AML Checks for Accountants: Key Requirements, Challenges, and Best Practices

Money laundering is a serious problem across a wide range of industries, and accountants are a central force combating this challenge.

Accountants typically handle large amounts of their clients’ funds and often have access to sensitive financial data. Therefore, they play a major role in actively looking out for signs of suspicious and potentially illegal financial activity, especially money laundering and other related crimes. They are also often tasked with immediately reporting and thus stopping such activity. To perform both these roles effectively, they need to stay on top of relevant anti-money laundering (AML) regulations.

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Why AML matters in accounting

Accountants play a very important role in combating money laundering. In most instances, they are the first line of defense when it comes to spotting red flags in their clients’ financial behavior or business dealings. For instance, if they are helping to set up a business, filing tax returns and auditing them, they would have access to financial information that the average person might not – information that may reveal fraud, expose shell companies, and flag unexplained wealth, for example.

Global regulators recognize this sensitive yet crucial role that accounting firms play, and thus, they have placed a lot of pressure on them to be AML-compliant. According to Fintech Global, regulators imposed over $19.2 billion in fines on financial institutions worldwide in 2024 for not complying with AML, KYC, and data protection rules. As an accountant, you might not only want to avoid hefty fines but also protect your clients’ interests, their reputations, and the overall financial ecosystem from crime.

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AML regulations accountants must follow

Accountants may often have to comply with a mix of global and local AML requirements. Let’s talk about a few examples.

The Financial Action Task Force (FATF) is an organization that sets international standards. In the U.S., key regulations include the Bank Secrecy Act (BSA) and the USA PATRIOT Act, while in the UK, the Money Laundering Regulations 2017 apply.

Laws like the ones above require accounting firms to take a risk-based approach. This means understanding which clients pose higher risks and applying stricter checks to them. For example, clients with complex company structures, offshore accounts, or connections to high-risk countries need enhanced due diligence (EDD).

The AML checks at the core of these laws involve verifying the identity of a client, finding out the source of their funds, monitoring their financial behavior, and reporting any red flags. Additionally, accounting firms must also log and maintain detailed records of such checks and file suspicious activity reports (SARs) when the need arises. Let’s take a closer look at these.

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Core AML checks required of accountants

For accountants, performing the core AML verification checks isn’t just about ticking a bunch of boxes. It’s about understanding their clients on a deeper level and preventing the abuse of the financial system. Below are the key checks accounting firms must perform.

• Identity Verification: This is the first step in any AML process. It involves confirming the client’s identity using government-issued documents or other reliable digital methods.
• Proof of Address: In this step, documents like utility bills, leases, and bank statements are commonly used to verify the physical location of individuals or companies.
• Source of Funds Verification: Here, the firm must try to understand and verify where the client’s money is coming from. Is it from a legitimate source, like employment, a business, or inheritance, or potentially something suspicious?
• Beneficial Ownership Checks: Even if the client is a business, it is important to identify the individual(s) who actually owns or controls it. In case the business is found to be involved in suspicious activity, the authorities should know whom to pursue.
• PEP Screening: Politically exposed persons (PEPs) may pose a higher risk due to their position and access to public funds. Therefore, it is important to identify them early on.
• Sanctions List Screening: Firms must also make sure their clients are not listed on any global sanctions or watchlist, which could indicate involvement in criminal or terrorist activities.
• Client Risk Profiling: Each client’s profile needs to be thoroughly assessed so that they can be assigned a risk level and the intensity of checks they’re put through can be adjusted accordingly.
• Ongoing Monitoring: This involves checking in on clients regularly to make sure their activities and behaviors don’t indicate anything unusual or remotely suspicious.
• Transaction Pattern Reviews: It’s important to look at the bigger picture and pick up on financial transactions that don’t match a client’s usual profile. If you notice a series of quick cash deposits or an unusual international transfer, it should raise a red flag.
• Record-Keeping: Typically, firms are required by law to maintain detailed logs of all AML checks and reviews for at least the next five years.

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AML compliance challenges in accounting

Despite a company’s best efforts, perfecting AML compliance is no easy task. Accountants face a number of complex challenges that could expose them to serious financial, legal, and reputational risks if not handled tactfully.

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AML failures and their impact

AML failures in the accounting industry are more common than you may think, despite the rules and regulations typically being quite well-defined. Often, these failures are not due to purposeful neglect but basic errors like forgetting to verify a client’s identity properly, missing a suspicious transaction pattern, or not submitting a SAR on time (or at all!).

And the consequences can be devastating. Even unintentional errors can lead to strict action from regulatory bodies. Ignoring your AML obligations can lead to your accounting firm getting fined heavily, the suspension of your business license, and even criminal investigations.

