1 in 5 Accountancy Firms Are Failing AML Compliance - Is Yours at Risk?

The 2024 Anti-Money Laundering (AML) supervision report from the Institute of Chartered Accountants in England and Wales (ICAEW) revealed a stark reality: nearly 20% of supervised accountancy firms are falling short of AML compliance.

This is more than just a statistical concern – it’s a direct threat to the legal standing and reputation of UK firms. In today’s environment of heightened regulatory scrutiny, even minor compliance failures can lead to revoked licences, disciplinary action, and long-lasting reputational harm.

In this blog, we explore what the ICAEW findings mean for accountancy practices, the most common compliance gaps, and how firms can take proactive steps to protect themselves through confidential, independent reviews.

Why AML Compliance Is a Critical Obligation?

AML compliance is a statutory requirement under the UK’s Money Laundering Regulations 2017 (as amended). It requires firms in regulated sectors – including accountancy – to implement robust systems to detect, prevent, and report potential money laundering activity.

For accountancy firms, this includes:

Conducting client due diligence (CDD)
Performing risk assessments on clients and services
Keeping accurate and up-to-date records
Monitoring transactions and client relationships
Reporting suspicious activity where necessary
Ensuring staff receive ongoing AML training

Failure to meet these obligations is not just a regulatory breach; it may constitute a criminal offence, particularly where there is willful neglect or gross failure in oversight.

What the ICAEW AML Report Revealed?

In October 2024, ICAEW released its annual AML supervision report. It highlighted systemic issues across many firms, with common problems including:

Incomplete or missing client risk assessments
Lack of documented internal AML procedures
Failure to review or update AML policies
Insufficient evidence of ongoing monitoring
Staff unaware of red flags or escalation protocols

While some failures were administrative, others pointed to deeper cultural or procedural weaknesses. In several cases, firms were unaware of their deficiencies until ICAEW intervened with audits, reviews, or penalties.

The Misconception of “Low Risk”

A recurring issue among non-compliant firms is the assumption that their business is “low risk” because they operate on a smaller scale or serve long-term, trusted clients. This mindset leads to a false sense of security.

Regulators have made it clear: risk is not defined by size or familiarity, but by the nature of services offered, transaction types, and the exposure of clients to higher-risk categories (e.g. politically exposed persons, overseas interests, complex corporate structures).

Even firms with modest operations are expected to demonstrate a thorough understanding of AML risks and apply proportionate controls. This includes maintaining a firm-wide risk assessment – a requirement many firms continue to overlook.

Internal Weaknesses That Trigger Non-Compliance

Even well-meaning firms can fall short due to internal weaknesses that often go unnoticed. Common operational and procedural issues include:

Outdated AML policies copied from templates with no tailoring
Failure to re-train staff or update procedures annually
Lack of documented decision-making around client acceptance
Insufficient oversight by senior partners or compliance leads
No formal schedule for reviewing client risk levels or documents

These gaps, while seemingly minor, collectively create exposure that regulators are increasingly unwilling to ignore.

The Cost of Waiting for a Regulator to Step In

Once regulators initiate an investigation or audit, the process can be intrusive, time-consuming, and resource-intensive. More importantly, at that stage, your firm is reacting to scrutiny, rather than managing it.

Sanctions can include:

Financial penalties – often disproportionate to the size of the breach
Revocation or suspension of practice licences
Publication of disciplinary outcomes on public registers
Mandatory remedial actions, including training, audits, and compliance overhauls
Loss of client trust, as reputational damage can linger well beyond the penalty

A Proactive Approach: AML Health Checks

The most effective way to stay ahead of regulatory scrutiny is through voluntary, independent AML assessments. At Investigation Engine, we offer confidential, professional reviews that help firms uncover weaknesses and address them before they escalate.

These reviews are designed to align with regulatory expectations and industry best practices. Our team assesses your documentation, processes, internal controls, and training effectiveness, providing a clear picture of where you stand – and how to improve.

What’s Involved in a Review?

A typical AML review covers:

Your firm-wide AML risk assessment
Client onboarding procedures and documentation
Record-keeping and transaction monitoring practices
Staff roles and awareness of AML responsibilities
Internal reporting and escalation frameworks
Training logs and ongoing learning materials
Review of policies against current regulatory expectations

The outcome is a clear, actionable report that highlights strengths, flags concerns, and provides a roadmap to achieving full compliance.

The Value of Discretion and Clarity

One of the primary concerns for partners and firm owners is confidentiality. At Investigation Engine, we understand that AML issues are sensitive. All assessments are conducted discreetly and professionally, without disrupting your operations or alarming clients or staff.

You retain control over what to implement and when, with the support of experienced professionals who specialise in regulatory risk and investigative analysis.

Strengthening Trust Through Compliance

Compliance is not just about avoiding penalties – it’s about building a sustainable and trusted business. Firms that actively manage their obligations are more attractive to clients, strategic partners, and professional networks.

Being able to demonstrate that your firm takes AML seriously – through formal assessments and policy reviews – is increasingly becoming a differentiator in a competitive marketplace.

Summary:

The ICAEW’s findings should act as a wake-up call for accountancy firms across the UK. With nearly 1 in 5 falling short of compliance, the risks are not theoretical – they are current, widespread, and increasing.

Taking control of your firm’s AML strategy now, before issues arise, is the most responsible and effective route forward. A proactive AML health check gives you clarity, confidence, and a safeguard against enforcement.

At Investigation Engine, we’re here to help you achieve full compliance – discreetly, professionally, and without unnecessary disruption.

Visit www.investigationengine.com to learn more or request a confidential review.