AML for accounting and bookkeeping firms – practical requirements and pitfalls

An increasing number of accounting and bookkeeping firms understand what it means to be subject to the anti-money laundering (AML) framework. A “good gut feeling” about clients is no longer sufficient: a formal risk assessment, documented customer due diligence and ongoing monitoring are essential. In our earlier post on when an accounting firm must carry out customer due diligence we described what due diligence can look like in day-to-day work – here we focus on the overall AML framework for bookkeeping firms.

Why are bookkeeping firms subject to AML requirements?

An accounting or bookkeeping firm frequently handles clients’ payment flows, invoices and the bookkeeping of transactions. This can make the firm a potential channel for money laundering or terrorist financing. Firms are therefore subject to AML legislation and must comply with the AML framework in broadly the same way as banks and other financial actors, with proportionality according to the nature and risk profile of the business.

This includes requirements to:

• identify and assess risks of money laundering and terrorist financing in the business,
• apply customer due diligence measures when establishing a business relationship or carrying out an engagement,
• monitor ongoing engagements and react to unusual transactions or behaviour,
• report suspicious activity to the competent authority, and
• maintain internal procedures, training and control functions.

Core AML obligations for bookkeeping firms

The AML framework is extensive, but for a bookkeeping firm it can often be structured around a few main areas.

• Business-wide risk assessment – a documented review of services, client types, sectors and geographies that may present higher risks of money laundering or terrorist financing.
• Policies and procedures – internal documents describing how the firm should work in practice with due diligence, risk classification, monitoring, reporting and record-keeping.
• Customer due diligence (KYC) – verifying who the client is, the beneficial owner, the purpose of the engagement and the source of funds. This also covers handling higher-risk clients, such as politically exposed persons (PEPs) or clients in certain sectors.
• Ongoing monitoring – not just a check at onboarding, but periodic updates to client information and monitoring of whether the engagement changes over time.
• Reporting obligations – an obligation to report suspicions of money laundering or terrorist financing without delay, and not to tip off the client that a report has been made.
• Training and oversight – staff must understand the framework and how it applies in the firm’s daily work, and management must follow up to ensure procedures are effective.

Customer due diligence in practice – how does it affect the firm’s ways of working?

Customer due diligence sits at the heart of AML for bookkeeping firms. Legally, the aim is to obtain sufficient knowledge of the client to assess the risk of money laundering and terrorist financing, and to detect unusual behaviour.

In practice, this means the firm needs to:

• collect and document identification, certificates of incorporation, details of the beneficial owner and similar materials before the engagement begins,
• ask about the client’s business, operating model, principal sources of income and payment patterns,
• make an overall, client-specific risk assessment (low, standard or high risk) and select the level of measures accordingly,
• pay particular attention to complex ownership structures, an unusual volume of cash transactions, or international flows that do not fit the client’s profile, and
• update due diligence on an ongoing basis as the company grows, changes focus or starts operating in new markets.

A key principle is the risk-based approach: a smaller, locally active client in a low-risk sector will typically require less extensive due diligence than a client with a complex group structure, international payment flows or activities in higher-risk sectors.

Common shortcomings among bookkeeping firms

Experience shows that certain shortcomings recur among accounting and bookkeeping firms working under the AML framework.

• Unclear or overly general procedures – policy documents that describe “general principles” but not, concretely, how the firm should act in typical scenarios.
• Poor documentation – due diligence is performed in practice but records do not show what was checked, when, and why specific judgements were made.
• No or limited risk classification – all clients are treated alike, despite AML being based on a risk-based approach.
• Insufficient training – staff lack an understanding of when behaviour may be a red flag, or how reporting obligations operate.
• Technology without governance – various checklists and systems are used without a coherent risk strategy and allocation of responsibilities.

These shortcomings create both compliance and business risk. During supervision or audit the firm must be able to demonstrate a structured approach, not merely that it “felt on top of its clients”.

How bookkeeping firms can embed AML in their processes

For a bookkeeping firm, AML is often about building the framework into existing processes rather than creating entirely new ones.

• Start from an up-to-date, documented business-wide risk assessment and link it to the scope of controls.
• Integrate due diligence and risk classification into the onboarding process for new clients, for example within the firm’s existing systems.
• Create clear practical aids – checklists, templates to document due diligence, and decision support on when to consider reporting.
• Appoint responsible individuals for AML matters, while ensuring all handlers have a basic understanding of the framework.
• Follow up with regular internal checks, updating procedures and training in line with emerging risks or legal changes.

For leadership and those responsible for compliance, this means AML cannot be treated as a side project but as part of the firm’s core processes and quality management. Once the structure is in place, it becomes easier to maintain order over time and to demonstrate an effective system during any supervisory review.

Accounting and bookkeeping firms seeking to strengthen their AML work may benefit from engaging external legal expertise, both to interpret the framework and to translate it into practical processes, templates and training. At Morling Consulting, our AML experts help accounting and bookkeeping firms design sustainable, business-aligned AML structures. Read more at morlings.se.