Whether preparing accounts, conducting audits, advising businesses or completing tax returns, they often have access to financial information that can reveal unusual patterns, inconsistencies and warning signs that others might miss.

The UK government has placed increasing emphasis on tackling economic crime in recent years. The Economic Crime and Corporate Transparency Act 2023 has strengthened Companies House powers, introduced new corporate criminal liability provisions and increased expectations around transparency and verification.

However, fraud remains the most commonly experienced crime in the UK, while money laundering, sanctions evasion, modern slavery and the misuse of corporate structures continue to present significant risks.

Against this backdrop, professional scepticism remains one of the most valuable tools available to accountants. While accountants are not expected to investigate criminal offences, they do have responsibilities under the anti-money laundering (AML) regime to identify and report suspicious activity. Understanding some common indicators can help practitioners recognise when further questions may be warranted.

Poor or incomplete accounting records

Under the Companies Act 2006, directors are required to maintain accounting records sufficient to show and explain the company's transactions and disclose its financial position with reasonable accuracy. Businesses that cannot produce meaningful records beyond a collection of invoices, receipts and bank statements may present a heightened risk.

Poor record-keeping does not automatically indicate criminal activity. However, where management appears unable or unwilling to explain how revenue is generated, how liabilities arise or how transactions are recorded, accountants should consider whether the deficiencies could be concealing other issues.

Questions may be particularly appropriate where records appear deliberately fragmented, key documents are unavailable, or explanations change over time.

Revenue patterns that do not fit the business model

Financial data should generally make sense in the context of a business's operations. Unusual revenue patterns may warrant closer examination, particularly where income appears inconsistent with the nature, scale or operating hours of the business.

For example, significant card receipts recorded during the early hours of the morning for a business that does not operate at night may be difficult to explain through legitimate trading activity.

Similarly, businesses reporting strong revenues despite limited customer activity, minimal marketing presence or little visible commercial infrastructure may require further scrutiny.

Modern payment systems provide increasingly detailed transaction information. Reviewing trends, timings and customer payment patterns can sometimes highlight anomalies that merit further questioning.

Insufficient assets or supplies to support reported sales

Another common indicator is a mismatch between reported activity and the resources available to generate it.

A business claiming to operate in a capital-intensive sector should ordinarily possess, lease or have access to the assets necessary to undertake that activity. Likewise, businesses selling goods would normally be expected to purchase sufficient inventory to support reported sales.

Such inconsistencies may suggest false accounting, undisclosed suppliers, fictitious revenue or the use of a business as a vehicle for laundering criminal proceeds.

Staffing costs that appear implausibly low

Employment-related information can provide valuable context when assessing whether a business's reported results are credible. Service-based businesses with significant turnover but minimal staff or subcontractor costs may present questions about how services are being delivered.

Comparing revenue against sector averages, productivity measures or published labour market data may help identify situations where staffing arrangements appear inconsistent with reported performance.

Unusual payroll patterns may also be relevant and may indicate labour exploitation, modern slavery concerns or tax evasion risks.

Unusual loans and financing arrangements

While legitimate explanations often exist, financing structures that lack a clear economic purpose can sometimes indicate money laundering, fraud or coercive criminal activity.

Particular care should be taken where financing arrangements appear commercially irrational. Extremely high interest rates, unusual security arrangements or transactions involving vulnerable individuals may warrant additional questions.

Complex ownership structures and opaque control

Complex corporate structures involving multiple entities, overseas jurisdictions or nominee arrangements are not inherently suspicious. However, where there appears to be no clear commercial rationale, additional scrutiny may be appropriate.

Sanctions and international risk exposure

Professional firms should ensure that sanctions screening forms part of their broader client acceptance and monitoring procedures. Accountants should remain alert to transactions involving high-risk jurisdictions, sanctioned individuals or entities connected to countries subject to significant international restrictions.

Cryptoassets and emerging technologies

While many cryptoasset activities are legitimate, accountants should be alert to situations where clients are unable to explain the source of digital assets, provide evidence of ownership or demonstrate how valuations have been determined.

Similarly, advances in artificial intelligence and digital technologies have increased the sophistication of some frauds. Fabricated documentation, artificial identities and manipulated records can make traditional verification procedures more challenging. Maintaining professional scepticism and obtaining independent evidence remain essential safeguards.

When suspicion arises

The presence of one indicator does not necessarily mean criminal activity is taking place.

Often it is the combination of unusual factors, inconsistencies and unexplained transactions that should prompt further consideration.

Accountants are not expected to prove wrongdoing. Their role is to identify concerns, apply appropriate professional judgement and comply with their legal and regulatory obligations. Where knowledge or suspicion of money laundering arises, a Suspicious Activity Report may be required.

Timely reporting helps law enforcement agencies and other authorities build intelligence that can contribute to the prevention, detection and disruption of economic crime.