Business and Technology · Regulation and financial crime

Anti-Money Laundering Procedures and Reporting for ACCA BT

Updated 11 October 2026 · Fact-checked

Anti-money laundering (AML) procedures are the controls a firm uses to stop criminals passing dirty money through it. They include customer due diligence (KYC), monitoring transactions, reporting suspicions to the MLRO, who decides whether to report to the authorities, and keeping records. Never tip off the customer.

Understand Anti-Money Laundering Procedures and Reporting

Money laundering is making money from crime look as if it came from a legitimate source. Banks, accountancy firms, lawyers and other regulated businesses can be used as channels. So the law requires them to have procedures that detect and report it.

The first line of defence is customer due diligence (CDD), often called know your customer (KYC). Before you act for a client, you identify who they are and verify it with reliable documents. For companies and trusts you also identify the beneficial owner, the real person who ultimately owns or controls the entity. You also understand the purpose of the relationship and where the money comes from.

The level of checking depends on risk. Simplified due diligence can apply to low-risk customers. Enhanced due diligence applies to high-risk cases, such as politically exposed persons (PEPs), high-risk countries, complex ownership structures or unusual transactions. CDD is not a one-off task. You also keep monitoring the relationship and the transactions.

If an employee has knowledge or suspicion of money laundering, they make an internal report, a suspicious activity report (SAR), to the Money Laundering Reporting Officer (MLRO). The MLRO is a senior person who receives these internal reports, assesses them, and decides whether to pass a report to the national authority. The authority's name varies by country, so describe it generally in the exam as the relevant national financial intelligence unit or law enforcement agency.

Two more points matter. Tipping off, warning the person that a report has been made or an investigation is under way, is an offence in most jurisdictions. And firms must keep records of identity evidence and transactions for a set period (commonly at least five years in many countries) so that investigators can trace funds. Staff also need regular training.

Key formulas to remember

Core AML procedures: Identify and verify the customer → assess risk → monitor → report suspicion internally → MLRO decides → keep records; Use this chain as the skeleton for any answer.
Customer due diligence: CDD = identify + verify identity + identify beneficial owner + understand purpose of relationship + ongoing monitoring; Enhanced due diligence is used for higher-risk customers such as PEPs.
Reporting route: Employee → MLRO → national authority; Staff report internally to the MLRO, not directly to the authority, under the usual structure.
Tipping off: Do not tell the customer or any third party about a report or investigation; Tipping off is an offence in most jurisdictions.
Record keeping: Keep ID evidence and transaction records for the legally required period; Commonly at least five years in many countries; give the period only if the question does.

How to solve Anti-Money Laundering Procedures and Reporting questions

Most BT questions on this topic ask you to identify the correct procedure, role or action in a short scenario. Use this method.

1Read the scenario and decide the stage: taking on a customer, monitoring, suspicion arising, reporting or record keeping.
2If it is about taking on a customer, think CDD or KYC: identify, verify, beneficial owner, purpose.
3Check the risk level. A PEP, high-risk country or complex structure points to enhanced due diligence.
4If someone has a suspicion, the employee reports internally to the MLRO.
5Remember the MLRO decides whether to make an external report. The employee does not tip off the customer.
6For records, choose the answer that keeps identity and transaction evidence for the required period.
7Remove options that break a rule, such as telling the client, ignoring suspicion, or reporting only after proof.

Quickest way: Stage-and-role check

When to use it: Use it for multiple choice and multiple response questions when time is short.

Name the stage in five seconds: onboarding, monitoring, suspicion, reporting or records.
Match the stage to its owner: staff do KYC and raise suspicion, the MLRO assesses and reports externally.
Eliminate any option that involves tipping off or waiting for proof.
For multiple response, pick only the number of options stated.

Common mistakes in Anti-Money Laundering Procedures and Reporting

Saying staff report suspicions directly to the authorities.
Students think reporting is the individual's job alone.
Fix: In the standard structure the employee reports to the MLRO, who decides on external reporting.
Thinking you need proof of money laundering before reporting.
Students confuse suspicion with evidence.
Fix: Knowledge or reasonable suspicion is enough. Investigating is for the authorities.
Warning the client that a report has been made.
It feels honest or helpful.
Fix: This is tipping off, an offence. Say nothing about the report.
Treating CDD as a one-off check at onboarding.
Students focus on the identity documents.
Fix: CDD includes ongoing monitoring of the relationship and transactions.
Forgetting the beneficial owner when the customer is a company or trust.
Students stop at the legal entity's documents.
Fix: Always identify the real person who owns or controls the entity.
Applying the same checks to every customer.
Students ignore the risk-based approach.
Fix: Use simplified checks for low risk and enhanced due diligence for high risk, such as PEPs.

Worked examples

Example 1

An accountant at a firm notices that a new client, a company, is making large cash payments that do not match its stated business. She suspects money laundering. What should she do? A) Tell the client she is worried B) Report to the MLRO C) Report to the police herself and tell the MLRO later D) Wait until she has proof

Show the solution

Stage: a suspicion has arisen, so the internal reporting route applies.
A is tipping off, which is an offence, so reject it.
D is wrong because suspicion is enough and waiting for proof delays the report.
C skips the internal route. The MLRO assesses reports and decides on external reporting.
B follows the standard procedure.

Answer: B) Report to the MLRO

Example 2

Which TWO of the following are part of customer due diligence on a new corporate client? 1) Identifying the beneficial owner 2) Informing the client of any internal suspicion reports 3) Verifying the client's identity using reliable documents 4) Destroying identity records once the engagement ends

Show the solution

Option 1 is a core CDD step for companies, so it is correct.
Option 2 is tipping off, which is prohibited, so it is wrong.
Option 3 is the identification and verification step, so it is correct.
Option 4 is wrong because records must be kept for the required period.

Answer: Options 1 and 3

Exam tips

Learn the roles as a chain: employee, MLRO, authority. Many questions test who does what.
Watch for the words tipping off. Any option that tells the client is almost always wrong.
In multiple response questions, select exactly the stated number of options.
Link high-risk wording such as PEP or complex structure to enhanced due diligence.
Expect scenario questions, so name the stage first, then pick the matching action.

Practice questions from Regulation and financial crime

Anti-Money Laundering Procedures and Reporting in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Anti-Money Laundering Procedures and Reporting: frequently asked questions

What is the difference between CDD and KYC?

KYC is the everyday term for knowing who your customer is. Customer due diligence is the formal process that delivers it: identifying, verifying, checking the beneficial owner and monitoring. In the ACCA exam you can treat them as closely linked.

What does an MLRO do?

The MLRO is the senior person who receives internal suspicious activity reports. They assess whether the suspicion is reasonable and decide whether to report to the national authority. They also oversee the firm's AML procedures and training.

How should an accountant report suspicious transactions?

Make an internal report to the MLRO as soon as you have knowledge or suspicion, and record the facts. Do not tell the client. The MLRO decides on any external report.

How long must AML records be kept?

The period is set by national law. Many countries require at least five years. Unless the question gives a period, say records must be kept for the legally required time.