What does the solo practitioner – a provider of accountancy, bookkeeping or tax services, or a portfolio/fractional CFO, a virtual assistant doing some bookkeeping, or a provider of payroll services, who has no staff or subcontractors (except perhaps an admin assistant) – have to do to comply with anti-money laundering requirements in the UK?
The attractions
Working entirely on your own has certain attractions. There is nobody telling you what to do and there is nobody whom you need to instruct about what to do, or how or when to do it. In consequence you have no need to review the work of others, or even to communicate with other members of your team. So there is no need to write down how you want the work to be done or to develop review checklists to monitor the work of more junior staff. These freedoms can be appealing! But do similar freedoms exist in connection with AML compliance?
The exemptions for a solo practitioner
A solo practitioner – just like a larger firm – is obliged to comply with the Money Laundering Regulations 2017, but there are some specific provisions in the MLR which exempt solo practitioners from requirements applying to larger firms – particularly in Reg 21(6). So what do the regulations expressly NOT require of the solo practitioner –
- No need to appoint a Money Laundering Reporting Officer – responsible for reporting suspicions – or a Money Laundering Compliance Officer – responsible for ensuring the firm’s compliance with MLR 2017 (although in practice the solo practitioner will fulfil both these roles and the firm’s supervisory body will regard the solo practitioner as MLRO and MLCO)
- No need to carry out screening of employees (although the firm’s supervisory body may require a Disclosure and Barring Service check on the solo practitioner)
- No need to establish an independent audit function to examine and evaluate the adequacy and effectiveness of the firm’s AML policies, controls and procedures (unless the solo practitioner’s supervisory body expressly request that such an examination be undertaken).
The remaining requirements
Other provisions refer to taking into account “the size and nature” of the practitioner’s business, such as Reg18(3) dealing with the firm-wide AML risk assessment; or procedures being “proportionate with regard to the size and nature” of the practitioner’s business, such as Reg 19(2) dealing with the firm’s policies, controls and procedures document. But it is clear that the solo practitioner DOES have to prepare a firm-wide AML risk assessment and an AML policies, controls and procedures document.
Equally the solo practitioner DOES have to carry out Client Due Diligence and AML Risk Assessments on each of his or her clients, and undertake AML training.
And of course all these things which the solo practitioner is obliged to do have to be documented.
Can all this be avoided?
There are some circumstances where all the burdens of AML compliance can be avoided.
The MLR 2017 apply to individuals, companies, partnerships and other entities who are “acting in the course of business carried on by them in the United Kingdom”. They do not require AML registration of individuals who are simply employees. So if a solo practitioner can arrange to be an employee of each of his ‘clients’, and be paid under PAYE instead of by invoice, then AML registration is not necessary.
There are also certain other circumstances in which HMRC advice is that AML registration is not necessary if specific criteria are satisfied. There is detailed information about that on the UK government website HERE.
Risk
Just as the practitioner has to be guided by ‘risk’ in the firm’s AML compliance, the firm’s supervisory body has to be guided by ‘risk’ in selecting which firms’ compliance is reviewed by the supervisors (and how frequently). It might be supposed that supervisory bodies would view solo practitioners as presenting the lowest risk of non-compliance or of failure to detect and report possible money laundering by their clients.
I suspect this is not the case. Supervisors know that a solo practitioner has no-one able to comment upon, or review, or offer a ‘second pair of eyes’ on their day to day work – and, in the worst case, a ‘rogue’ solo practitioner can do a lot of damage to clients and to the reputation of the profession. So I would expect solo practitioners to be on supervisors’ agenda for occasional reviews.
If you are concerned that your firm’s AML compliance is inadequate, or even non-existent, get in touch now using the link below and we can work together to fix this. The hardest part is getting started.
