Understanding AML Check Under the Economic Crime Act: Compliance, Challenges, and Best Practices

Together, these elements form a comprehensive AML check process that aligns with the principles of the Economic Crime Act and supports a risk-based approach to compliance.

How the Economic Crime Act Impacts AML Checks

The Economic Crime Act has significantly reshaped the landscape of AML compliance in the UK, introducing new obligations, expanding supervisory powers, and raising the bar for due diligence standards. Understanding how the Act influences AML checks is essential for organizations seeking to remain compliant and avoid costly penalties.

Expanded Scope of AML Obligations

The Economic Crime Act broadens the scope of entities subject to AML regulations beyond traditional financial institutions. Under the Act and MLR 2017, the following sectors are now required to conduct AML checks:

• Credit institutions (banks, building societies)
• Financial services firms (investment firms, insurance companies)
• Accountancy service providers
• Legal professionals (solicitors, barristers) involved in financial transactions
• Estate agents and high-value dealers (e.g., art dealers, precious metal traders)
• Trust or company service providers
• Cryptoasset businesses (under the Money Laundering and Terrorist Financing Regulations 2019)

This expansion reflects the government’s recognition that economic crime can occur across diverse sectors, and robust AML checks are necessary in all high-risk areas.

New Corporate Criminal Offenses

A landmark feature of the Economic Crime Act is the introduction of corporate criminal liability for failing to prevent economic crime, including fraud and money laundering. Under the Act, organizations can be held liable if:

• A person associated with the company commits a fraud offense.
• The company fails to have adequate procedures in place to prevent the offense.

This offense—often referred to as the "failure to prevent" offense—applies to large corporations and SMEs alike, emphasizing the need for comprehensive AML checks and internal controls. Organizations must demonstrate that they have implemented proportionate measures, including risk assessments, staff training, and monitoring systems, to comply with the Act.

Enhanced Transparency Requirements

The Economic Crime Act places a strong emphasis on transparency, particularly regarding corporate ownership. Key transparency measures include:

• Register of Overseas Entities: Foreign companies owning UK property must register their beneficial owners with Companies House. Failure to comply can result in restrictions on property transactions and criminal penalties.
• Beneficial Ownership Information: Companies must maintain accurate and up-to-date records of their beneficial owners, and this information must be accessible to law enforcement and competent authorities.
• Verification of Information: Companies House now has greater powers to query and verify the information provided, reducing the risk of false or misleading disclosures.

These transparency measures directly support AML checks by providing clearer visibility into ownership structures, making it easier to identify high-risk entities and individuals.

Strengthened Enforcement and Penalties

The Economic Crime Act has significantly increased the penalties for non-compliance with AML obligations, including:

• Unlimited fines for breaches of AML regulations.
• Criminal prosecution for senior managers and directors found to be complicit in economic crime.
• Disqualification from acting as a company director.
• Public censure and reputational damage from regulatory enforcement actions.

These stringent penalties underscore the importance of conducting thorough and ongoing AML checks to avoid legal and financial consequences.

Implementing an Effective AML Check Program Under the Economic Crime Act

Building and maintaining an effective AML check program is not merely a regulatory obligation—it is a strategic imperative for organizations operating in the UK. A well-designed AML program helps mitigate risks, protect customers, and uphold the integrity of the financial system. Below are the key steps to implementing a compliant and robust AML check program under the Economic Crime Act.

Step 1: Conduct a Comprehensive Risk Assessment

The foundation of any effective AML check program is a thorough risk assessment. Organizations must identify and evaluate the risks of money laundering and terrorist financing across their operations, including:

• Customer Risk: Assess the risk profile of different customer segments (e.g., individuals, businesses, PEPs, high-net-worth clients).
• Product and Service Risk: Evaluate the risk associated with specific products or services (e.g., cash-intensive services, international transfers, anonymous transactions).
• Geographic Risk: Consider the risk levels of jurisdictions where customers are based or where transactions originate (e.g., high-risk countries identified by the Financial Action Task Force).
• Delivery Channel Risk: Assess risks associated with digital onboarding, third-party introducers, or remote customer interactions.

Based on this assessment, organizations should categorize customers into low, medium, or high-risk tiers and apply proportionate AML checks accordingly.

Step 2: Develop and Document AML Policies and Procedures

Organizations must establish clear, written policies and procedures that outline how AML checks will be conducted. These documents should cover:

• Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD) processes.
• Transaction monitoring and suspicious activity detection criteria.
• Record-keeping and retention policies.
• Staff training and awareness programs.
• Internal reporting mechanisms for SARs.
• Ongoing compliance monitoring and review processes.

