supervisoryreport2025_amlgreen Final Draft for approval

IAB Anti-Money Laundering Supervision Report 2025 Reporting period: 6th April 2024 – 5th April 2025 Disclaimer: This report was prepared prior to the HM Treasury AML regulatory reform announcement on 21 October 2025 and reflects the regulatory position as understood at the time of preparation.

Contents Leadership Perspective

03

AML Complete: An Investment into Smarter Supervision

05

Strengthening Supervision and Supporting the Profession

06

A Data-Driven Supervision Process that Raises Standards

08

Promoting Stronger AML Supervision Through Collaboration and Advocacy

11

Risk in Focus: How Data and Frameworks Shape our Supervision

12

Embedding Effective AML Compliance: Supporting Practices through Risk Awareness and Tailored Guidance

14

Risk-Based Supervisory Inspection Methods and Key Insights

16

2024–2025 Outcomes: Phase 2 Inspections Suggest Sustained Effective Compliance

18

5 Year Inspection Overview

19

The Year Ahead

20

External Resources

21

www.iab.org.uk

Leadership Perspective The landscape for anti-money laundering (AML) is becoming increasingly demanding, shaped by both global uncertainty and the growing expectations placed upon regulators and professionals alike. International bodies, including the United Nations, are making greater use of sanctions and other measures to combat financial crime.

For supervisors in the UK, this means we must respond to evolving risks with agility and ensure that our members have the guidance and reassurance they need to remain compliant and resilient.

Sarah Palmer CEO IAB

The responsibility to comply with the Money Laundering Regulations (MLRs) comes alongside wider regulatory changes in the accounting and bookkeeping industry. These developments reflect the need to evolve with technology, reshaping how business support for the profession is delivered while ensuring that AML compliance remains embedded at the core. Professionals must balance day-to-day practice with complex and often shifting regulatory demands, and they need structure and clarity to navigate this environment effectively.

As a membership organisation the Institute of Accountants and Bookkeepers (IAB) plays a crucial role: we bring insight into the realities of practice, we can reach and support our community, and provide the direction needed for them to carry out their obligations with confidence. By working in partnership with them, we can ensure our approach is both robust and practical, supporting compliance while recognising the realities of professional life.

As an active business owner these are responsibilities which I also experience and recognise.

The IAB role is twofold. We are a supervisor, tasked with ensuring that standards are upheld and risks addressed. But we are also an educator, committed to equipping members with the knowledge, guidance, and tools required to operate effectively. As both a regulated education provider and a supervisory body, we are well placed to deliver this dual role: our mission, is to provide supervision hand in hand with education – a must if we are to reduce risk while supporting a healthy and trusted profession. However, this comes at a cost and one which the IAB has continued to pay despite the uncertainty of the industry reform consultation.

Technology is central to our vision and reflected by the level of investment we have committed to in developing our proprietary platform AML Complete. Mandatory for all our supervised members, this platform generates rich, dynamic data that gives us deeper insights into the risks and

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behaviours within our population. By leveraging this intelligence, we are improving the quality and timeliness of the guidance we provide, while making supervision more focused and proportionate. In practice, this means that members receive clearer, more targeted support, while unnecessary burdens are reduced. Embracing technology is not just about keeping pace with change—it is about shaping a smarter, more sustainable approach to AML supervision. We are developing this tool further to encourage members continuous improvement of their practice by more focused independent review and revision.

The challenges ahead are real. Criminals continue to adapt, sanctions regimes will grow in complexity, and regulatory demands on the profession will remain. Yet, through strong collaboration, a commitment to innovation, and a shared determination to uphold the highest standards, we can respond with confidence.

The priority of the IAB remains to be a supervisor that is firm but fair, and an educator that leads and guides the profession in their regulatory requirements and career progression.

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AML Complete: An Investment into Smarter Supervision AML Complete was developed in response to long-standing supervisory review findings such as limited risk awareness, slow review processes, and outdated paper-based systems.

A key objective of the platform is to transform how risks are identified, managed, and addressed in real time. It is designed to drive compliance, moving practices beyond tick-box exercises towards genuine risk recognition and proportionate action. The system enables the IAB to verify effective compliance is being applied, while providing members with the structure and guidance needed to navigate their obligations with confidence.

There is still a significant roadmap of development for AML Complete but the initial outcomes signal progress. IAB are currently revising the platform to include a particular focus on independent review driving continuous improvement of members practice and compliance

The impact for IAB as a supervisors Accurate Risk Picture: Provides real-world insight into risks across the supervised population, correcting gaps between perception and reality (e.g. 12% of IAB practices reported cash-intensive clients, but only 1% of actual clients fell into this category).

