The session covered upcoming changes to the Money Laundering Regulations, progress on AML supervisory reform, and common themes emerging from monitoring reviews. While most firms continue to demonstrate good levels of compliance, the discussion highlighted opportunities to simplify processes, strengthen risk-based approaches and focus on what really matters.
AML supervisory reform: what happens next?
One of the most popular topics during the webinar was the government's plans to move AML supervision for the accountancy, legal and trust and company service provider sectors to the FCA. Based on current timelines, ICAEW expects to remain the AML supervisor for firms through this year, next year and likely much of 2028. While the supervisory body may change, the underlying Money Laundering Regulations are not changing, meaning firms should not expect significant changes to their day-to-day AML obligations in the immediate future. Questions were also raised about firms currently supervised by HMRC. The proposed reforms would apply across the sector, including HMRC-supervised firms.
What is the potential cost of FCA supervision?
At this stage, there is no confirmed fee structure and further detail is expected as the legislative and implementation process progresses.
Regulatory updates and CCAB guidance
The webinar also covered changes due to come into force on 30 June, including updates to monetary thresholds within the regulations. The key change relates to the mandatory requirements for enhanced due diligence – with high risk third countries now being defined as the FATF ‘blacklist’ only. However, for many firms, this will likely not change those countries that they have assessed to be higher risk under their firm-wide risk assessment and associated mitigating policies and procedures.
Attendees were also keen to hear about the revised CCAB AML Guidance. ICAEW has submitted the updated guidance to HM Treasury for approval and, while recent political changes may cause a short delay, publication is still expected during the summer.
Companies House verification and customer due diligence
A recurring theme throughout the webinar was the relationship between Companies House identity verification and AML requirements.
Many firms asked whether they can rely on Companies House identity verification, including the new personal codes issued following verification. The current position remains unchanged: the Money Laundering Regulations do not permit firms to rely on Companies House verification for AML purposes. Firms must continue to carry out their own risk-based customer due diligence procedures.
The same principle applies when identifying directors and trustees. Firms should identify all directors or trustees but take a risk-based approach to deciding how many individuals require verification. In many standard-risk engagements, verifying the primary contact may be sufficient.
How long should you retain identification documents?
While many firms choose to keep copies of passports and proof of address documents, the key requirement is being able to evidence the verification process. In some circumstances detailed file notes may be sufficient where documents cannot be retained.
Identity verification and ongoing monitoring
Reviewer insights highlighted that some firms may be carrying out more checks than necessary. Obtaining and reviewing original identification documents remains one of the strongest forms of identity verification. Electronic verification services can be valuable, but firms should understand exactly what those systems provide, as many focus on sanctions, politically exposed persons (PEPs) and adverse media screening rather than true identity verification.
The webinar also clarified that firms do not need to obtain updated passports or proof of address documents simply because existing documents have expired.
Do I need to obtain updated passports or proof of address documents simply because the existing documents have expired?
If the client's circumstances and risk profile remain unchanged, there is generally no need to refresh verification evidence. Similarly, ongoing monitoring should be genuinely risk-based. Rather than applying the same review cycle to every client, firms should update due diligence when circumstances change or new risks emerge. Higher-risk clients may require more frequent monitoring, while lower-risk clients may need less frequent intervention.
The role of the money laundering reporting officer
The discussion also explored the role of the MLRO and deputy MLRO.
Neither role requires the individual to be a qualified accountant. However, they should have sufficient authority, knowledge and understanding of the regulations to oversee compliance effectively, recognise suspicious activity and, where appropriate, make suspicious activity reports.
Reviewers noted that AML works best when responsibility is embedded across the firm rather than resting solely with the MLRO. Strong firms ensure the MLRO is properly supported by partners, management and staff.
Common challenges and areas of good practice
Reviewers shared several observations from monitoring reviews, including areas where firms often struggle and examples of effective approaches.
One common challenge is ensuring that all elements of a firm's AML framework connect together. Firm-wide risk assessments, policies and procedures, client risk assessments, verification evidence and ongoing monitoring should all support and reflect one another.
Another area of difficulty is identifying when enhanced due diligence is required and ensuring that any additional checks directly address the risks identified. Simply collecting more identification documents does not necessarily mitigate higher-risk scenarios.
Examples of good practice included:
- concise but meaningful client risk assessments;
- clear documentation explaining the client, risks and rationale for decisions;
- compliance reviews that cover multiple regulatory areas at the same time;
- regular, tailored AML training linked to real-life scenarios; and
- ongoing monitoring that responds to genuine changes in client circumstances.
For many firms, particularly smaller practices, a short but well-written note demonstrating a clear understanding of the client can be more valuable than pages of completed checklists.
Technology and AI
The webinar concluded with discussion around AML software and emerging AI tools.
The key message was that technology should support, rather than replace, professional judgement. Firms should understand what their software is doing, ensure it reflects their own risk appetite and periodically review whether it remains suitable for their client base.
Whether using traditional documentation, electronic verification systems or AI-enabled tools, firms remain responsible for applying a risk-based approach and ensuring their AML procedures are effective in practice.
Further resources
Our expert presenters
Michelle Giddings is ICAEW’s Head of AML with operational responsibility for the AML supervision of ICAEW’s 9,500 AML-supervised firms. She is co-Chair of the Accountancy AML Supervisors Group and was Chair of the AML Supervisors’ Forum in 2021. Michelle qualified as a Chartered Accountant in 2005, completing her training contract at a Big Four firm and working within audit for Professional Services firms. In 2009, Michelle joined ICAEW’s Quality Assurance Department as a Senior Manager, leading monitoring reviews to larger, higher-risk firms and managing a team of reviewers conducting monitoring reviews across the country.
Sandy originally trained with Ernst & Young, where she qualified as a chartered accountant. She then had operational roles in industry, including a few years at the BBC. This was followed by a stint as a sole practitioner which helped her to appreciate the many challenges faced by smaller firms. After 14 years as a quality assurance reviewer she now works in the AML supervisory team at ICAEW. Although her role does encompass monitoring firms' compliance with the Money Laundering Regulations, a large chunk of it is dedicated to providing guidance to our member firms.