enhanced scrutiny because the opacity of ownership may facilitate beneficial ownership concealment.
The professional nature of accountancy means that firms often serve clients before full beneficial ownership information becomes publicly available. For private companies, ownership information does not appear in publicly available registers. Firms must therefore obtain detailed beneficial ownership data directly from clients. This requirement means that the client onboarding process becomes a critical compliance touchpoint where risk must be carefully identified.
Additionally, firms should recognise that certain client sectors present elevated risk profiles. Clients operating in high-risk industries including online gaming, precious metals dealing, cash management services, and international trade finance require more intensive scrutiny. The regulations acknowledge these sector-specific risks through Regulation 33, which mandates enhanced due diligence in circumstances presenting heightened money laundering or terrorist financing risk.
Client risk profiles must consider industry-related AML risks, helping firms determine the level of AML compliance required.
Geographical Factors Affecting AML Risks
Geographical factors influence the industry-related AML risks accounting firms face, particularly in high-risk regions.
The geographical locations where clients operate or where beneficial owners reside create meaningful risk variations. Regulation 33 of the MLRs 2017 identifies high-risk third countries as those lacking effective anti-money laundering systems, exhibiting significant corruption levels, or providing support to terrorism. Countries subject to EU or UN sanctions fall automatically into the high-risk category, as do nations with designated terrorist organisations operating within their borders.
For accounting firms, clients operating in or connected to high-risk jurisdictions require mandatory enhanced due diligence procedures. This means obtaining additional information on the customer and ultimate beneficial owners, understanding in greater depth the intended nature of the business relationship, verifying the source of wealth and source of funds, and securing senior management approval before establishing or continuing the relationship.
AML Risks in Different Service Types and Transactions
Each service type and transaction has its own industry-related AML risks, with variations depending on the sector involved.
The services offered by an accounting firm create distinct compliance risks. Firms providing trust and company formation services face heightened risk because these services can be deliberately misused to obscure beneficial ownership. The creation of corporate structures without transparent beneficial ownership information creates opportunities for illicit fund concealment.
Similarly, firms facilitating transactions concerning real property or business entities must recognise that property transactions, particularly those involving substantial sums and international elements, present recognised money laundering vectors. The volume of funds involved means that successful fund placement through property transactions can facilitate significant money laundering schemes.
Transactions that are unusually large relative to the client’s stated business profile, transactions that deviate from the stated purpose of the business relationship, or transactions involving payments from unknown third parties all represent red flags warranting enhanced scrutiny. The regulations require firms to conduct ongoing monitoring throughout the client relationship to identify activities inconsistent with their understanding of the client and their business purpose.
Recognizing these industry-related AML risks helps firms stay compliant and reduce exposure to financial crime.
Using Technology to Address Industry-Related AML Risks
Technology plays a vital role in managing industry-related AML risks, providing firms with tools to streamline compliance.
Modern compliance platforms such as Figs Flow address industry-specific risks through integrated functionality that enables firms to embed risk assessment and due diligence procedures into their standard client onboarding and engagement management processes. Understanding how such platforms facilitate effective compliance represents an important practical consideration for modern accounting firms.
By leveraging technology, firms can better mitigate industry-related AML risks and enhance their AML compliance strategies.
Client Onboarding and AML Risk Assessment Procedures
Client onboarding processes must account for industry-related AML risks, ensuring that firms assess potential risks early.
The engagement process creates the natural starting point for AML/KYC compliance. Platforms such as Figs Flow integrate regulatory-compliant engagement letter templates meeting standards of major accountancy bodies, which provides an important foundation for establishing compliance obligations with clients from the outset. This early clarification of compliance requirements protects firms by ensuring clients understand that AML/KYC procedures will apply to the engagement.
Client onboarding functionality should enable firms to gather essential identifying information including full name, date of birth, residential address for individuals, and company name, registration number, and registered office for corporate entities. Critically, the platform should facilitate collection of beneficial ownership information identifying all individuals exercising control or ownership exceeding 25 percent. For private companies, this information must be obtained directly from the client because public registers do not contain it.