Targeted Resource Use: Directs inspections and interventions where they matter most, ensuring supervisory resources have maximum impact.

Consistent Oversight: Standardised practice profile reporting reduces variation and supports a uniform approach across the supervised population.

Live Sector View: Continuous updates from practices means the IAB holds an up-to-date picture of risks, enabling proactive, not reactive, oversight.

The impact for IAB members Dynamic Alerts and Reminders: Practices are prompted when potential risks arise or when reviews are due, providing the opportunity to embed AML checks into standard processes.

Whole-Practice Assessments: Each practice receives an overview of its risk profile, ensuring resources are focused on the areas of greatest need.

Client-Specific Risk Outputs: Risk factors are flagged at client level, supporting proportionate and informed decision-making.

Personalised Risk Summaries: Firms are provided with tailored documents highlighting the risks most relevant to them.

Up-to-Date Compliance: By moving away from reliance on annual declarations, practices keep their compliance profile current and accurate throughout the year.

The overriding change being that AML Complete can help to deliver a more effective use of time to regulation, one of the biggest barriers to member engagement. Encouraging the ability to integrate AML into everyday practice management and helping them move from reactive compliance to proactive risk management.

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Strengthening Supervision and Supporting the Profession As a Professional Body Supervisor (PBS), the IAB are committed to upholding the highest standards of compliance with the UK Money Laundering Regulations (MLRs). Our approach combines robust oversight with targeted support, ensuring that our members meet their legal obligations but also have the tools, knowledge, and confidence to deliver high-quality, compliant services.

Our Role as a Professional Body Supervisor As a PBS under the MLRs, the IAB oversees the compliance of accountancy and bookkeeping practices operated by our members. As a supervisor and an educator, our objective is to ensure that our supervised population consistently meet the requirements of the regulations while upholding professional integrity.

Defining the Scope of Supervision The MLRs clearly define regulated activity: External Accountants (Regulation 11(c)): Providing accountancy services by way of business, including recording, reviewing, analysing, calculating, or reporting financial information outside a contract of employment.

Tax Advisers (Regulation 11(d)): Offering material aid, assistance, or advice on tax affairs, including completion of returns, tax calculations, and tax planning.

Supervising this population ensures those delivering accountancy and tax services act with professionalism, integrity, and accountability.

Gatekeeping the Profession The IAB safeguard association with the profession through a structured membership framework: Member (MIAB) – Qualified through recognised accountancy or bookkeeping qualifications.

Fellow (FIAB) – Experienced professionals with at least five years’ practice, including demonstrable use of commercial accounting software.

Going beyond the minimum standards set out in the MLRs; IAB requires that every UK member must provide an annual criminal record check (DBS or equivalent), ensuring only fit and proper individuals can deliver regulated services. Supported by a ‘due diligence’ assessment this further protects clients, enhances trust, and maintains public confidence.

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Supporting and Developing Members Being an Ofqual regulated qualification provider the IAB naturally extends the role of supervision into education. We invest heavily in the professional development of members, so they remain confident and capable in meeting AML obligations. Support includes:

CPD-accredited learning, including monthly virtual coffee mornings and free AML training modules.

Regular publications, such as digital newsletters and a quarterly magazine.

Ambassador-led support groups.

The forthcoming development for AML Complete will also expand the use of independent review to improve and update practice and compliance.

This culture of continuous learning equips members to adapt to regulatory developments and emerging risks.

Delivering Effective Supervision Our supervisory framework is risk-based, proportionate, and consistent.

Risk assesses our supervised population to target resources effectively.

Monitor practices to ensure they conduct risk assessments and implement robust policies, controls, and procedures.

Monitor and prompt practices in their use of independent review.

Raise awareness of emerging risks, keeping members ahead of evolving threats.

Approve BOOM appointments, ensuring integrity in leadership roles.

Apply proportionate disciplinary action where contraventions occur.

Share intelligence with law enforcement, government, and fellow PBSs, strengthening the UK’s AML system.

Owning a Balanced Role: Supervisor and Educator By combining firm regulation with clear guidance and education, we ensure practices achieve more than compliance alone. They are supported to navigate complexity, operate with efficiency, and maintain the confidence of regulators, clients, and the wider public.

Our model demonstrates how a PBS can both enforce the regulations and lead the profession towards higher standards.

