Anti-money laundering (AML) supervision is an essential part of the regulatory landscape for bookkeepers. While many practitioners understandably wish to avoid the stress of an inspection, it is crucial to recognise that inspections are routine, necessary, and—most importantly—triggered by very identifiable factors. Lucy Brown’s webinar “Bookkeepers: How to Prepare for an AML Inspection” provides clear guidance on what supervisors look for and what can prompt an inspection.
This article summarises the main AML inspection triggers highlighted in her session.
1. Risk-Based Supervision and Annual Reviews
Under Regulation 17 of the Money Laundering Regulations, supervisors must regularly identify and assess the risk level of every practice they oversee. To do this, they rely on information submitted by bookkeepers, usually via:
- Annual questionnaires
- Fit-and-proper tests (HMRC)
- Client-related data uploaded to required software
This information forms the basis of your annual risk assessment, and the supervisor will cross-check your answers with other sources.
If anything appears inconsistent, your risk rating may increase—raising your chances of being selected for inspection.
2. Inconsistencies With Public Information
Supervisory bodies routinely compare your submitted information with publicly available sources such as:
- Your website
- Companies House
- Google listings
If these sources don’t match what you report—such as the size of your team, the services you offer, or the clients you claim to have—this creates a red flag for potential non-compliance.
Examples of problematic inconsistencies:
- Claiming you have no staff, while your website showcases a full team
- Featuring testimonials from clients who do not appear in your AML risk assessments
- Presenting a fictional or exaggerated team for marketing purposes
These discrepancies signal to supervisors that something may be amiss, increasing the likelihood of an inspection.
3. High-Risk Practice Ratings
Some supervisory bodies set inspection frequency based solely on risk rating categories:
- High-risk practices: every 3 years
- Medium-risk practices: every 6–7 years
- Low-risk practices: every 10+ years
If your supervisor follows this approach, there may be little you can do to reduce inspection frequency. Instead, the focus should be on compliance readiness.
4. Missing or Late Annual Returns
Failing to submit your annual questionnaire or AML return on time is a major trigger. Supervisors may interpret this as:
- Poor organisation
- Lack of seriousness about compliance
- Possible non-compliance
Late, incomplete, or inaccurate returns directly increase the chance you’ll be selected for an inspection.
5. Minimal Use of Required AML Software
For bookkeepers whose supervisory body requires use of specific AML software:
- Lack of regular client reviews
- Failure to input or update client data
- Inconsistent or incomplete records
…can indicate a lack of engagement with AML duties. This behaviour suggests heightened risk and can lead to targeted inspection.
6. Falling Behind With Membership or Supervision Fees
Late or unpaid fees are a serious concern. Supervisors may view arrears as a red flag for broader compliance issues.
More importantly, significant delays can mean you are trading without supervision, which is prohibited for regulated professionals. This can instantly trigger both disciplinary action and an AML inspection.
7. Client Complaints or Other Disciplinary Investigations
Any complaint submitted to your supervisory body—even if unfounded—can lead to an AML inspection as part of the investigation process. Supervisors often use this opportunity to review your compliance as a whole.
8. “Giveaway Queries”: Questions That Reveal Non-Compliance
While supervisors encourage bookkeepers to reach out for guidance, any query that explicitly reveals non-compliance must be dealt with appropriately.
For example:
- Asking how to handle a client you should have risk-assessed months ago
- Admitting you skipped CDD checks
- Revealing that you haven’t reviewed clients for years
These are legitimate concerns, but they can alert your supervisor that issues already exist—potentially triggering an inspection.
However, queries about new clients or new situations posed before taking action should not prompt an inspection, and bookkeepers should not hesitate to seek help.
9. Random Spot Checks
Finally, some inspections occur simply because your practice is randomly selected. Supervisors conduct these to test their own systems and ensure that risk profiling is accurate.
A random inspection does not indicate any suspicion.
AML inspections are an integral part of supervision—and while no one welcomes them, they are manageable when you understand what triggers them. By ensuring accuracy in your annual returns, maintaining consistency across public information, engaging fully with required AML software, and keeping your membership and supervision fees up to date, you significantly reduce the likelihood of triggering an inspection.
Most importantly, proactive compliance—regular client reviews, honest documentation, and seeking advice before issues develop—remains the most effective protection.
FAQ:
1. What is an AML inspection and why might I be selected for one?
An AML inspection is a review carried out by your supervisory body to assess your compliance with the Money Laundering Regulations. You might be selected due to your risk rating, inconsistencies in your submitted information, late submissions, or simply at random.
2. What information do supervisors use to assess my AML risk?
Supervisory bodies use:
- Annual questionnaires or AML returns
- Fit-and-proper tests (HMRC)
- Data from required AML software
They also compare your answers with publicly available information such as your website, Companies House, and social media profiles.
3. Can inconsistencies with my website or social media trigger an AML inspection?
Yes. If your marketing or public information contradicts your AML return—for example, showing staff that you claimed not to have, or including fictional testimonials—this creates a red flag and may increase your likelihood of inspection.
4. What happens if I submit my annual AML return late or not at all?
Late or missing AML returns signal to supervisors that you may not be taking your compliance duties seriously. This can raise your risk profile and increase the chance of an inspection.
5. Can not using the required AML software properly trigger an inspection?
Yes. If your supervisory body expects you to use their specified software, failing to regularly update or review your client records may indicate weak compliance and result in inspection.
6. Does falling behind on membership or supervision fees increase my chances of inspection?
Absolutely. Unpaid or overdue fees raise concerns about broader compliance. In some cases, severe delays may mean you are trading without supervision—an immediate red flag for inspection and disciplinary action.
7. Will a client complaint or disciplinary issue trigger an AML inspection?
Yes. Even if the complaint is unfounded, supervisors often use the opportunity to conduct an AML inspection as part of their broader investigation.
8. Can asking my supervisor a question trigger an inspection?
It depends on the question. General queries or requests for advice about new clients or new situations should not trigger an inspection.
However, a “giveaway query” that reveals clear non-compliance—such as admitting overdue client reviews—may alert your supervisor and result in an inspection.
9. Are AML inspections always triggered by concerns?
No. Supervisors conduct random inspections to test their systems and ensure fairness. Being selected does not necessarily mean you’ve made mistakes.
10. Can I reduce the likelihood of an AML inspection?
You can reduce risk by:
- Ensuring accuracy in your AML returns
- Keeping public information consistent with your filings
- Maintaining complete client AML records
- Paying fees on time
- Following guidance and acting on issues promptly
The contents of this article are meant as a guide only and are not a substitute for professional advice. The author/s accept no responsibility for any action taken, or refrained from, as a result of the material contained in this document. Specific advice should be obtained before acting or refraining from acting, in connection with the matters dealt with in this article. The information at the time of publishing was accurate and could be subject to final changes.
