AML software - is it now essential?

Take, for example, the latest AML Annual Return form from ACCA. The form asks a series of questions about your firm, its clients and your services to those clients. It goes on to ask what proportion of your clients are high-risk and low-risk. Collating this information is something AML software does routinely, making completion of the annual return a relatively simple matter.

But if you do not have AML software then you may need to look through all your client risk assessments - or just make an educated guess - to complete the return.

What are the benefits of AML software?

Aside from making completion of returns easier, what other benefits might firms derive from AML software? I would suggest good quality AML software would assist firms to put in place procedures and systems to:-

• Gain considerably greater control over the firm’s AML compliance

• Obtain and retain identification documents from clients

• Verify the identity of clients and directors/beneficial owners

• Organise and record electronic ID checks

• Automatically extract information from Companies House records

• Carry out and record appropriate initial AML risk assessments of clients

• Recognise and pinpoint higher risk clients and record the enhanced due diligence undertaken on them

• Ensure appropriate ongoing monitoring of clients is undertaken at the proper time and recorded

• Take appropriate action in relation to any PEPs 

• Enable appropriate retention of AML records for ex-clients, and

• Facilitate AML compliance reviews by the MLRO.

That said, AML software is a tool, not a substitute for professional judgement. It is only as good as the information entered into it and the decisions made by the people using it. The responsibility for AML compliance remains with the firm and its MLRO.

Where should firms look for good quality AML software? 

One option is to adopt an AML module from your existing software supplier. A number of the large suppliers of accounts preparation and tax compliance software offer additional AML modules in their software suites, and it makes sense to have a look at these.

There is also the option of specially written AML software from the likes of Firmcheck and Xama. That software may be able to pull data from your accounts/tax software package and Companies House, meaning that you do not need to re-key information already held elsewhere.

Whichever route you take, ask some practical questions before committing. Does the software reflect your own firm-wide risk assessment and client risk criteria, or does it impose a generic scoring model? How are electronic ID checks charged and who provides those checks? Does it produce a clear audit trail that your supervisor can review? And can you export your records if you later change supplier, bearing in mind that AML records must generally be kept for five years after a business relationship with a client ends?

What of the future?

Over the next two to three years we expect the FCA to take over AML supervision of accountants, bookkeepers, tax advisers and TCSPs from the professional bodies and HMRC. The signs are that the FCA will want to regularly collect data from the firms it supervises, and AML software will be invaluable in collating that data.