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A Data-Driven Supervision Process that Raises Standards Rigorous Entry Controls Ensure Integrity Every practice applying for IAB AML supervision undergoes a comprehensive due diligence process. Alongside criminal record checks under MLR Regulation 26, over 1,500 intelligence system searches were conducted during this reporting period.

Ensuring: Declared practice profiles are accurate.

Risks are identified early.

No integrity concerns are overlooked.

Applications are scrutinised through desk-based reviews of policies and procedures, allowing us to identify weaknesses and intervene at the earliest stage. Where standards are not met, we take robust action.

During the reporting period:

1

supervision application was declined.

4

supervision licences were revoked.

109 applicants were vetted.

This clear and decisive approach maintains the integrity of our supervised population and safeguards the sector.

AML Complete Delivers Real-Time Risk Insight AML Complete is now central to how we supervise and support members. By moving away from static, paper-based submissions, the platform gives both supervisor and practice a live, accurate picture of risk.

The power of having dynamic, accessible data is instantly clear. Previously nearly 12% of practices reported having at least one cash-intensive client, analysis of the overall client base through the AML Complete platform revealed that only 1% of clients were actually cash intensive. This level of granular insight has enabled two significant outcomes for us as a supervisor.

1 Targeting supervisory resources more effectively and ensure support is relevant and proportionate.

2 Directing specific attention to the cash intensive 1% of members with cash intensive clients For IAB members, AML Complete provides built-in prompts and alerts, automated whole-practice risk and client risk assessments, and client-level insights—transforming compliance from a tick-box exercise into a process of genuine risk recognition.

As a supervisor the investment in AML Complete has provided a sector-wide view that ensures oversight is consistent, efficient, and intelligence-led.

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edit From the

AML Edit: Acting on Insight and Communicating Risks with Impact Our supervisory data highlighted that practices were missing important regulatory updates delivered piecemeal throughout the year. To address this, we launched AML Edit, a quarterly digital newsletter providing concise, actionable updates and insights drawn directly from our supervisory work.

The results of the April 25 launch edition speak for themselves: AML Edit open rate: 77.8% vs. Business & Finance average 31%/Non-Profit average 40%.

Click-through rate: 14.8% vs. Business & Finance average 2.78%/Non-Profit average 3.27%.

Source: IAB for AML Edit; Mailchimp for industry benchmark email marketing data AML Edit statistics suggest that guidance is not only reaching members but resonating with them, bridging the gap between regulatory expectations and day-to-day application.

Continuous Monitoring Through Multiple Channels Supervision does not end at approval. Practices are subject to ongoing monitoring through: Closed intelligence searches to flag new concerns.

Practice profile discrepancy reviews to detect undeclared activities.

Open-source keyword monitoring to identify risks linked to emerging threats.

This layered approach ensures our oversight is dynamic and proactive, not reliant on static declarations.

Transparent Inspections and Independent Review.

Our inspection model is built on consistency, accountability, and independence. Since 2020, we have conducted nearly 800 inspections, led by a team of experienced inspectors, most with over five years in post. Where deficiencies are identified, we implement mandatory action plans, apply disciplinary measures, and, where required, escalate cases to the Adjudication Panel.

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To maintain quality and integrity, we carry out an annual inspection audit, independently reviewing a sample of cases for completeness, consistency, timeliness, and accuracy. We also ensure follow-through on sanctions and outstanding actions, supported where necessary by an appointed debt collection service.

Results show steady progress: 2024–25, 19% of inspected practices required no mandatory actions, compared to just 3% in 2020–21. This demonstrates a measurable rise in standards across the IAB supervised population. In consequence, the IAB is now in the process of reviewing inspection outcomes to elevate expectations and re-focus the application of sanctions. Going forward there will be raised expectation that practices have addressed compliance before inspection by the use of independent or external review.

Proportionate Disciplinary Action as an Effective Deterrent When practices fail to engage, sanctions are applied firmly but fairly. Fines are scaled to both the size of the issue and the practice, with penalties of up to £50,000 available. An example being a case involving an initial fine of £1,500, escalating to full termination of supervision and additional costs after repeated failures to comply.

Such outcomes reinforce that compliance is non-negotiable, while our monitored action plans provide a clear route for practices to return to compliance where engagement is genuine.

IAB Supervision Delivers Positive Strategic Outcomes, a Reflection of a Robust Process and Investment Through rigorous entry checks, real-time platform insight, innovative communications, ongoing monitoring, and proportionate enforcement, we deliver supervision that is both effective and forward-looking. The statistics show progress, while our investment in technology ensures supervision is live, intelligent, and responsive to risk.