These policies must be approved by senior management and regularly reviewed to ensure they remain effective and aligned with the Economic Crime Act and evolving regulatory guidance.

Step 3: Implement Robust Customer Identification and Verification

Accurate customer identification is the cornerstone of an effective AML check. Organizations should use a risk-based approach to verify customer identities, leveraging a combination of:

• Government-issued photo identification (e.g., passport, national ID card).
• Proof of address documents (e.g., utility bill, bank statement).
• Biometric verification (e.g., facial recognition, fingerprint scanning).
• Electronic identity verification (eIDV) solutions that cross-reference multiple data sources.

For high-risk customers, such as PEPs or those from high-risk jurisdictions, organizations must conduct Enhanced Due Diligence (EDD), which may include:

• Obtaining additional information about the source of funds.
• Conducting enhanced monitoring of transactions.
• Seeking senior management approval before onboarding.

Step 4: Establish Transaction Monitoring Systems

Transaction monitoring is a critical component of an AML check program, enabling organizations to detect and investigate unusual or suspicious activities in real time. Effective transaction monitoring systems should:

• Set risk-based thresholds for identifying anomalies (e.g., transactions above a certain amount, rapid movement of funds).
• Use advanced analytics and machine learning to detect patterns and trends indicative of money laundering.
• Integrate with customer profiles to assess whether transactions are consistent with expected behavior.
• Generate alerts for suspicious activities that require further investigation.

Organizations should regularly review and update their monitoring rules to adapt to new typologies of financial crime and regulatory expectations.

Step 5: Train Staff and Foster a Culture of Compliance

Human error and lack of awareness are common causes of AML compliance failures. To mitigate these risks, organizations must invest in comprehensive staff training programs that cover:

• The legal and regulatory framework of the Economic Crime Act and AML laws.
• Recognizing red flags of money laundering and terrorist financing.
• Proper procedures for conducting AML checks and reporting suspicious activities.
• Ethical responsibilities and the consequences of non-compliance.

Training should be tailored to the roles and responsibilities of different staff members and delivered on a regular basis, including updates on new threats and regulatory changes.

Step 6: Maintain Accurate Records and Conduct Regular Audits

The Economic Crime Act and MLR 2017 require organizations to maintain records of customer due diligence, transactions, and AML checks for at least five years. These records must be accurate, complete, and readily available for inspection by regulators or law enforcement.

To ensure compliance, organizations should:

• Implement secure and auditable record-keeping systems.
• Conduct regular internal audits to assess the effectiveness of their AML program.
• Engage external auditors or consultants to provide independent reviews of AML controls.
• Document all decisions and actions related to customer due diligence and suspicious activity reporting.

Regular audits not only help identify gaps or weaknesses in the AML check program but also demonstrate a commitment to compliance to regulators and stakeholders.

Challenges in Conducting AML Checks Under the Economic Crime Act

While the Economic Crime Act provides a robust framework for combating financial crime, organizations face several practical and operational challenges when implementing AML checks. Understanding these challenges—and developing strategies to address them—is essential for maintaining compliance and

Emily Parker

Crypto Investment Advisor

The AML Check Economic Crime Act: A Critical Step for Crypto Compliance and Investor Protection

As a crypto investment advisor with over a decade of experience, I’ve seen firsthand how regulatory clarity can shape the future of digital assets. The AML Check Economic Crime Act represents a pivotal moment for the industry, aligning anti-money laundering (AML) standards with the realities of decentralized finance. While some critics argue that stricter regulations stifle innovation, I believe this legislation strikes a necessary balance—protecting investors from economic crime without suffocating the sector’s growth. For institutional and retail investors alike, compliance with these measures isn’t just a legal obligation; it’s a safeguard against fraud, sanctions evasion, and illicit activity that could destabilize the market.

From a practical standpoint, the AML Check Economic Crime Act introduces critical tools for transparency, such as enhanced due diligence requirements and real-time transaction monitoring. For crypto businesses, this means integrating robust AML checks into their operations—a shift that may require investment in compliance technology but ultimately reduces risk exposure. Investors should view this as a positive development: platforms that prioritize compliance will attract more institutional capital, while those that lag behind may face regulatory scrutiny or reputational damage. My advice? Treat this act as a roadmap for sustainable growth, ensuring your portfolio aligns with compliant, forward-thinking projects.