Independent audit function

Learn more about the independent audit function and how the role ensures that the firm’s efforts to combat money laundering are effective and compliant with applicable legislation.

Glossary
Independent audit function

Explained – what does an independent audit function do?

An independent audit function is a control function under the Act (2017:630) on Measures against Money Laundering and the Financing of Terrorism. The function must regularly review and assess whether the firm’s organisation, IT systems, internal controls and risk management are appropriate and effective. An AML consultant can support this work by conducting independent reviews and recommending enhancements. The function is organisationally separate from the business it reviews and reports directly to the board.

When does the independent audit function become relevant?

The question of an independent audit function arises for businesses subject to the Anti-Money Laundering Act and where a structured compliance control is required. This includes, for example, financial institutions, insurance companies and other actors with higher risk exposure. The function becomes particularly important when the board needs assurance that internal procedures work in practice and that risk management is adequate.

Illustration of an independent audit function, showing compliance checks and assurance controls, representing internal audit and governance oversight.

Key considerations for an independent audit function

An independent audit function carries broad responsibilities that include several critical elements:

Review and assess the firm’s organisation, governance processes and IT systems.
Ensure that internal controls are effective and fit for purpose.
Verify that the business follows internal procedures and guidelines.
Assess the firm’s risk management against the overall risk assessment.
Evaluate the quality of the work performed by other control functions.
Provide recommendations for improvements and corrective measures.
Follow up to ensure recommended measures are implemented.

These tasks establish a vital control mechanism that strengthens compliance and gives the board a clear view of the firm’s risk management.

Independent audit function

Why is an independent audit function important?

The independent audit function matters because it provides an objective check on the organisation’s work to counter money laundering and terrorist financing. By being organisationally separate, it offers an independent assessment of how well the firm’s procedures and processes operate.

The function helps identify weaknesses in internal controls, risk management and other control functions. Through regular review, management receives the basis for taking action and developing organisational governance. This is often framed as an independent review function in practice and may include an AML independent review to test design and operating effectiveness.

Having a robust independent audit function increases confidence that the business manages its risks correctly. This enhances trust from customers, business partners and supervisory authorities, and supports firms undertaking an anti money laundering independent review as part of their assurance cycle.

It is a function that regularly reviews and assesses the firm’s risk management, internal controls and procedures under the Act (2017:630).

Companies subject to the Anti-Money Laundering Act with more complex operations should establish such a function. It is particularly relevant for banks, insurers and larger financial actors.

A specially appointed officer is responsible for ensuring that procedures and risk assessments are in place. The independent audit function, in turn, checks that these actually work and reports directly to the board.

An independent audit function is responsible, among other things, for:

Reviewing governance processes, IT systems and internal controls
Assessing risk management against the overall risk assessment
Providing recommendations to relevant stakeholders
Following up on implemented measures

The function may be performed internally by an organisationally separate unit or outsourced to an external party. The company always retains ultimate responsibility for ensuring the work is carried out correctly as an independent review function.

The function provides the board with independent assurance on how well the company complies with the Anti-Money Laundering Act. By identifying weaknesses in organisation, risk management and controls, the company can take appropriate action. This reduces the risk of compliance failures and creates greater confidence both internally and externally. A well-functioning independent audit function also strengthens confidence among customers and authorities.