AML shouldn’t damage client relationships

Good accountants and bookkeepers ask questions.

This content is brought to you by AMLCC.

‘Why do you need my ID? I only want help with the bookkeeping.’

If you have just set up in practice, you may be keen to get a new client’s work underway. Asking a prospective client for identity evidence can feel like putting an obstacle in the way. An established practitioner may have a different worry: offending a client who has trusted them for years.

Both situations call for a clear explanation of what you need and why. Anti-money laundering (AML) checks should reflect the client’s circumstances, whether you met them last week or have prepared their accounts for decades.

Build an understanding of the business

With a new client, establish how the business earns its money and what work you will provide. Ask what activity you should expect to see, including how payments are received. Relevant records, where available, can help you assess the explanation and recognise changes later.

That understanding should inform a documented client risk assessment. Being new to you does not automatically make a client high risk. A small turnover or local address is no guarantee of low risk. Equally, proportionate AML does not mean asking every client to account for their entire financial history. The enquiries should reflect the client, your work and the risks, while meeting the required customer due diligence checks.

As the relationship develops, a bookkeeper may be the first person to notice that takings no longer fit the trading pattern, or that payments described as business expenses keep going to an unfamiliar recipient. There may be an ordinary explanation. Your knowledge of the business helps you recognise when to ask for it.

Make identity checks easier to understand

Identity verification can be the first point of friction when agreeing an engagement. Even a personal introduction does not remove the need for appropriate checks.

Make the requirements clear when you first discuss taking on the work: ‘Before we start, I need to verify your identity as part of our anti-money laundering checks. I’ll explain what’s needed and how to provide it securely.’

For an established client, explain the actual reason for the request. Perhaps a review has identified missing verification evidence, or changed circumstances require an update. Do not imply that everyone must submit fresh ID each year, or ask again for adequate information already held without a reason.

Where evidence is missing, be candid: ‘We’ve worked together for years, but a review of your file has identified a gap in our verification records. Let me explain what we need to put that right.’

Be specific about the documents or verification steps required, how to complete them securely and when you need them. A bare instruction to ‘send ID’ leaves the client to guess what will be accepted.

A client who does not hold a passport or struggles with an identity app may need help completing the process. Consider appropriate alternative evidence under your procedures and current sector guidance. Practical difficulty is not the same as unwillingness to cooperate.

If they say their bank or lawyer has already checked them, explain that another professional’s involvement does not automatically discharge your responsibilities. Formal reliance arrangements have conditions; a client’s assurance is not enough.

Completing the identity check gives you evidence of who the client is. You still need to understand the business relationship and keep that understanding up to date.

Keep the question connected to the work

The same approach helps when a transaction needs explaining.

Suppose a self-employed electrician transfers £15,000 into the business account and asks you to record it as ‘money introduced’. That describes an accounting entry, but may leave you needing to understand the source of the money. It might be savings, the sale of a vehicle or a family loan.

‘Can you talk me through where this came from and whether any of it has to be repaid?’ is a reasonable professional question. The answer helps you understand both the transaction and its accounting treatment. Whether supporting evidence or further enquiries are needed depends on the circumstances and risk.

You should be able to explain why you asked, what the answer established and whether anything remains unresolved. Copying ‘client confirmed’ into the file will be of little value if it does not record what they confirmed or why the explanation made sense.

Recognise when a conversation is not enough

Some clients will still resist. Find out whether the obstacle is confusion, concern about sharing documents or a refusal to provide necessary information.

You can help with the process while standing by the requirement. If required due diligence ultimately cannot be completed, you cannot simply carry on: follow your procedures for declining or ending the relationship and considering any reporting obligation.

An awkward response or unusual payment is not, by itself, proof of wrongdoing. Nor must you prove a crime before reporting. If you know or suspect money laundering, or have reasonable grounds to do so, act promptly under your reporting procedures. Take care over what you tell the client to avoid unlawful tipping off.

You are expected to exercise professional judgement, not conduct a criminal investigation. Keep a clear record of the information considered and the reasons for your decisions.

Build confidence before the difficult conversation

Explain at the start of a relationship that you’ll need information about identity, ownership and the nature of the work, and that you may ask for updates later. Build the necessary checks into onboarding and periodic reviews, rather than contacting clients only when a file is urgently incomplete.

For an established client, a friendly explanation and a specific request will usually be easier to understand than a long, unexplained questionnaire. Some clients will still push back. Be polite, explain the professional requirement and stand by the checks you need to complete.

The strongest client relationships aren’t those in which nothing difficult is ever discussed. They’re those in which appropriate questions can be asked openly and respectfully.

After all, good accountants and bookkeepers don’t just process the figures they’re given. They take the time to understand the people and businesses behind them.

Clear processes make it easier to ask the right questions. Discover how AMLCC’s practical guidance and risk assessment tools can help you understand your clients and document your decisions. Find out more at amlcc.com.

This content is brought to you by AMLCC.

AMLCC provides practical anti-money laundering software, including training and guidance for accountants and bookkeepers. Its platform connects business and client risk assessments; client due diligence; policies, controls and procedures; helps users apply professional judgement; manage financial crime risks and maintain clear evidence of the steps taken to meet their AML compliance obligations.