If you are an independent bookkeeper qualified by experience and you have chosen not to be a member of a professional body then you need to register to be supervised by HMRC for Money Laundering Regulations ...
There is the person who engages you as the bookkeeper for the business, but you also need to look behind the business and check who is actually in control. Most of the companies I deal with are limited companies, so I will always look up a potential new client on the companies house website and check who the directors are and who has significant control.
With all my clients, the director is my main contact at the business, but that might not always be the case. Whilst I am there I can also download copies of the most recent financial reports and double-check what I am seeing there matches what I expect. You can often see who their accountant is too. I keep screenshots and copies of the companies house information as part of my checks.
Then, to double-check the identity of the client, I ask for a photo ID, either passport or driving license usually works best. I prefer a driving license as it also includes their home address which you also need to check. If it is the passport I will usually ask for a household bill with the address on it, and if the company address is different I ask for a utility bill copy for the company too. This also allows you to see their date of birth.
So, in order to thoroughly check the ID, I use a Money Laundering Check service by a company called Veriphy. It costs roughly £4 per check and you can also plug in other information like their mobile phone number and it will double-check they are who they say they are and that all the information is correct.
I have never had anyone who fails these tests, except maybe if someone moved house recently it might flag up a query, so if all checks are correct then I am happy to move to the next stage. I would redo these checks if any information changes, such as when the ID has expired, then you should request the new ID or even if they move house. So, far no one has ever changed their date of birth.
I then move onto risk assessing the business. This involves things like checking they are registered for the appropriate taxes for their business. Do they have a PAYE scheme, are their returns up to date on Companies House, are they registered for VAT if appropriate? If the nature of my relationship with them is I am just doing simple bookkeeping or data entry then I would ask for their accountant's details and request a letter from them saying they deal with these elements for them.
I might also ask them to state that they have done their due diligence on them and ask for a letter on their headed paper stating this. Some are happy to comply and some will just say 'yes we are their accountant' and that's as far as they go. It depends on the accountant. I will always try and develop a friendly and collaborative relationship with any bookkeeping clients accountant as it makes all our jobs easier in the long run.
You also need to be aware of which countries are on the 'at risk' register or if the business has a relationship with a politically exposed person which you can find out from the HMRC website if you read their updates on money laundering regularly or follow the link in my first paragraph.
If your client is just UK based, and you see invoices being processed and customers paying invoices for work done in a relatively normal industry sector and from what you see and know of them then your client might be low risk like mine. I often don't get to really carry out these checks until I have started working with the client so it's something I mentally review as I do my job.
As a bookkeeper dealing with a client's financial transactions, you are in a prime position to spot if there are money laundering activities going on within a business, and if you do have your suspicions you should report straight to the National Crime Agency (NCA) and not tell the client using a suspicious activity report (SAR). You obviously need to keep your own safety in consideration too so I would always seek support from an independent third party if I was really worried.
I have a policy document that states my process for checking new clients, I keep copies of the risk assessments and checks I have done as part of my due diligence, I keep copies of the client ID and I keep a list of the training I have done (Veriphy do a simple course for around £30 which is a good start) and I read the HMRC updates which they email out to keep up to date.
You must keep your records for 5 years after the business relationship ends to comply with the legislation and also make sure you review your client's information at least annually and keep alert in your day to day job with regards to spotting anomalies that could flag money laundering activities.
If you would like some support in getting your systems sorted for being supervised by HMRC then please get in touch and I will happily share with you my templates as a starting point so you can get a good system in place for your business too.
The HMRC guidance is long-winded and can be very confusing, so sometimes you just need someone to point you in the right direction or break down the requirements into simple tasks so you too can remain complaint.
I'm always happy to help.
If anything I've written here resonates with you, call me on 01604 420057 and let's see how we can help you.