The platform should guide practitioners through a risk classification process that evaluates customer, product, service, geographical and transaction factors. This evaluation determines whether standard due diligence, enhanced due diligence, or simplified due diligence procedures apply. The tiered classification system reflects regulatory requirements under Regulation 33 and Regulation 37 of the MLRs 2017, with higher-risk profiles triggering more intensive verification and monitoring.
Effective AML risk assessments during onboarding help identify industry-related AML risks and prevent compliance failures.
Ensuring Proper Documentation and Verification for AML Compliance
Proper documentation and verification processes are essential for addressing industry-related AML risks and ensuring compliance.
Effective compliance requires proper documentation of due diligence steps taken. Regulation 40 of the MLRs 2017 mandates that firms retain records of all steps taken to comply with customer due diligence and enhanced due diligence requirements. These records must be maintained for five years from the end of the client relationship and must be readily retrievable when required by regulatory authorities.
Technology platforms should facilitate the collection, storage and organisation of required verification documents. For individuals, essential documentation includes proof of identity such as passports, driving licences or national identity cards, and proof of address such as utility bills, bank statements, or council tax bills. For corporate entities, the platform should support collection of certificates of incorporation from Companies House, certified registers of directors and shareholders, and certified articles of association.
The verification process creates a crucial compliance control point. Firms must ensure that identity information is validated against independent authoritative sources rather than relied upon blindly. This may involve cross-referencing information provided by clients against Companies House registers for UK entities, checking against sanctions lists maintained by HM Treasury and the United Nations, conducting adverse media searches for negative information regarding clients, and implementing politically exposed person screening where applicable.
This documentation must reflect industry-related AML risks to ensure firms meet regulatory requirements.
Enhanced Due Diligence for High-Risk Clients and Transactions
Enhanced due diligence (EDD) is crucial for managing industry-related AML risks associated with high-risk clients and transactions.
For clients identified as presenting elevated risk, the platform should facilitate systematic application of enhanced due diligence measures. Regulation 33 mandates that where higher-risk profiles are identified, firms must examine the background and purpose of the engagement more thoroughly, increase monitoring intensity, and for clients connected to high-risk third countries, obtain additional information on the customer and beneficial owners, gather additional information on the intended nature of the business relationship, verify source of wealth and source of funds, obtain information on transaction reasons where applicable, and secure senior management approval.
The platform should create workflow triggers that identify when enhanced due diligence circumstances arise and should guide staff through the mandatory additional procedures. Documentation of enhanced due diligence procedures becomes particularly important because this demonstrates that the firm identified elevated risk and responded appropriately.
“By applying EDD procedures, firms can mitigate industry-related AML risks and ensure regulatory compliance.
Ongoing Monitoring and Transaction Analysis for AML Compliance
Ongoing monitoring of transactions is key to detecting industry-related AML risks that may emerge over time.
Compliance extends beyond the initial client onboarding stage. Regulation 28 of the MLRs 2017 requires firms to conduct ongoing monitoring of business relationships by scrutinising transactions to ensure they remain consistent with the client’s profile and by keeping customer information up to date. The intensity of ongoing monitoring should reflect the risk profile of the client, with higher-risk clients receiving more frequent review.
Technology platforms should enable monitoring workflows that flag transactions or activities requiring review. This may include transactions that are unusually large relative to the client’s norm, transactions that deviate from the stated business purpose, transactions involving multiple layered intermediaries, or transactions to or from high-risk jurisdictions. The platform should create audit trails documenting the monitoring review undertaken and decisions made.
Regular transaction analysis helps firms address industry-related AML risks and ensure continued compliance.
Recognizing Red Flags and Suspicious Activities in AML Compliance
Recognizing industry-related AML risks involves spotting red flags and suspicious activities early in the compliance process.
Effective compliance depends upon staff ability to recognise activities presenting money laundering concern. The regulations require that relevant employees receive training to recognise and deal with transactions and situations that may relate to money laundering, terrorist financing or proliferation financing. Red flags vary by industry, but certain patterns require attention across all sectors.