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Promoting Stronger AML Supervision Through Collaboration and Advocacy As one of the UK’s accountancy sector PBSs, we play an active role in shaping effective AML supervision. We sit on key working groups that ensure alignment with best practice, enable real-time sharing of risks and developments, and promote consistency across the supervisory landscape. These include, the Accountancy AML Supervisors’ Group (AASG), the Anti-Money Laundering Supervisors Forum (AMLSF), and the Intelligence Sharing Expert Working Group (ISEWG).

Supporting Members at Government Level An active part of our role is ensuring the voice of accountants and bookkeepers is heard in national policymaking. We have contributed directly to HMRC’s Raising Standards consultation, emphasising the importance of accountability, proportionate regulation, and recognition of the profession.

Virtual

Coffee Morning Our monthly CPD-accredited ‘coffee mornings’, regularly attracting over 200 members each session, provide a direct channel for dialogue. These sessions allow us to share updates on our government engagement, while also collecting member feedback to shape our position in consultations such as Raising Standards and Reforming Anti-Money Laundering and Counter-Terrorism Financing Supervision.

This approach ensures the voices of practices and professional individuals are fully represented in policy discussions, demonstrating our advocacy in the real-world experience of practitioners at the frontline. It also provides regulators with direct insight from those we supervise with the aim that the future regulatory environment is one that is both rigorous and practical.

Contributing to the Wider AML Landscape Our supervisory role extends beyond our membership, recognising risks from unregulated individuals acting without professional oversight. By contributing to the Professional Enablers Strategy, supporting the Economic Crime Plan 2, and providing evidence to the UK National Risk Assessment and review of the Money Laundering Regulations, we ensure supervisory insight informs national priorities and strengthens accountability across the sector.

Building on our 2022 chair of the ISEWG, we continue to promote intelligence sharing between PBSs and law enforcement, reducing the risk of non-compliant practices evading supervision and supporting criminal justice outcomes. Our dedicated Single Point of Contact (SPOC) and secure CJSM channel provide clear, effective routes for engagement.

To protect the accountancy and bookkeeping profession against abuse we provide multiple reporting channels—online, by post, and by phone—including anonymous options, for suspected breaches of the MLRs. While no reports were received this period, we continue to maintain transparent pathways to safeguard the sector and wider society.

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Risk in Focus: How Data and Frameworks Shape our Supervision A clear understanding of our supervised population is central to our role as a Professional Body Supervisor (PBS). By analysing practice profiles and client bases in detail, we not only identify key risk factors but also tailor support to help members meet their AML responsibilities. This evidence-led approach ensures that both supervision and guidance are grounded in real operational insight.

Who We Supervise During the reporting period our supervised population consisted of 705 practices, providing a wide range of services: 67% 61%

Bookkeeping services Payroll services

69% 53% 56% 13%

Tax services (excluding self-assessments) Self-assessments Accounts preparation Trust and Company Service Provider (TCSP) activity

To deepen this understanding, we can also segment practices via our Practice Scalability Framework, which segments practices by turnover and operational scale. It also doubles as a business support tool: alongside the framework we have launched a bespoke video course, which features three AML segments detailing IAB AML Support an AML Complete overview and information on the IAB AML Training Modules. Ultimately with or without the course members can identify where they sit within the framework, helping them unlock broader IAB membership support.

Although the framework is not a formal part of the supervisory process, its interpretation of the data alongside our more rigid sources can provide layered insight delivering both regulatory robustness and practical guidance should we choose to unlock it.

2. Successful Practice Books are full WFH Working 30-35hrs a week Well paid job Turn Over £31k-£60k IAB Supervised Members = 22.6%

Profit

1. Start-Up

Good technician No systems No experience of running a business Lacking in confidence Under charging Turn Over £0-£30k

IAB Supervised Members = 61.2%

4. Successful Business

3+ employees Good systems for work/marketing/recruitment More Time Asset Turn Over £100k+

IAB Supervised Members = 8.1%

3. Transitioning to a Business Toughest phase Dip in profits New Skills – employer Min of 3 employees Turn Over £61k-£99k

IAB Supervised Members = 8.7%

Leverage Credit: E-Myth Bookkeeper, Michael E Gerber | Turn Over Source: IAB @ April 2025

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x4

Sector Risk Profile The 2025 National Risk Assessment (NRA) rates the accountancy sector as HIGH risk for money laundering and LOW risk for terrorist financing. Services most vulnerable to exploitation remain company formation, mainstream accounting, and payroll.

