Understanding what AML software is right for your firm by Firmcheck

“Not all AML software is created equal”...

I can almost imagine that line being read out in a packed theatre full of accountants, something reminiscent of a scene from a Shakespeare play – a scroll in hand, and a feather in cap, with those seven simple words etched into it. Upon reading them out, the crowd gasps loudly 😱 – only for the messenger to collapse into a heap in the middle of the stage.

THE END.

Only that’s not quite the end, and there is lots to learn – but it is true, that not all AML software is created equal. There is an emergence of brand new apps, and also a myriad of established software providers building in AML functionality for accountants and bookkeeping professionals.

And if you consider the urgency of the regulatory environment, it can feel like the heat is on, so how do you choose the right solution for your business? Especially when you're not quite sure what exactly you need to have in place in the first instance to ensure you meet your AML compliance requirements.

Before we jump into the software itself, let’s remind ourselves of some AML fundamentals that you should have in place regardless of whether or not you’re using AML software to manage your compliance obligations.

1. Have a documented AML policy, which includes your processes and controls, and essentially sets out how you will comply with your AML obligations

2. Ensure you have due diligence measures in place to verify who you’re working with, and whereby the risk is heightened you have a process for assessing those risks in line with the law and your policies

3. Make sure that you’re conducting thorough risk assessments, closely tied to your due diligence measures, this will help you understand what risk a potential client (or existing client) poses, and what measure or additional information gathering you might need to do

4. Understand the level of overall risk your firm has amongst your clients by having a well-documented and regularly updated firm-wide risk assessment, so you can demonstrate how you are assessing risk, and should you need to, report on it

5. Regularly training your employees, at least once per year, ensuring they are up to date with the legislation, how to spot potential money laundering and also that they are up to speed with how to implement your AML processes internally

6. Implement ongoing monitoring – one of the most common AML compliance gaps is the ongoing requirement to keep things in check (including updating risk assessments)

Importance of choosing the right solution for AML compliance

No matter what part of your AML journey you’re on, you may or may not already be using AML software. 

Using AML software is not essential – there are many accounting firms successfully managing their AML obligations using good old-fashioned spreadsheets, document management systems and simple CRM tools or practice management systems.

The advantages of a manual approach mostly revolve around software costs – why pay for a system if what you’re doing isn’t broken?

What we often don’t factor into the simpler approach is the gaps it can create, how much harder it can be to manage things on an ongoing basis as your firm grows, as well as keeping on top of being compliant.

In the next section we’ll dive deeper into the different types of AML software, but before you even consider which tool, it’s important to think about your situation – what you choose to implement can be dependent on a number of factors:

• The size of your firm

• The makeup of your firm e.g. what roles and departments exist?

• The sorts of clients and industries you typically work with

• The services your firm provides

• The geographies in which your firm is servicing

• The stage of your firm e.g. are you starting from scratch or are you established?

The list above isn’t exhaustive but just some of the more common factors that typically weigh on the decision “What AML software is right for me?”.

The different types of AML software

There are a multitude of different types of software in the market that you can use as part of your AML compliance process. You’ll read different labels all across the internet, but typically most AML compliance software in the market can be put into either one of these categories or bridge several.

• AML screening tools – these types of software are used to identify and highlight individuals or entities that are part of any watchlists, such as sanctions lists or identify if they might have or be associated with someone considered a politically exposed person (PEP). From an AML perspective, screening for sanctions and PEPs is not essential, it’s more optional, but it’s good practice to build this into your process to ensure you’ve highlighted and mitigated any risk. It’s easy to assume because you know someone that running PEP checks or screening for sanctions isn’t necessary, but it can be a key defence for your firm in ensuring you’re managing risk more robustly.

• KYC & ID checking tools – a large portion of AML software in the market focuses on these elements, and there is a misconception that checking and verifying IDs means that you’re AML compliant, that’s at least what I’ve been hearing from the market. The KYC and ID verification components of AML are critical, but are only the starting point – the information you gather during this phase is critical to help you make an informed risk assessment and thorough due diligence.

• Background checking and credit reporting tools – beyond PEP checks and sanctions screening, there is other software that can help you carry out background checks on individuals and entities, and this may come in the form of criminal records or credit checks. Running these checks can help build a more complete picture of the business or individual you’re working with. They aren’t essential for AML purposes, but they can be additive to help you build up a more comprehensive risk assessment of your client and help you in other parts of your business too.

• Transaction monitoring tools – software focused on transaction monitoring can help you identify and flag suspicious transactions that may be indicative of money laundering or other financial crimes. There’s a good chance that if you’re an accountant dealing with the finances of a company or individual you have lots of visibility and scrutiny of financial transactions, however implementing monitoring tools can help you stay on top of things more easily, leveraging automation to reduce the manual workload of combing through transaction statements line by line. Transaction monitoring tools could be considered an ongoing defence to detect money laundering activity as opposed to a key part of your initial onboarding engagement.

• AML management tools - More often than not some AML software on the market will have some components of the above tools integrated into one system, and some also work well as standalone tools as an additive component of your AML processes. Despite that another type of software that typically brings more of the above together is an AML management tool, these tools look to incorporate all the key elements of AML compliance into one place, and this might not be limited to just the AML process that you engage with you client it, it might include more broader functionality such as a place to store your staffs AML training records, or a way to manage your firm-wide risk assessment.

Another consideration often overlooked is who the software itself is geared towards – because AML compliance is prominent throughout the entirety of financial services, with banks being the biggest market, a large percentage of the AML software we see today is designed for banking as the primary use case and is usually geared towards individuals.

In the accounting space, whilst we might work with individuals, typically we find ourselves working with businesses. This introduces an additional consideration when it comes to documenting risk assessments and carrying out due diligence, and something that your KYC & ID checking tools that aren’t designed for the accounting industry typically don’t account for as they are focused on individuals. There are also other nuances that we need to consider as accountants that AML software designed for banking doesn’t do as well as it could.

The key features of a good AML solution

That’s a lot to take in so far. But whatever your decision when it comes to how you manage your AML compliance at your firm, be that with or without software, making sure you’ve got a proactive AML compliance program and that you’re meeting your obligations should be your number one priority.

As we’ve touched on, there is no one size fits all, because there are many influencing factors that might impact how you choose to manage AML at your firm, and as we highlighted some components of it can even be managed in a spreadsheet.

But, it goes without saying that any software which brings as many components of AML into one place as possible is going to be more beneficial for you and your firm. One of the advantages of keeping it in one place is that you can spend less time on the admin of AML and have more confidence in your process, which is a win-win all around, and your AML process may end up being additive, or a better customer experience as a result of leveraging software.

Finally, a key feature of any AML software is ultimately one that helps you meet your AML obligations and helps you do that as easily and efficiently as possible.

If you’ve made it this far, congratulations, perhaps finding a suitable AML software is high on your agenda at the moment? We’d be happy to have a chat with you about all things AML, including how and what software might help, and if you’ll forgive us for a shameless plug, we’d be happy to show you around our AML management system, which is built specifically for the accounting industry — how does that sound?