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Should accountancy bodies mandate AML portals?

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With the Institute of Accountants and Bookkeepers’ decision to mandate its AML Complete portal to members, two accounting supervisory bodies have now chosen to build their own anti-money laundering tools. What are the pros and cons behind this approach, and could the landscape change with the latest supervisory review?

11th Apr 2024
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The government’s ratcheting up of measures to tackle economic crime has generated a steady stream of criticism from accounting professionals, with the increasing workload burdens placed on practices one of the main points of contention.

This has led to a boom in anti-money laundering (AML) software designed to ease the pressure on hard-pressed practitioners, with the emergence of standalone tools such as AMLCC, Firmcheck and XamaTech, and existing players such as Bright, CCH, Go Proposal, Ignition and TaxCalc all strengthening their AML offerings. 

But this action has not just been confined to the private sector. The Institute of Accountants and Bookkeepers (IAB) recently built and rolled out its proprietary tool AML Complete, the use of which is now mandated to more than 700 firms under IAB’s supervision. 

AML Complete is a digital register, risk assessment and monitoring tool, where accountants and bookkeepers log client details as part of the IAB’s AML supervisory regime. The system then generates client AML risk ratings based on a background algorithm. It is available at no additional cost to members and also serves as an educational platform offering video training.

The IAB joins the Institute of Certified Bookkeepers (ICB), which introduced its purpose-built AML Online tool more than a decade ago and is also a requirement for its 3,700 members.

While such tools bring advantages to members and supervisors, users and compliance experts have raised questions about the rollout, efficiency and functionality of the systems.

Benefits of accounting supervisor AML portals

For the supervisory bodies themselves, there are several key benefits to having their own software. 

“Having access to members’ AML records assists supervisors in their compliance with regulation 17, thereby reducing reliance on members’ completing a substantial annual questionnaire,” said Lucy Brown, director at compliance support firm Calathea Solutions

Larger institutes such as the Association of Chartered Certified Accountants (ACCA) and the Institute of Chartered Accountants in England and Wales (ICAEW) have not developed their own AML software. Instead, they rely on annual risk assessment questions which are time-consuming and repetitive to complete. Using the accounting body AML portals, members enter client details once. 

With readily available access to data on client due diligence and risk assessments performed by their members, supervisory bodies with their own AML tools can also pick up on members who appear to be failing to onboard new clients to the portal. They can also see if a member rapidly onboards clients after receiving notice of an upcoming AML inspection.

Brown also noted that it could be seen by the supervisor as a membership retention aid, as the inconvenience of moving large volumes of data from one system to another may be dissuasive.

Perhaps for the smaller bodies, it also shows they are not a soft touch for unqualified or qualified-by-experience (QBE) accounting professionals looking for AML supervision.

The IAB told AccountingWEB it had built AML Complete to “provide the best support and guidance” to its members and “gain a comprehensive understanding” of members’ compliance status and level of understanding.

Expanding on its reasons for building the software, IAB questioned how applicable many of the commercial AML tools available are to its members and expressed concern about the value of such systems.

“In our experience, much of the software on the market is the result of multiple opinions, offering a one-size-fits-all approach which we feel doesn’t work,” said a spokesperson. “Additionally, these solutions often lock users in, making them vulnerable to price increases for a third-party level of service. We saw this as an opportunity to provide better value and offer a higher quality of supervision.”

Potential drawbacks of accounting supervisor AML portals

In the wake of the IAB mandating AML Complete at the start of 2024, several members (who asked to remain anonymous) contacted AccountingWEB to express reservations about the mandation of the system to members and its benefits.

One firm owner, whose practice employs five staff, estimated it took the best part of 10 working days to copy client data across to AML Complete, while another claimed it had cost their firm between £13,000 and £15,000 in billable time to copy data across.

Data duplication and app overlap are other issues cited by members. Member firms of the IAB and ICB are allowed to use third-party software, provided they complete the requisite work within the member portals. 

Having an AML tool available at no extra cost can benefit the smallest firms. However, slightly larger firms or those looking to grow may wish to deploy software with more functionality, and both the IAB and ICB systems do not currently offer integration options for third-party providers.

“The IAB system has Know Your Client functionality and risk assessment questions but doesn’t do ID checks or letters of engagement,” stated one accountant. “They’ve promised it will be better in future but it’s not a complete system.”

Another firm raised concerns that in a fast-moving regulatory environment, an organisation whose primary function is not software development may struggle to keep the system up to date. 

“Do they have the knowledge or technical expertise to ensure regular updates are made and the software is providing the member with the desired benefit? And is this an effective use of supervision fees?