Our data shows that while 61% of supervised practices offer payroll services, only 2% of clients receive payroll as a standalone service—significantly reducing risk exposure. Likewise, although 13% of practices provide TCSP services, only 0.1% of clients use these without further business engagement. This continuity of service provides practitioners with a fuller client picture, making unusual activity easier to detect.

Equally, the fragmentation of services across multiple professionals—an acknowledged money laundering tactic—is far less common within the IAB population. For example, just 3% of clients receive standalone bookkeeping services, meaning most engagements span multiple touchpoints and increase opportunities to spot red flags.

Client and Service Delivery Risks Client risk factors remain low across the supervised population. Only 1% of clients are cash intensive, the most common risk category in the sector.

Service delivery risks are also mitigated by the localised nature of practice work. Just 5% of clients are serviced on a non-face-to-face basis, reducing vulnerabilities associated with remote or cross-border engagements.

Embedding Compliance Beyond Box-Ticking The NRA highlights that accountancy and bookkeeping are most vulnerable when practitioners lack understanding of money laundering risks. We have addressed this by embedding risk awareness, practical guidance, and structured training into supervision, supported by AML Complete. By flagging practice-specific risks and review deadlines, the platform ensures members move beyond tick-box compliance towards active risk management.

Preventing Professional Enabling Accountancy Service Providers (ASPs) occupy a unique position to detect illicit activity through the granular financial records they review. Failure to act risks practices becoming professional enablers of money laundering. Through supervision, education, and proportionate enforcement, we reinforce the duty to report suspicious activity and prevent products being accepted at face value by third parties.

Emerging Risks: Technology and AI Technology remains both an opportunity and a threat. While automation and AI tools can strengthen accuracy and efficiency, they must be used with appropriate oversight. Practices cannot rely solely on system outputs or marketing claims but must integrate tools into a wider compliance framework. Meanwhile, criminals are increasingly using technology—from crypto assets to deepfakes—to bypass checks. Our supervisory content prepares practices to recognise these risks.

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Embedding Effective AML Compliance: Supporting Practices Through Risk Awareness and Tailored Guidance A lack of understanding of risk within the sector remains a key vulnerability. We believe this goes beyond a failure to recognise risk indicators—it reflects a wider issue of context and comprehension. To address this the IAB promotes a bigger-picture view of AML compliance. Our magazine, iabConnect serves as key platform for long-form, in-depth articles that provide both context and tangible examples of the real-world damage caused by money laundering. These insights strengthen understanding of why AML obligations matter, while our cross-channel engagement ensures members remain connected to guidance and best practice.

We recognise that generic MLR guidance can overwhelm some individuals. Our role as an educator is to contextualise regulation into content that resonates with our supervised population.

Embedding AML into Everyday Practice One of our central supervisory outcomes is ensuring that practices integrate AML into day-to-day operations rather than treating compliance as an annual, tick-box exercise.

AML Complete, now active across the IAB supervised population, is a mandatory process that requires every practice to complete client risk assessments to a consistent standard. This approach reduces the chance of missed risk indicators and ensures that positive red flags cannot be ignored.

To support this, articles such as Getting in the Habit of AML Compliance (pg8) and AML Complete 1st Birthday (pg13) highlight how AML can be integrated into routine workflows.

Member-focused case studies bring this to life, such as Lessons Learned from an AML Inspection Journey (pgs12/13), where a practice shared how embracing compliance responsibilities, supported by IAB guidance, directly improved their efficiency and business reputation.

There is also the added layer of immediacy with AML Complete which provides explanatory notes alongside questions guiding practices to better understand the risks within their client base, embedding both knowledge and compliance as they go through the process.

Promoting Risk Awareness and Professional Scepticism We continue to prioritise strengthening member awareness of relevant risks, the use of AML Complete equips them with the ability to respond effectively as they can update their practice and client details as and when required.

The article Navigating the Risk Jungle of High and Low Risk Clients (pg11) provided practical insights into how client characteristics affect risk exposure.

In scenarios where established practices join the IAB for supervision and have previously relied on complex third-party templates and tick-box systems that are detached from real-world operations, engaging with this type of content aims to support the development of a deeper understanding of the purpose behind AML obligations, encouraging them to streamline their processes, and ultimately improve compliance effectiveness.

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Clarifying the Purpose of Compliance Compliance is only effective when practices understand its purpose. We ensure that members see AML not as an administrative burden but as a professional responsibility with direct benefits to practice growth and resilience.

