AML Solutions for Auditors and Accountants

Most of the clients the Auditors and Accountants come across are legal entities or legal arrangements, and AML/CFT regulations across major countries require the auditors and accountants to identify and verify the natural person who holds ultimate control and conducts operations of a legal entity or arrangement. These natural persons are classified as UBOs.

In most countries, accounting professionals are obligated by AML regulations to identify UBOs of a legal entity or arrangement. However, if an organisation has too many layers of owners and/or shareholders, identifying the UBO becomes tricky and challenging for the accounting professional.

It is crucial and mandatory for auditors and accountants to verify the identity of their customers, assess potential risks, and monitor transactions to avoid any financial crime risks. By performing KYC and CDD, these accounting professionals conduct a background check before establishing a relationship of trust or continuing already established relationships.

There are instances where accounting professionals are unable to collect verifiable documents, and if documents are received, they are unable to assess them accurately. Due to this lack of understanding, the effectiveness of KYC and CDD measures is low.

Ongoing monitoring helps keep a check on customers and assess their transaction patterns to catch any red flags or potential financial crimes. However, there are a few factors that restrict or pose challenges to accounting professionals. Factors such as a lack of sufficient tech tools, limited knowledge of tools, resource constraints, and a lack of awareness can lead to poor implementation of ongoing monitoring.

Imagine keeping every receipt for every purchase or impulsive buy, from the beginning. Does not sound easy, does it? Record-keeping and maintaining are tedious tasks, but they are crucial in the AML compliance area.

Records of every customer relationship, the KYC, due diligence process, and other AML controls implemented for each relationship, the assessments, findings, as well as approvals from the AML Compliance Officer to Senior Management, must be recorded and maintained for a prescribed duration, as directed by the applicable AML laws. Due to a lack of resources and staff, the auditors and accountants find it challenging to keep track and comply with this requirement.

The name screening process is one of the most effective yet extensive AML compliance requirements. For better and accurate screening results, one should be well-trained about the tools and methodology. Even if one knows how to use the screening software, one should be well-versed in assessing the results to form an accurate conclusion.

Not everyone is equipped with the most efficient screening software among the auditors and accountants. Some accounting professionals rely on a manual name screening process and legacy systems. Additionally, in instances of false positive results, poorly configured software is to blame, which stands as a challenge for these professionals.

The most common yet painful challenge auditors and accountants face in any region is a lack of trained compliance staff. AML compliance is a crucial requirement, and having a well-trained team is a basic need. However, to upskill the team, it takes effort, time, and resources.

Not having a trained team to assist accounting professionals in fulfilling AML compliance requirements efficiently makes compliance difficult.

AML Compliance is an ever-evolving area, and keeping pace with the changing regulations, typologies, increasing red flags, and rapidly updating sanctions list should be a top priority. Accounting professionals who rely on legacy AML compliance software face serious repercussions.

Having AML software that is outdated and cannot keep pace with the fast-changing world will never solve any problems but add to them. Today’s auditors and accountants should be well-versed with advancements in technology, such as the availability of unified AML software that is equipped to iron out common difficulties by capitalising on its capabilities that include fuzzy matching, machine learning, and AI, which fulfils the compliance needs hassle-free while minimising issues related to data security and data privacy, which originate from working with legacy systems.

The AML regulations require regulated entities like auditors and independent accountants to adopt a Risk-based Approach (RBA). An approach with a systemic methodology to identify risks and deploy commensurate resources to manage or mitigate these risks, as well as ensure the utmost utilisation of available resources. Following the RBA is critical for every accounting professional. However, these professionals fall short or overcompensate in meeting compliance requirements.

For an auditor, when the lack of resources is compounded by the reliance on a legacy system and a shortage of trained staff, achieving timely regulatory reporting of suspicious activity or transactions becomes a far-fetched idea.

The AML regulations mandate the timely reporting of suspicious activity and transactions for faster and effective preventive measures to take place. However, if an accounting professional is unable to efficiently detect suspicious activity or transaction, reporting the suspicion may lead to a breach of AML reporting requirements for the applicable country.