Firmcheck: How technology can help you improve your AML compliance management

The AML world is increasingly being split in two. On the one side, firms sticking their head in the sand and hoping compliance magically becomes easier. On the other side, firms use the latest tools to work faster, protect their bottom line and turn AML into a value-add. That’s just one of the findings from our exclusive new report.

In our survey, we asked just over 200 accounting firms of all sizes, types, and regions throughout the UK about their approach to AML including their current ways of managing AML compliance. 

We found a market where firms are aware of their AML obligations, but struggling to manage them effectively, and in some cases even unsure as to what being AML compliant actually looks like. Case in point: 91% of firms recognise AML compliance as important, but 30% still don't have standard client risk assessments and 28% lack firm-wide risk assessments.

But through it all, there was one clear thread: technology is the key.

What are the challenges of AML for firms?

AML compliance has always been a moving target for accounting firms since its introduction 20 years ago. 

As regulations have changed and evolved, combined with an increasingly laser focus on data privacy concerns and the mounting complexity of regulations like GDPR, getting clients to cooperate with some aspects of KYC has been an ongoing challenge. 

We found that 45% of firms are struggling to secure necessary documentation from clients, making the ongoing task of AML challenging​​. The fundamental AML processes — gathering customer information (Know Your Customer or KYC), verifying IDs for new clients, and updating records — reveal a somewhat juxtaposed view of the world: nearly all firms (90%) express confidence in their compliance measures, yet a significant proportion lacks standardised risk assessments​​, which is a critical component of meeting regulatory requirements.

What are the impacts on firms and clients?

The discrepancies in compliance practices not only expose firms to potential legal risks and fines but also could potentially damage trust between firms and their clients, should anything go awry. 

The inability to efficiently manage AML processes can lead to delayed client onboarding, potential fines for non-compliance, and reputational risk. 

Meanwhile, for clients, the inconvenience and administrative burden of firms repeatedly requesting sensitive information can put pressure on relationships and deter them from engaging further.

The brutal reality is that AML compliance is not a ‘nice-to-have’ – outside of being a legal obligation, it’s an essential part of onboarding, ongoing management and proactive risk management in your firm, and the data suggests that a more modern approach to AML, which includes leveraging technology, can reap real rewards.

The tech-driven future of AML

As has already been the story with bookkeeping, data management and invoicing, new technology is changing the way accountants scope, design and deliver AML services. And it’s leading to measurable changes in the outcomes that matter. Firms who use AML software aren’t just reducing an administrative burden on their firm – they’re making AML compliance work for them, and because of what technology can enable in the AML space, likely building more compliant AML processes with the same, if not less amount of work.

We found that firms who adopt AML software not only view AML compliance as critically more important but are also achieving higher standards of compliance. These firms are twice as likely to have completed both firm-wide and client-specific risk assessments, which we know is one of the most common areas of AML compliance to be neglected​​. 

The use of technology in managing AML compliance has proven to enhance the frequency and thoroughness of reviews, with tech-savvy firms being 3.2 times more likely to conduct regular reviews, another commonly missed, and essential part of maintaining AML compliance.

This aligns with our own experience building AML software, and from the conversations we have daily. Accountants are well aware of the need to protect their firm and that they have to do something, but with so much technology to choose from, it’s hard to know where to start, so a lot of the time sticking with the old way of doing things can feel like the easiest solution despite the administrative burden. Given that AML is an ongoing process, fitting in reviews around other, seemingly more urgent, tasks often leads to it being delayed or avoided. But once you solve that issue – making data accessible, and the process more efficient – firms can apply the same high standards to AML compliance as to the rest of their services.

Make AML work for you and your clients

AML compliance is growing in scrutiny, as evidenced by the increasing amount of AML reviews from the likes of the ICAEW, but also the recently announced consultation on the MLR 2017 by the UK Government. The ‘burden’ on firms is likely to continue to grow so choosing to remain apathetic to AML compliance – but preparing your firm to be ready for whatever comes is worth considering. From this research, we can see that technology is the way to go, and whilst we naturally have some skin in the game so it’s easy to suggest an element of bias, adopting technology to support your AML is a surefire way to get yourself on the road to AML compliance.

Firms sticking with manual processes are incurring a range of unnecessary risks, which include the potential for incomplete records, missed reviews, and messy audit trails, something that isn’t going to reflect lightly should you be in line for a review from your supervisory body.

But we understand that a big blocker for adopting AML technology or moving systems relates to the fact that AML compliance is a data-heavy and document-heavy exercise – so if you’ve got several hundred clients, it can be daunting.

Besides building Firmcheck to help streamline and simplify the AML compliance process for accounting firms, we’re also committed to helping firms migrate their historic records as part of your subscription costs. 

By integrating features like risk assessments, ID and address verification, and checks for PEPs and sanctions, Firmcheck helps you get strong AML foundations in place to protect your firm from unnecessary risk, throw into the mix our free onboarding and training and we give you a clear pathway to compliance. If you do find yourself struggling with knowing where to start, we’ve outlined a 5 step maturity framework, which includes some easy-to-follow guidance as to how to “level up” your AML compliance in our landscape of AML compliance report.

(NB: This article doesn't constitute legal advice and is only intended for general informational purposes. Always consult with a legal expert or compliance consultant for guidance specific to your firm.)