Our 8 video training modules focus on the importance of compliance and set out how strong regulatory frameworks support both efficiency and business confidence. Modules 1 and 8 are provided Free of Charge to all supervised members and they must re-visit annually upon renewal.

To counter recurring supervisory findings on template overuse, during this reporting period we developed updated guidance to help practices create their own tailored policies, resisting one-size-fits-all solutions that often undermine risk recognition.

This was followed by an ‘edited’ version of the guidance linked to AML Edit, which distilled key outcomes into digestible, practical takeaways for members. The aim being to raise awareness of the new guidance.

Reinforcing Trust and Reputation Ensuring practices understand that robust AML compliance is also an investment in their reputation and business integrity.

The article Staying on the Right Side (pg8) gave members practical steps to protect their businesses against non-compliance risks.

Harnessing the Strength of Ambassador Groups The increasingly popular IAB Ambassador Groups serve as hubs of practical experience, enabling members to share insights, advice, and real-world solutions to AML challenges as well as other operational and day-to-day issues. The AML focus of these groups has directly shaped our Ambassador selection process, with successful candidates required to demonstrate a strong track record of positive cooperation with AML obligations and delivering meaningful outcomes.

Positioned in this way, Ambassadors provide a vital peer-support network where other members can learn from each other while raising collective questions back to us. This two-way dialogue ensures that supervisory guidance remains grounded in the day-to-day realities of professional practice and that members see ‘what good looks like’ from shared best practice across the IAB community.

Ambassador www.iab.org.uk

Strengthening AML Education and Guidance Together with our Ambassador Groups, our magazine, social media channels, and CPD-accredited coffee morning we have a strong communications network that embeds AML into professional culture. These platforms deliver accessible education, highlight proportionate and effective processes, and keep members engaged with evolving risks. By combining practical peer insight with structured guidance, we ensure members not only meet their regulatory obligations but also build resilient, compliant practices that strengthen the integrity of the sector.

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Risk-Based Supervisory Inspection Methods and Key Insights A proportional, intelligence-led approach As required by the MLRs, the IAB applies a risk-based methodology to allocate inspections across its supervised population. This approach ensures that our resources are directed to where the greatest regulatory impact can be achieved. Risk factors such as services offered, client type, and practice size are weighed alongside the potential consequences of non-compliance. We also consider indicators of higher likelihood of active non-compliance, such as patterns of behaviour or signals from other supervisory activity.

By taking this holistic approach, we balance supervision across the full spectrum of risk, rather than concentrating exclusively on high-risk practices. Over the past five years, we have conducted full inspections of 80% of high-risk practices, 86% of medium-risk practices, and 54% of low-risk practices. Many others have been subject to additional oversight measures within the same timeframe. This proportionate cycle ensures that all practices remain within an appropriate supervisory window while targeting scrutiny where it is most needed.

Live practice profile reporting Traditionally, PBSs relied on annual returns to update practice data. The introduction of the AML Complete platform in 2024 marked a step-change, enabling supervised practices to update their practice profile throughout the year. This provides us with real-time insight into both the supervised population as a whole and the evolution of individual practices.

By integrating updates into live risk assessments, we can adapt quickly to emerging sector trends, redeploy resources as risks shift, and provide timely communication to members about specific threats. This continuous cycle also feeds into the development of tailored guidance and support resources, ensuring supervisory activity is complemented by education.

On-site and virtual inspections In partnership with Compliance and Privacy Solutions Ltd (CaPS), we have continued to operate our dual onsite and virtual inspection model, now in its fifth year. This system allows us to scale oversight without geographical limitation, while maintaining the same depth of review in both formats.

Inspections test compliance against key areas of the MLRs, supported by CCAB sector guidance, and result in a graded outcome of Outstanding, Good, Requires Improvement, or Inadequate.

Each practice receives a full inspection report, with action plans and follow-up monitoring applied where improvement is required.

Serious or persistent failings trigger escalation, ranging from fixed fines to referral to the IAB Adjudication Panel, which has powers to issue penalties of up to £50,000 or terminate supervision entirely. This tiered approach ensures proportionality while maintaining regulatory credibility.

Thematic reviews: analysing SARs Thematic reviews are a vital complement to inspections, allowing us to investigate systemic issues in depth and to adapt our supervisory approach accordingly. These reviews do not apply grades but instead provide an evidence base to assess whether risk ratings are appropriate and whether new guidance is required.

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The output of such reviews is also constructive in our collaboration with other PSBs. We see collaboration as being essential and central to raising standards. By sharing this output while retaining autonomy to address the unique risks in our own population, we ensure supervision is both effective and proportionate.