Cash-intensive clients presenting unusual patterns of cash handling, particularly involving receipt of cash that is immediately transferred to third parties, warrant heightened scrutiny. Similarly, clients whose stated business purpose does not align with their transactional activity require investigation. For example, a client described as a management consultant whose accounting records show primarily real estate acquisitions and sales presents an inconsistency requiring clarification.
Clients providing incomplete or inconsistent information on the identity of beneficial owners, clients appearing to deliberately structure transactions to remain below reporting thresholds, and clients requesting unusual transaction patterns all present red flag indicators. Documentation retained in client files should evidence that these red flags were identified and either investigated or escalated appropriately.
Critically, Regulation 333A of the MLRs 2017 prohibits “tipping off” clients regarding reporting of suspicious activity. If a firm forms a suspicion of money laundering and files a suspicious activity report with the National Crime Agency, the firm must not inform the client that this reporting has occurred or that an investigation is contemplated. This prohibition applies even if the client would normally expect to be informed of issues affecting their account or engagement.
By identifying industry-related AML risks, firms can act promptly to prevent illegal activities.
Establishing Effective Governance and AML Compliance Structures
Establishing governance structures is crucial for managing industry-related AML risks and ensuring firm-wide compliance.
Regulation 19 of the MLRs 2017 requires all regulated entities to implement comprehensive anti-money laundering frameworks as part of their operational structure. These frameworks must include written AML policies outlining the firm’s approach to preventing money laundering and terrorist financing, detailed procedures for customer due diligence, transaction monitoring and record-keeping, regular staff training to ensure employees understand their obligations and can identify suspicious activities, and an independent audit function reviewing the effectiveness of AML systems and controls. Sole practitioners with no employees are exempt from the independent audit requirement due to practical limitations of their business structure.
Regulation 21 imposes a specific requirement that firms appoint a Money Laundering Reporting Officer at board or senior management level. This individual must possess sufficient understanding of the business, its service lines and clients, must hold sufficient seniority to direct all staff activities including senior staff, and must possess authority to ensure compliance with the regulatory regime. The MLRO serves as the central point of accountability for AML compliance and acts as the primary liaison with regulatory authorities.
The MLRO, working with senior management, bears responsibility for establishing, approving and ensuring compliance with the firm’s AML policies and procedures across six critical areas.
These include:
Client acceptance procedures:
Establishing the framework for onboarding new clients and assessing their risk profiles.Risk management practices:
Developing and maintaining systems to identify, assess, and mitigate money laundering risks.Internal controls:
Implementing robust control systems, including employee screening and ongoing AML training programs.Internal audit and compliance review:
Supervising the annual AML compliance review process and ensuring effective internal audit functions.Customer due diligence:
Establishing policies for conducting appropriate due diligence.AML record-keeping:
Ensuring proper maintenance and retention of all required AML documentation.
Strong governance systems help firms effectively address industry-related AML risks and maintain regulatory adherence.
Training Staff to Recognize and Respond to AML Risks
Training staff to recognize industry-related AML risks ensures that firms can effectively prevent financial crime.
Regulation 24 of the MLRs 2017 requires firms to provide training to relevant employees whose work involves AML compliance or could help identify, prevent or detect financial crimes. The training must be provided to agents performing similar functions for the business. This requirement means that all staff involved in client-facing activities, including those involved in client onboarding, transaction processing, or engagement management, require appropriate AML training.
The training programme must explain the law within the context of the firm’s own commercial activities, outline requirements to carry out customer due diligence and conduct ongoing monitoring including how to carry out CDD and its purpose, clarify when it is appropriate to make an internal report to the firm’s MLRO and how to do so, identify red flags that relevant employees should recognise when conducting business, explain how to deal with client activity and situations that might relate to money laundering including how to use internal reporting systems, and cover relevant data protection requirements.
