You may be wondering what proportion of accountants in the UK fail to comply with the Money Laundering Regulations 2017.
This is not a simple question to answer – but we have some indications.
Firms reviewed by their professional body
The Professional Body Supervisors (PBSs) report annually on the results of their AML supervision of their members. The table below shows summary figures from the results for 2022-23 (published in May 2024). I have put (arguably) the most important figures at the top of this table.
The PBSs grade firms they review as either ‘compliant’, ‘generally compliant’ or ‘non-compliant’. My summary table focuses on the non-compliant. So these are not firms that got their AML compliance mostly right – these are firms that have serious problems with their AML compliance.
We can see that overall 7% of firms supervised by the PBSs were reviewed during the year to 31 March 2023 (which means either that they had a visit onsite to complete a face to face review, or that they had a ‘desk based review’ where they submitted documents and information at the request of their PBS). Overall slightly less than half of PBS reviews were completed onsite.
Of the firms reviewed by the PBSs 18% were graded as non-compliant.
There was a wide variation in the results of the various PBSs. There could be several reasons for that. Certainly PBSs are encouraged to review most frequently those firms where the risk of non-compliance is considered greatest. So a high proportion of non-compliant gradings may be a reflection of the PBS’s success at seeking out its non-compliant member firms.
Some PBSs concentrated on onsite visits, while others made the vast majority of their examinations by desk based review. Overall a slightly higher percentage of onsite visits resulted in a non-compliant grading (20% of onsite visits versus 17% of desk based reviews).
But the headline figure of 18% of reviewed firms being graded as ‘non-compliant’ is uncomfortably high.
Accountancy firms reviewed by HMRC
Not all accountancy firms are supervised by a Professional Body Supervisor. There are 16,504 Accountancy Service Providers (ASPs) supervised by HMRC and 1,540 Trust and Company Service Providers (TCSPs) – some firms may be both ASPs and TCSPs. This makes HMRC the largest supervisory body for accountants (by number of firms).
But HMRC also provide AML supervision for other businesses such as Estate Agency Businesses, Letting Agency Businesses, Money Service Businesses, High Value Dealers, Art Market Participants, and others. Overall HMRC supervise more than 35,000 businesses and employ 400 full time employees on that work.
During 2022-23 HMRC conducted 907 onsite visits and 834 desk based reviews across the 35,000 businesses it supervises, so 5% of the total (but I have no separate figures for ASPs). It graded 493 firms as non-compliant, which is 28% of the total reviewed. Again onsite reviews produced a slightly higher proportion of non-compliant gradings.
A particular issue noted by HMRC (which applies less to PBSs) is that firms were found which were engaging in supervised activity before registering for supervision or without having applied for supervision at all. These late registration cases appear to make up the vast bulk of cases in which HMRC has levied civil penalties under MLR 2017. (There is a blog article considering HMRC AML late registration penalties in more detail HERE.)
What are the most common failings?
Whenever supervisors comment on the AML failings of accountancy firms they refer to
- an inadequate Firm-wide AML Risk Assessment
- an insufficiently tailored Policies, Controls and Procedures document
- inadequate Client Due Diligence (particularly in relation to AML risk assessments).
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.