A thematic review of Suspicious Activity Reports (SARs) conducted during this reporting period highlighted both strengths and areas requiring further education. Findings confirmed that when SARs were submitted, they were good quality, demonstrating awareness of reporting obligations.

However, knowledge of Defence Against Money Laundering (DAML) requests was limited, and some practices—particularly those with multiple employees—lacked a clearly documented internal SAR process despite demonstrating sound informal practice.

As recognised by the UKFIU, underreporting within the accountancy sector remains a challenge.

Our review therefore reinforced the importance of embedding SARs as a practical and accessible outlet for reporting suspicious activity. The findings have directly shaped supervisory messaging, with SARs reporting now a recurring feature of AML Edit.

Policy and procedure reviews Policy and procedure reviews remain an important supervisory tool, particularly during the onboarding of new applicants. These reviews focus on the extent to which practices have developed tailored documentation that reflects their own risks and services, rather than relying on unedited generic templates.

As stated earlier in the report experience shows that practices who invest in creating their own proportionate and relevant documentation are more likely to implement effective compliance in practice. Conversely, those relying on templates risk missing critical elements of their obligations.

During 2023–2025, we therefore transitioned policy and procedure reviews to the initial onboarding process, where outcomes can lead to escalation into a full inspection. This ensures that new entrants engage properly with AML requirements from the outset.

Key insights from supervisory activity IAB methods not only ensure compliance but also generate insights that strengthen sector resilience. In particular: Risk-based allocation ensures proportional supervision while maintaining coverage across all risk bands.

Real-time profile updates provide a more accurate picture of the sector and enable targeted communications.

Onsite and virtual inspections deliver scalable yet robust oversight, with enforcement escalations where needed.

Thematic reviews offer deeper understanding of systemic issues—most recently around SAR reporting—and shape our guidance agenda.

Policy reviews at onboarding help instil proportionate compliance behaviours early, reducing future risk.

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2024–2025 Outcomes: Phase 2 Inspections Suggest Sustained Effective Compliance Phase 2 inspections, launched in December 2023, provide focused follow-up for practices previously subject to full supervisory review. Their purpose is to confirm that improvements identified through initial inspections are sustained, and to ensure that AML obligations are embedded into everyday practice, reinforcing both compliance and operational resilience. This approach also tests the effectiveness of our education-led support model and the impact of AML Complete.

During 2023–24, 16 Phase 2 inspections were completed, producing 6% Outstanding, 50% Good, 44% Requires Improvement, and 0% Inadequate.

In 2024–25, the number of inspections rose to 98 due to a longer monitoring period, with 8% Outstanding, 47% Good, 45% Requires Improvement, and 0% Inadequate.

The positive results shift shows that, an increased number of practices go beyond basic compliance, fully embedding AML requirements into their daily work. At the same time, the fact that no practices were rated Inadequate suggests that the IAB supervision approach effectively prevents serious non-compliance across the population.

Inspections are risk-based, prioritising practices according to their services, client profiles, prior inspection outcomes, and potential regulatory impact. Practices rated higher risk or previously flagged for non-compliance receive closer follow-up, while smaller or part-time practices are assigned review timelines proportionate to their capacity.

Phase 2 inspections also, ensure previously implemented improvements are maintained.

The inspections focus on three critical areas: Customer Due Diligence (CDD), Risk Management, and ongoing monitoring, with additional review of Systems and Controls, including policy and procedures. In general findings highlight these recurring themes: Systems and Controls – overreliance on generic templates, outdated or unedited documents, and insufficient explanation of how policies are operationalised.

CDD Implementation – incomplete risk assessments, limited understanding of electronic verification processes, and inadequate record-keeping of client documentation provenance.

Risk Management – inconsistent mitigation strategies and insufficient awareness of risks identified in client or firm-level assessments.

Monitoring – minimal internal review, lack of evaluation of policy effectiveness, and inconsistent application of updated regulatory requirements.

Phase 2 inspections also assess training retention and practical application, ensuring that knowledge gained from initial inspections is consistently applied to day-to-day AML processes.

By reviewing risk awareness, CDD application, and monitoring procedures, the inspections verify that practices are not only technically compliant but professionally engaged with the regulatory framework.

Across the population, targeted re-inspections confirm that good practices are maintained and that previously identified weaknesses are addressed. Practices adopting proactive AML measures consistently perform well across all assessed areas, highlighting the importance of embedding regulatory obligations into operational routines rather than relying on tick-box compliance.