Members also flagged that the supervisor uses data collected by the systems as a tool for selecting members for inspection. 

“As a result, members may move away from the supervisory body to avoid inspection thereby losing out on other member benefits and support available to them,” said one former ICB member.

Could this all be academic later in the year?

Under UK regulations, firms that provide audit, insolvency, accountancy and bookkeeping services, tax advice and trust or company services must be registered for AML supervision with a professional body supervisor (PBS) or HMRC (which is not classified as a PBS but supervises those not under the auspices of a professional body. A full list of PBSs can be found on gov.uk’s money laundering supervision for accountancy service providers page.

In the accounting world, 13 AML supervisory bodies are overseen by the Office for Professional Body Anti-Money Laundering Supervision (OPBAS) – a regulator housed within the FCA. HMRC is not currently supervised by OPBAS.

OPBAS recently called on professional bodies to “step up their efforts” as the “first line of supervisory defence against AML threats” or risk being stripped of their supervisory powers.

An active HM Treasury review, Reforming anti-money laundering and counter terrorism supervision, may strip the existing accounting PBSs of their powers anyway and create a new, overarching regulatory body. This move could put the future of existing accounting body AML tools at risk, as it would render their continued use redundant.

While some experts predict the Treasury will take the path of least resistance and enhance OPBAS powers, others believe it will go for the “nuclear” option of creating a new government body to do AML supervision instead of the professional accountancy supervisors. At this stage, what any new body may choose to do about AML portals is quite frankly anyone’s guess.

Replies (10)

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By Self-Employed and Happy
11th Apr 2024 10:18

No HMRC should be doing this.

Every person does their AML directly with HMRC via an App, they are then given a code that lasts 3 years, they give this code to anyone that needs it, that accountant, solicitor, bank or whoever log into an agent portal and types in the code, then confirms its the person wanting to engage them.

It's that simple and would save millions of wasted hours a year duplicating the process for the same person.

Thanks (10)
Michael Bennett, Owner of Michael B Bennett Ltd
By Michael Bennett
11th Apr 2024 10:28

Am I being a trifle thick here? If AML supervisory bodies require accountants/bookkeepers to enter details of their clients into a database held by the supervisory body, isn't that riding a cart and horses through the GDPR regulations?

We would need express written permission from our prospective client to share this information which, in itself, could lead to all sorts of difficulties in the ongoing relationship. It might deal with the out-and-out bad 'uns, but I cannot see how this can work in practice.

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By Crouchy
11th Apr 2024 11:27

AML seems to be about passing the buck ( and the blame), why have your own portal when you can blame someone else when things go wrong?

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By PAULLEWISFCCA
11th Apr 2024 11:33

How come the bankers are allowed to create paper currency and call it money.

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By carnmores
11th Apr 2024 11:39

a complete and utter waste of time. IAB obviously see this as a cash raising opportunity

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Replying to carnmores:
By Nick Graves
11th Apr 2024 12:16

Exactly.

Especially if it's typically third-rate dross software.

Any 'professional body' that does not understand that (genuine!) free-market competition improves the breed, ought not be regulating a financial services provider at all.

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By indomitable
11th Apr 2024 14:17

The government should be doing it and PAYING for it, The regulatory bodies have been asleep at the wheel in not lobbying government hard enough into doing it - NO just put the burden on the practitioner!!! Typical of government and the governing bodies - USELESS in my view.

My governing body the ICAEW is more interested in diversity and ESG than it is the plight of it's small practitioners.

YES there needs to be a central database that everyone can access - solicitors. estate agents, accountants etc. and paid for by government IF they wish to regulate in this way

IMO it is a waste of time - better concentrate on the black economy, benefit fraud and trying to catch the serious money launderers which you won't catch by a simple AML check

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By Tom+Cross
11th Apr 2024 16:36

https://www.gov.uk/government/news/fraudsters-behind-539-million-benefit...

May I suggest that nothing more, needs to be said! What a country this really is. Civil Servants clearly asleep on the job. For the last five years!

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Replying to Tom+Cross:
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By ArianBloodwood
12th Apr 2024 09:53

Hah - that press release itself makes the case that chasing benefits fraud is NOT value for money: The Fighting Fraud in the Welfare System programme has a £900m budget over 3 years, and expects to save £600m over 5 years.

Lets focus on what is the REAL problem: large-scale money laundering facilitated (if not actively supported) by weak regulators colluding with unethical politicians.

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By PAULLEWISFCCA
12th Apr 2024 11:29

Central bankers = largest 'money' launderers by a country mile - and yet par liar ment has protected them from day 1 - or at least from the seventh year after formation, when the Bankrupt of England was allowed to suspend payments in specie (real money)

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