The government thinks payroll is riskier than accountancy. Here's why.

Payroll might seem like a routine administrative service, but from an anti-money laundering (AML) perspective, it can present risks that differ from those associated with traditional accountancy work.

In its article, Firmcheck explains why government and HMRC regard payroll as a higher risk area for money laundering. A key issue is visibility: payroll bureaux may process employee payments and payroll information without having the same insight into the wider business activity, underlying transactions or source of funds that could help identify suspicious behaviour.

For accountancy practices, this highlights the importance of treating payroll as more than a processing task. Practical steps include:

• Assess the client, not just the service: Consider the nature of the business, its activities and any factors that could increase money laundering risk.

• Understand the limits of available information: Recognise when payroll data alone may not provide enough context to understand unusual activity.

• Keep risk assessments current: Review them when a client's circumstances or business activities change.

• Document decisions and concerns: Maintain clear records of due diligence, risk assessments and actions taken when something appears unusual.

The wider lesson is that AML controls should reflect the risks of the work being undertaken, rather than assuming payroll is low-risk because it is routine.

Read the full article here >