A key consideration is that someone accused of a Failure to Report offence has a defence if they did not know or suspect that someone was engaged in money laundering because their employer had failed to provide appropriate training. However, this defence places the business at risk of prosecution for a regulatory breach, creating liability for the organisation. This interaction creates powerful incentive for firms to ensure adequate training is provided to all relevant staff.
Beyond formal training, firms should aim to foster a compliance culture where all staff recognise that AML compliance represents everyone’s responsibility rather than a matter solely for the compliance department. Periodic awareness campaigns, regular reminders of key obligations, and encouragement for staff to raise concerns when uncertain contribute to embedding compliance within organisational culture.
By educating staff about industry-related AML risks, firms can empower their teams to spot issues early.
Best Practices for Implementing AML Compliance Frameworks
Implementing best practices in AML compliance involves addressing industry-related AML risks specific to each sector.
Effective AML compliance depends upon ongoing commitment to maintaining current knowledge, implementing clear procedures, and fostering strong compliance culture. Several principles guide best practice implementation across the sector.
Firms should maintain up to date understanding of regulatory changes and ensure that compliance frameworks align with current legislation. The regulatory landscape for AML/KYC compliance has evolved substantially over recent years and continues to develop. Policies and procedures require regular review and updating to reflect changing requirements, particularly when new guidance is issued by the FCA, HMRC, professional bodies, or when significant judicial decisions clarify regulatory obligations.
Clear written procedures should guide staff actions in specified situations. These should address opening new accounts or engaging new clients, the documentation required at each stage, procedures for monitoring client transactions over time to identify unusual or suspicious patterns, assessment methodologies for determining client risk levels, and processes for reporting suspicious behaviour through the internal reporting system and escalating matters to the MLRO.
Firms should address industry-specific requirements applicable within their sector. For example, if a practice serves clients within the online gaming sector, practitioners must implement enhanced identity verification procedures appropriate to that industry. Similarly, if a firm provides services to clients engaged in trust and company formation, particular emphasis on beneficial ownership verification requirements becomes necessary.
Most fundamentally, firms should foster strong compliance culture where compliance represents a positive organisational value rather than an administrative burden imposed by external regulators. This cultural foundation enables firms to attract and retain staff committed to compliance excellence and creates organisational resilience in maintaining high compliance standards.
Following these best practices ensures firms effectively manage industry-related AML risks and stay compliant.
Helpful Resources
- Complete Guide to AML Compliance & Financial Crime for UK Accountants: Complete Guide to AML Compliance & Financial Crime Prevention | FigsFlow
- List of AML Regulations & Regulators in the UK: List of UK AML Regulations for Accountants 2025 | FigsFlow
- How to Verify Client Identity for AML Compliance: Verify Client Identity in AML: Step‑by‑Step Guide | FigsFlow
- UKSanction Screening Guide for Professionals & Businesses: Sanction Screening UK Guide 2025/26 | FigsFlow
- Common Identity Verification Mistakes in AML: Common ID Verification Mistakes in AML | FigsFlow
Conclusion: Managing Industry-Related AML Risks with Effective Compliance
To effectively manage industry-related AML risks, firms must implement strong compliance measures tailored to their operations.
Industry-specific AML risks require proportionate compliance responses reflecting the genuine financial crime threats posed by the services offered and client base served. For accounting firms, the gatekeeper role imposed by regulation carries significant responsibility to ensure that compliance frameworks operate effectively to prevent misuse of professional services for money laundering purposes.
Technology platforms including Figs Flow provide important practical tools enabling firms to embed AML/KYC procedures within their standard business processes. By integrating customer due diligence, beneficial ownership verification, risk assessment, ongoing monitoring and documentation procedures into platform functionality, firms can achieve compliance more efficiently whilst reducing the risk of inadvertent non-compliance.
Ultimately, effective AML compliance depends upon clear governance structures, well-trained staff, documented procedures, and commitment to embedding compliance within organisational culture. When these elements operate together, firms discharge their gatekeeper responsibilities effectively whilst managing financial crime risks appropriately.
In conclusion, managing industry-related AML risks with effective compliance frameworks is crucial for staying ahead of regulatory requirements.
