What is anti-money laundering (AML) and why does it matter for UK businesses?

Introduction

Money laundering remains a serious threat to the global financial system, and the UK is no exception. It is a process by which criminals disguise the origins of illicit funds, making them appear legitimate. The scale of the problem is significant: the National Crime Agency estimates that billions of pounds are laundered through the UK each year.

Anti-Money Laundering (AML) regulations aim to prevent and detect this activity. For UK businesses, compliance is not optional. Failing to implement appropriate AML measures can result in severe legal and financial consequences, as well as lasting reputational damage.

Whether you are a financial institution, a law firm, or a company operating in a regulated sector, understanding AML obligations is essential. This blog outlines what AML is, who it applies to, and why it matters for UK businesses of all sizes.

What is anti-money laundering (AML)?

Anti-Money Laundering refers to a set of laws, regulations, and procedures designed to prevent criminals from disguising illegally obtained funds as legitimate income or assets. It encompasses a wide range of controls and obligations placed on businesses to detect, report, and deter money laundering activities.

In the UK, the primary legal framework for AML compliance includes:

• The Proceeds of Crime Act 2002 (POCA) – establishes money laundering offences and powers for investigation.
• The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, as amended – sets out detailed requirements for risk assessment, customer due diligence, and ongoing monitoring.
• The Criminal Finances Act 2017 – enhances powers to investigate and recover criminal property.

AML legislation is enforced by multiple regulatory bodies, including HM Revenue & Customs (HMRC), the Financial Conduct Authority (FCA), the Solicitors Regulation Authority (SRA), and the Gambling Commission, depending on the sector.

The core purpose of AML laws is to make it more difficult for individuals and entities to conceal the origins of criminal proceeds, thereby disrupting organised crime, terrorism financing, and corruption.

Who needs to comply with AML regulations in the UK?

AML obligations apply to a wide range of businesses and professions, particularly those involved in managing or moving money. Under UK regulations, the following sectors are considered at high risk and are therefore subject to AML requirements:

• Financial and credit institutions
• Accountants and tax advisers
• Law firms and notaries involved in transactions such as property, trusts, or company formation
• Estate agents and letting agents
• Trust or company service providers (TCSPs)
• High-value dealers, including those handling large cash payments
• Gambling operators

Compliance requirements are not limited to large organisations. Small businesses, particularly those offering services in regulated sectors, must also adhere to AML obligations.

If a business is covered by the Money Laundering Regulations, it must register with a supervisory authority, carry out risk assessments, and implement suitable policies and controls. The level of scrutiny required will depend on the nature of the services offered, the size of the business, and the risk profile of its clients.

Failure to comply, even due to oversight, can lead to regulatory enforcement and significant penalties up to and including imprisonment.

Key AML requirements for UK businesses

For businesses operating within the scope of UK AML regulations, compliance involves more than simply knowing the rules. It requires a proactive, risk-based approach to monitoring and preventing financial crime.

The key obligations include:

• Risk assessment

Firms must conduct a documented AML risk assessment to identify and assess the risks of money laundering associated with their clients, services, and delivery channels.

• Customer due diligence (CDD)

Before entering into a business relationship or carrying out certain transactions, businesses must verify the identity of their clients and, where applicable, the beneficial owner. This includes collecting and assessing identification documents and other relevant data.

• Enhanced due diligence (EDD)

Where a higher risk is identified, such as dealing with politically exposed persons (PEPs) or jurisdictions with weak AML controls, enhanced checks are required.

• Ongoing monitoring

AML compliance is not a one-time exercise. Businesses must monitor transactions and relationships continually to detect unusual or suspicious activity.

• Reporting obligations

If suspicious activity is detected, it must be reported to the National Crime Agency (NCA) through a Suspicious Activity Report (SAR).

• Record keeping

Businesses must retain records of customer identity checks, transactions, and risk assessments for a minimum of five years.

• Appointment of an MLRO

Many regulated firms must appoint a Money Laundering Reporting Officer (MLRO), responsible for internal oversight and reporting of suspicious activity.

Conclusion

Anti-Money Laundering compliance is a legal obligation for many UK businesses, but more importantly, it is a vital part of operating responsibly and ethically in today’s business environment.

By understanding your obligations and embedding robust AML procedures, you not only mitigate risk but also protect your business, clients, and reputation.

Our expert team can assist you if you have any questions, contact us on 020 7940 4060 or send us an email at mail@anthonygold.co.uk.