Understanding AML risk

Regulation 46 requires a supervisory authority such as the IPA to ‘adopt a risk-based approach to the exercise of its supervisory functions, informed by the risk assessments carried out by the authority under regulation 17’. Regulation 17 requires the IPA to identify and assess the risks of money laundering and terrorist financing to which IPA members are subject, taking into account (among other things) the UK’s National Risk Assessment (prepared by the Treasury and the Home Office under regulation 16(6)).

Regulation 17 also requires the IPA to keep a record of the risk profile of each Insolvency Practitioner that it supervises, taking account of the risks that an Insolvency Practitioner will not ‘take appropriate action to identify, understand and mitigate money laundering and terrorist financing risks’. So AML risk is fundamentally important to both Insolvency Practitioners and supervisory authorities such as the IPA.

What is AML risk?

Regulation 16 of the Money Laundering Regulations states that the Treasury and the Home Office must make arrangements for a risk assessment to ‘identify, assess, understand and mitigate the risks of money laundering and terrorist financing affecting the United Kingdom’, and they must report on that risk assessment. That report has become known as the National Risk Assessment (NRA). According to regulation 17, the IPA must identify and assess the risks (of money laundering and terrorist financing) to which its members are subject, and regulation 18 requires each Insolvency Practitioner to identify and assess the risks to which their business is subject.

An Insolvency Practitioner is subject to the risk that they will fail to comply with the Money Laundering Regulations, but the wider public bear the risk that money laundering or terrorist financing will take place and might even go undetected. The Insolvency Practitioner’s risk of noncompliance includes the risk that they may be subject to exploitation for money laundering purposes. In fact, the Money Laundering Regulations refer to a relevant person’s responsibility to mitigate the risks, which can only be done through avoiding involvement in the money laundering process.

Therefore, when we talk about an Insolvency Practitioner’s AML risk, we are referring to both the Insolvency Practitioner’s risk of exploitation for money laundering and the risk that the Insolvency Practitioner may fail to identify (or reasonably suspect) money laundering where it has taken place.

UK National Risk Assessment

As stated above, Regulation 16 of the Money Laundering Regulations requires HM Treasury and the Home Office to assess and report on the risks of money laundering and terrorist financing (ML/TF) affecting the UK. The National Risk Assessment (NRA) identifies sectors or areas of higher and lower risk, and must be kept up to date to reflect evolving threats and trends.

The latest NRA was published in July 2025, marking the fourth national assessment following earlier reports in 2015, 2017, and 2020. The full 2025 report is available here.

As in previous assessments, the 2025 NRA continues to classify Insolvency services as high risk for money laundering and low risk for terrorist financing. Insolvency is placed in the same group as accountancy services which spans a broad range of services and providers.

Insolvency Practice and the NRA

In the 2020 NRA, it was stated that:

“There continues to be a risk that criminals will exploit company liquidation and associated services (including insolvency practice, which may be conducted by certain accountancy professionals) to mask the audit trail of money laundered through a company.”

In comparison, the 2025 NRA provides less direct insolvency reference points but maintains concern about this area and others in the accountancy sector. Company liquidation and insolvency services continue to present a potential avenue for abuse, particularly where they are used to obscure audit trails, conceal the proceeds of crime, or disengage from liabilities. Licensing requirements and regulatory oversight are important mitigating factors.

The IPA recognises the continued relevance of these risks and remains committed to working with members, supervisors and government bodies to ensure high standards of professional conduct and the effective mitigation of money laundering threats across the insolvency sector.

IPA’s AML sectoral risk assessment

According to regulation 18 of the Money Laundering Regulations, an IPA member who is a relevant person must take appropriate steps to identify and assess the risks of money laundering and terrorist financing to which their business is subject, taking into account:

information made available to them by the IPA (including the sectoral risk assessment required by regulation 17(1)), and
risk factors relating to its clients, services, transactions and delivery channels, and the countries or geographic areas in which they operate.

The IPA’s sectoral risk assessment is available here, and it incorporates the Risk Outlook of the AASG referred to below.

Anti-Money Laundering high-risk indicators

The IPA has compiled details of areas that may indicate a higher risk of money laundering in insolvency. These indicators should assist our supervisees with their consideration of AML risks for their own business and which feed into their firm’s AML risk assessment.

The indicators may also assist with any specific cases where an appointment has been made, or where supervisees have been approached to assist an individual or a company, and their consideration and monitoring of an individual case risk assessment.

Click here to access the document.

AASG accountancy sectoral risk guidance – 2025 update

HM Government, law enforcement, and the professional body supervisors continue to work together to ensure that criminals find it difficult to exploit accountancy services. The Accountancy AML Supervisors’ Group (AASG), of which the IPA is a member, has updated its Risk Outlook (2025) to reflect the findings of the UK’s latest National Risk Assessment (NRA) and other emerging threats and trends.

The updated guidance sets out the key risks and red-flag indicators most relevant to the accountancy sector, recognising shifts in how criminals attempt to abuse professional services. The 2025 update places greater emphasis on:

Evolving economic crime threats, including the misuse of complex corporate structures, offshore arrangements, and high-risk jurisdictions
Professional service vulnerabilities, with insolvency and restructuring services highlighted as areas that can be exploited if client due diligence and ongoing monitoring are not robust
Beneficial ownership risks, with increased expectations on firms to go beyond identification and apply meaningful, risk-based verification
Technology and new typologies, including risks linked to digital assets and online platforms that may obscure client identities or sources of funds
Heightened focus on high-risk services, particularly trust and company services, transactional support, and situations involving opaque funding or rapid changes in ownership/control

The AASG Risk Outlook is intended to assist accountants and Insolvency Practitioners in assessing AML risk with reference to the services they provide and the clients they engage with. A firm’s written risk assessment remains a key tool in identifying areas of greatest risk and ensuring that resources are properly focused where they are most needed. The updated 2025 AASG Risk Outlook can be accessed here.

Guidance on verifying beneficial owners

Alongside the 2025 Risk Outlook, the AASG has issued sector-wide guidance on verifying beneficial owners. This is a critical compliance area under the Money Laundering Regulations 2017 (MLR17) and applies to Insolvency Practitioners, auditors, accountants, and tax advisers. Insolvency Practitioners should pay close attention to ensure they are applying this guidance.

Summary points:

Mandatory steps (Regulation 28): Identify the beneficial owner; take reasonable measures to verify their identity; and understand the ownership/control structure where legal persons or arrangements are involved.
Definition (Reg. 5): A beneficial owner is always a natural person – typically one who owns/controls more than 25% of shares or voting rights, exercises ultimate management control, or otherwise controls the entity.
Verification (Reg. 28(18)): Must be based on reliable, independent documents or information (e.g., official records, not solely client-supplied data).
Identification vs. verification:
- Identification = tracing ownership/control to a natural person.
- Verification = obtaining independent evidence to confirm identity.
Risk-based approach:
- High-risk cases: Collect varied, independent evidence to mitigate risks.
- Low-risk cases: In limited circumstances, previously verified or non-independent sources may be sufficient.

The guidance has links to the CCAB Anti-Money Laundering Guidance for the Accountancy Sector (AMLGAS) and aims to provide consistency across the professions.

The AASG Guidance on Verifying Beneficial Owners can be accessed here.

AML alerts

Access AML alerts from financial intelligence units here (member login required). Please note that the documents in this section are for IPA members only and should not be reproduced in any way.