Two years ago I wrote a blog on here about software supporting AML compliance – but a lot has changed since then. Perhaps the most important changes have been the advances in AML compliance software (in terms of the number of alternatives in the market and the features of that software) and the changes being introduced by Companies House as the provisions of the Economic Crime and Corporate Transparency Act 2023 are progressively being implemented.
Do accountancy firms have to have AML software?
The answer to that, in my opinion, is still no. But using AML software makes AML compliance easier, more efficient and less prone to unrecognised gaps – and the purchase costs can be negligible. (I know of one supplier, for example, who charges just £6 per client per annum for AML compliance software.)
The ‘real’ cost of AML compliance software (like the real cost of AML compliance) is in staff time – not in purchase payments.
How could AML software help?
AML compliance software helps firms in a number of ways. I would list the five most important benefits as assisting with –
- Obtaining and storing of records of client ID
- Reporting on the client ID records held by the firm
- Completing, recording and reporting on client AML risk assessments
- Completing, recording and reporting on staff AML training, and
- Providing summary information to support the Firm-wide AML Risk Assessment.
I could list further benefits. For example, having and using AML compliance software will make writing the firm’s AML Policies, Controls and Procedures document easier and will provide useful data for use in completing annual returns to your AML supervisory body and for completion of your internal independent AML compliance reviews. But lists are of limited value.
Oh dear!
I was talking recently to a firm of accountants who had contacted me because they had been selected for an AML compliance inspection. They were not using AML compliance software. They had a system of opening, within each client folder, an AML folder for every client. I selected a few client names in a purely arbitrary fashion and asked the firm what ID documents and information they had for each of these clients. It turned out that in roughly 50% of these cases the ID records were incomplete. So I asked about client risk assessments and records of ongoing monitoring. The results were even worse.
If that firm had been using AML compliance software they would have known – before I asked – about the gaps in their AML compliance. But these did not come to light until the trigger of an imminent AML inspection.
The Companies House changes
The Companies House changes will require UK registered companies who submit accounts, confirmation statements and other documents to Companies House to have the ID of all their directors and PSCs verified to the satisfaction of Companies House. This is planned to be done over a 12 month period commencing from the Autumn of 2025.
This need not impact accountancy firms at all. It will be perfectly acceptable for accountants to remain aloof from this whole process and leave the directors and PSCs of client companies to deal directly with Companies House to verify their identity.
However some firms of accountants will wish to engage with this process to assist their client companies and one option for those accountants is to act as an Authorised Corporate Service Provider (ACSP) and then themselves to verify the identities of directors and PSCs of client companies to the Companies House verification standard.
In order to do that these accountancy firms will either have to have some of their staff specifically trained in document examination (to detect forged documents), or will have to use some form of ID verification technology (IDVT) such as a mobile phone app which compares a ‘selfie’ of the client with the image in a passport or driving licence.
AML compliance software can include the necessary ID verification technology. So this may be a further incentive for firms to acquire AML compliance software.
Sources of AML compliance software
There are various sources of AML compliance software. Some comes as modules attached to software suites for accounts and tax return preparation. Other software is available as a separate purchase.
I would recommend firms to carefully review more than one offering and to consider the pros and cons of each and the effect of introducing the software on the other work of the firm.
But I would not recommend leaving this unconsidered until an AML supervisor’s review is imminent!
If you are concerned that your firm’s AML compliance is inadequate, out of date, 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.