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5 Year Inspection Overview Grading results demonstrate steady progress in AML compliance, with phased inspections targeting the areas that need the most attention.

Virtual inspections – Completed 2021-2022

2022-2023

2023-2024

2024-2025

255

176

156

161

2021-2022

2022-2023

2023-2024

2024-2025

Outstanding

0%

2%

3.9%

1.3% / 7.7%

Good

33%

43%

53.9%

27.5% / 46.2%

Requires Improvement

46.3%

50%

39.7%

68.8% / 46.2%

Inadequate

20%

5%

2.5%

2.5% / 0%

2021-2022

2022-2023

2023-2024

2024-2025

Action plan issued

87.5%

78%

74%

79% (combined)

Fines issued

39

6

12

5

£6,700

£4,463

£30,500

£5,825

2021-2022

2022-2023

2023-2024

2024-2025

88%

78%

59%

72%

2%

10%

18%

16%

Incomplete

10%

11%

23%

12%

Referred to Adjudication Panel

0%

1%

0%

0%

2021-2022

2022-2023

2023-2024

2024-2025

Completed

36

24

0

0

Good

0%

12.5%

-

-

Requires improvement

30.5%

25%

-

-

Inadequate

69.5%

45.5%

-

-

Action plan issued

100%

87%

-

-

0

0

-

-

Completed

Grading breakdown (P1/P2)

Practices issued with action plans or fines

Total fine value

Action plan reviews

Fully completed at first review Incomplete

(not requiring further monitoring) (requiring further monitoring)

Policy and Procedure reviews

Fines issued

P1 – Phase 1 inspection; P2 – Phase 2 inspection

19 | www.iab.org.uk

The Year Ahead AML Complete: Driving Insight and Practical Support AML Complete will remain at the core of our supervision providing real-time visibility of risks across our population, enabling us to respond with clear, targeted guidance. In the year ahead, we will use these insights, combined with our role as an educator and professional support provider to innovate in how we provide supervisory support. The effects of an enhanced approach, using AML Complete to promote self-initiated compliance and business reviews will drive continuous improvement across the membership.

Phase 2 Reviews: Sustaining Strong Compliance Phase 2 inspections will continue to test whether improvements identified in initial reviews are maintained over time. These follow-ups confirm that good practice is embedded, highlight where further support is needed, and ensure members stay aligned with regulatory updates. Insights from these reviews will directly shape future educational content, keeping our guidance relevant and responsive.

Collaboration and AML as Social Responsibility We will continue to welcome collaboration with regulators, law enforcement, and professional bodies to ensure consistent and effective supervision across the sector. We will continue our communications—through AML Edit, our magazine, coffee mornings, and Ambassador groups to provide practical guidance and capture member feedback. Future plans for content will reinforce AML not just as compliance, but as a social responsibility: protecting people, safeguarding businesses, and upholding the integrity of the profession. Framed within wider ESG goals, we will continue to highlight the profession’s frontline role in combatting economic crime.

20 | www.iab.org.uk

External Resources CCAB – the Anti-Money Laundering and Counter-Terrorist Financing Guidance for the Accountancy Sector (AMLGAS) This HM Treasury approved guidance interprets the requirements of the MLRs for accountancy practices, offering clear guidance and examples of application. As official sector guidance for all operating in the accountancy sector, this should be a practices primary resource for compliance with the regulations.

The National risk assessment of money laundering and terrorist financing 2025 (NRA) The overall risk assessment of MLTF risks across all sectors within the UK, updated in 2025. The accountancy sector is specifically addressed at page 122.

2021 HM Treasury National risk assessment of proliferation financing The overall risk assessment of proliferation financing within the UK. National Crime Agency, for Suspicious Activity Reports (SAR).

Official guidance on how and when to report a SAR, including best practice for submitting a good quality SAR and up to date glossary codes. The online SAR reporting portal (updated in September 2023) can be accessed through this site.

HMRC supervised business register and reporting.

Check the HMRC register of businesses registered for statutory supervision. Report suspected unsupervised practice by completing their online form.

OFSI (Office of Financial Sanctions Implementation) The Office of Financial Sanctions Implementation (OFSI) helps to ensure that financial sanctions are properly understood, implemented and enforced in the United Kingdom. OFSI is part of HM Treasury.

Public register of Authentic Identity and Travel Documents Online (PRADO) A useful public resource provided by the European Council. Listed by country, examples from participating countries of ID documents and associated security measures can increase your ability to identify false or forged documents.

21 | www.iab.org.uk

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