In a submission to the government consultation on the UK’s anti-money laundering (AML) regime, the IFA called for greater clarity on supervision of “relevant persons” in the accountancy industry and the need to tailor AML measures to the realities faced by smaller accounting practices. The IFA stressed that while its members are committed to combating financial crime, overly complex or burdensome regulations would be counterproductive.
“It’s crucial that any changes don’t create unnecessary administrative burdens on supervised firms,” says Tim Pinkney, IFA Director of Professional Standards. “Our members are already juggling numerous regulatory requirements. We need to ensure AML measures are proportionate and risk-based.”
The consultation focuses on four key areas: customer due diligence (CDD), system coordination, scope clarity, and Trust Registration Service reforms.
Customer due diligence to encompass higher risk clients
The IFA believes firms understand the current regulatory CDD triggers, but cautions against complicating them further. However, clarifying guidance on when to conduct “source of funds” checks for higher-risk clients would help.
The submission highlights concerns about the emerging market for digital identity verification software amid concerns some providers misrepresent their products as mandatory AML solutions. Clear government messaging to counter these claims and potentially approving specific software platforms could discourage this practice.
The IFA supported the removal of the current mandatory checklist approach for clients in high-risk jurisdictions to allow for more flexible, risk-based assessments tailored to individual client circumstances.
“The challenge is that navigating jurisdictional risk in high-risk countries can be difficult,” Pinkney says. “Many verification procedures won’t actually reduce the associated risk. A more flexible approach could be beneficial.”
Stronger information sharing between supervisory bodies and law enforcement, and including the National Investigation Service (NATIS) in information sharing gateways would further support fraud investigations.
“We’ve engaged with NATIS on several alleged COVID-19 loan fraud cases,” Pinkney says. “Extending the information sharing provisions would allow for more efficient cooperation and strengthen the overall AML regime.”
The consultation recommendation for the MLRs to require all supervisory authorities publish full registers of their supervised populations would overcome data protection hurdles and clearly identify which supervisor regulates each firm.
Organisational-wide risk assessments are important in effectively meeting AML compliance. The IFA provides templates and workshops to help members understand how to tailor assessments to their specific risks, informed by the National Risk Assessment (NRA).
The IFA touched on proposed changes to trust registration requirements, underlining the need for clear guidance to trustees on new de minimis exemptions to prevent potential abuse through the creation of multiple small trusts.
“Effective AML compliance requires a collaborative approach between government, supervisors, and practitioners,” Pinkney says. “We hope our recommendations contribute to a regulatory framework that enhances the UK’s defenses against money laundering while remaining workable for firms of all sizes.”