The financial damage from fines can run into hundreds of thousands of dollars, but the bigger cost is often invisible: loss of client trust. Once a firm’s name gets linked to money laundering or other financial crime, its reputation will take a hit that could sometimes be impossible to recover from. Long-term relationships could crumble within seconds, and attracting new clients can then be way too difficult.

Firms that fail to comply with AML regulations may also be subjected to more intense audits and investigations, which can disrupt their day-to-day operations for months or even years, causing even more problems.

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Complexity of international clients

Handling international clients adds a whole new layer of challenges to AML compliance. While the general understanding of AML compliance may be the same globally, different countries could have different privacy laws, financial regulations, and standards for business transparency. And that’s just the first of many concerns.

Something as basic as verifying the identity of a client can be difficult in a jurisdiction with a weak regulatory framework. Essential original documents may be in foreign languages and not meet the standards laid out by local regulatory bodies. Verifying the source of funds of offshore companies can require deep investigation across multiple jurisdictions, some of which might not even maintain proper or reliable public records. Similarly, tracking UBOs of global companies can be difficult as they often have complex ownership structures in place.

Thus, if your firm caters to international clientele, AML compliance will require greater investment in specialized knowledge, translation services, and cross-border legal advice.

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Technology gaps and manual processes

Outdated technology is a major weakness that could cause many accounting firms’ AML efforts to go to waste. This is a more serious threat for small and mid-sized firms that use basic tools such as spreadsheets, emails, or disconnected databases to perform AML checks.

Manual processes are slow, inefficient, and create huge opportunities for human error. A slight misstep could cause a major compliance offence.

Without centralized and automated systems, auditing AML efforts can be a pain, too. If a regulator asks for evidence for an old case, a firm relying on scattered spreadsheets may struggle to provide clean, organized records in its defense.

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Insufficient staff training and knowledge

Even the best processes can fail if your staff are not properly trained. A new team member with incomplete AML knowledge might not fully understand when a client’s risk profile changes or what to do when they spot unusual financial activity. Even experienced accountants can struggle if they don’t receive regular updates on changing regulations.

These inconsistencies within or across your teams can lead to dangerous gaps in the firm’s defenses. One person’s lacking can expose the entire company to fines and reputational damage.

Therefore, ongoing education and role-specific AML training are essential. Firms also need to make sure that everyone, from juniors to partners, understands the importance of AML compliance and treats it as a non-negotiable part of their daily work.

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Using AML software in accountancy

Using proper AML software largely wins over any manual compliance efforts. A digital solution offers faster onboarding, consistency, ongoing monitoring, and automatic flagging of suspicious behaviors. In contrast, manual checks often result in delays, lost paperwork, avoidable errors, and inconsistent documentation.

Today, there are many tools built specifically for accounting firms to help manage AML compliance. The right AML software must, of course, include AML basics like ID verification, real-time sanctions screening, risk assessment and scoring, and audit trails. But there are a few more aspects you should consider when choosing an AML compliance platform.

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Integration with existing tools

Your AML software should be easy to integrate directly into your accounting firm’s existing tools, whether that’s a CRM platform, accounting software, or any other system. This will save precious time and ensure that all client data is available in one place.

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Scalability

Regardless of what size your firm is right now, it is important to keep in mind what you’ve planned ahead. Maybe you’ve only just started out right now and might not need a fancy AML tool at the moment. However, you need to make sure your chosen tool can grow with your firm and accommodate your advanced compliance needs in the future.

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Customization

Not every firm needs an enterprise-level system. Smaller firms need AML software that fits their budget and allows them to set custom rules based on client risk, region, or other factors. Remember, an AML tool that adapts to your workflow is more effective than one that adds unnecessary steps or complications.

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Best practices for AML-compliant firms

Here are some things you can do if you want to maximize the effectiveness of your accounting firm’s AML compliance efforts.

• Conduct regular AML training and awareness sessions for all staff.
• Set up a clear, well-documented internal reporting system for red flags.
• Assign all key responsibilities to designated compliance officers or teams.
• Keep all AML documentation updated and easily accessible.
• Automate high-volume tasks where possible.
• Perform regular internal AML audits to identify gaps or weaknesses.
• Stay updated on local and global AML regulatory changes.

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Conclusion

AML checks are a core responsibility and a legal obligation for accountants because they have access to financial data and structures that criminals often try to exploit. And as the anti-money laundering landscape becomes more complex, accounting firms must also step up.

With intelligent, thorough AML practices, accounting firms can help build a safer financial environment. Invest in the right tools, training, and procedures to stay AML compliant so you can shield your clients, foster trust, and protect your firm’s future.

With a full suite of KYB verification tools, Vespia can help your accounting firm achieve and maintain compliance.

Book a demo today to learn more and kick off your AML compliance journey.

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