ICAEW AML Report 2025/26: Fewer Failings, Bigger Fines

The ICAEW's annual anti-money laundering supervision report for 2025/26 carries a headline that looks encouraging: compliance is improving. Across 1,608 reviews, a higher share of firms passed than in any recent year. But the fine total jumped from under £200,000 to more than £1 million in a single year, driven by a small number of serious cases. For accounting firms operating in the UK, that combination of carrot and stick deserves a careful read, especially with the FCA set to take over AML supervision from the professional bodies as early as late 2028.

Scale of Supervision in 2025/26

ICAEW conducted 1,608 AML reviews during the year, a 36% increase on the 1,185 carried out in the prior period. That ramp-up in activity is itself a signal: the professional body is intensifying oversight before the anticipated handover to the FCA. Reviews were a mix of on-site visits and desk-based assessments.

Compliance outcomes at a glance

Of the 1,608 reviews, the majority resulted in a generally compliant finding, which represents an improvement year-on-year. Where shortcomings were identified, 250 non-compliant outcomes were recorded. Of those:

• 163 cases led to informal action (follow-up only).
• 87 cases resulted in formal action, including reprimands or sanctions.

In percentage terms, 65.2% of non-compliant outcomes were resolved informally and 34.8% formally. The Office for Professional Body Anti-Money Laundering Supervision (OPBAS) has previously criticised professional body supervisors for being too lenient, and this split will likely feature in any future assessment of whether the ICAEW's approach is tough enough. That said, the overall improvement in compliance rates suggests an education-first model is having a measurable effect.

Where Firms Are Still Falling Short

The findings section of the report is arguably its most actionable part. Customer due diligence remains the single largest source of problems, though the rate of failures is declining across most sub-categories. Firms that use this data honestly, as a checklist for their own procedures, will be better placed than those that treat it as relevant only to others.

Customer due diligence failures

Problems with verification of evidence in relation to identified risks were found in 4.2% of reviews, down sharply from 10.2% the previous year. Issues with CDD for new clients also appeared in 4.2% of cases. Both figures represent real progress, though 4.2% of 1,608 reviews still means roughly 67 firms per category getting this wrong.

Client identification problems included failing to identify all beneficial owners and insufficient understanding of the client's business structure. A recurring pattern in review findings was that a straightforward internet search turned up information about which the firm appeared unaware. That is a low bar to clear: onboarding procedures should routinely include an open-source search as a minimum step.

Ongoing CDD: still the highest single failure rate

Ongoing CDD had the highest problem rate at 7.8% of reviews, down from 11.6% last year but still the most common area of weakness. Firms are required to check, at regular intervals, that they still hold current and accurate CDD information, including know your client data. Trigger events, such as the appointment of new directors or a client becoming a politically exposed person, must prompt an immediate update. Documenting that review is as important as carrying it out.

Firm-wide risk assessments, policies, and training

Problems with firm-wide risk assessments, policies and procedures, and AML training each appeared in around 5% of cases, slightly higher than last year. Both the UK Money Laundering Regulations and ICAEW's own AML guidance were updated during the summer of 2026. ICAEW has said it does not expect a fundamentally different approach from firms, but updated guidance often reveals small procedural mismatches that a firm would not otherwise notice. Reading the revised text against your current procedures is not optional: it is how you find the gaps before a reviewer does.

One area flagged explicitly in the report concerns electronic identity verification. If a firm relies solely on electronic checks, the service used must appear on the government's approved register. This is a simple point to verify and an easy one to overlook.

Fines: A Small Number of Cases, a Large Total

ICAEW issued 53 fines in 2025/26, up from 41 the year before. The headline figure is the total: £1,052,619 compared with £197,706 in the prior year. That fivefold increase is almost entirely attributable to a handful of serious, higher-risk cases. The range of fines this year ran from £350 to £735,000; last year the range was £240 to £31,700.

What the fine data means in practice

The case studies included in the report illustrate that serious failings can attract fines of between £10,000 and £20,000, with additional requirements such as external compliance reviews adding further cost. The £735,000 upper end signals that ICAEW is willing to deploy its full sanctioning powers for the most egregious cases, not simply issue modest penalties as a matter of routine.

For firms that received a review this year and committed to making specific improvements, the message is direct: follow through. A failure to deliver on promised remediation is treated as an aggravating factor and is likely to trigger regulatory action. ICAEW's position on broken commitments is consistent with OPBAS expectations, and with the FCA transition approaching, the appetite to tolerate repeated failures is unlikely to increase.

Support and Resources from ICAEW

Supervision is not only about enforcement. The report captures the scale of the ICAEW's educational output during the year: over 1,300 queries answered through its technical helpline, more than 67,000 visits to its AML resources, attendance of over 3,000 practitioners at three live webinars, and more than 10,000 views of its AMLbites content. These numbers indicate that firms are engaging with the available support, which likely contributes to the improvement in overall compliance outcomes.

Satisfaction with the review process itself was high: 97% of respondents rated the quality of interaction with ICAEW positively, and 89% were satisfied with the technical competence of their reviewer. Given the inherent tension of a compliance review, those figures suggest the supervisory relationship is functioning reasonably well.

The FCA Transition: Timeline and Implications

ICAEW's report acknowledges that the transfer of AML supervisory responsibility to the FCA is moving forward, though the timeline is measured in years, not months. Much of the enabling framework will sit in secondary legislation under the Financial Services and Markets Act. Practical preparations are expected to run through 2027 and 2028, with firms transferring to FCA supervision in tranches from late 2028 onwards.

What the transition means for firms now

The interim period between now and late 2028 creates a supervisory gap that firms should not misread as reduced scrutiny. ICAEW remains the responsible supervisor and will continue to conduct reviews at the current pace. The transition is also expected to involve staff movement: it is reasonable to expect that the FCA will seek to retain experienced AML reviewers from ICAEW and the other professional body supervisors, bringing institutional knowledge with them.

For firms, the practical implication is that standards are more likely to rise than fall during the transition, not least because OPBAS has historically criticised professional bodies for insufficient rigour. The FCA operates with a different enforcement culture and a higher public profile. Firms that treat the transition as an opportunity to tighten their procedures now will be better positioned than those that wait to see what the new supervisor expects.

Accounting and Compliance Implications

For accounting firms and their compliance leads, the 2025/26 report sets a clear direction. The areas with the highest failure rates, ongoing CDD at 7.8% and beneficial owner identification, are not technically complex: they are process discipline failures. The fix is procedural, not legislative.

For B2B: what firms and compliance officers should do now

The immediate action for any firm is to map its current AML procedures against the updated UK Money Laundering Regulations and ICAEW's revised guidance, both of which were refreshed in summer 2026. Pay particular attention to beneficial owner verification, including whether all owners at every relevant threshold have been positively identified, not simply listed. Review your electronic verification service against the government's approved register. And audit your ongoing CDD schedule to confirm that trigger events are captured and documented in real time, not retrospectively.

Firms using crypto accounting software or digital asset accounting tools to manage client portfolios with crypto exposure should apply the same CDD discipline to those engagements. Crypto-related clients often have more complex beneficial ownership structures, including multi-signature wallets and DAO arrangements, and the evidential standard is no lower than for any other client type. Robust digital asset accounting software that captures and stores client identification data in a structured way can support both initial onboarding and the ongoing CDD cycle, reducing reliance on manual tracking and the attendant risk of gaps.

For firms that received a review and made commitments, document progress formally and set an internal deadline ahead of any follow-up. For firms that were not reviewed this year, treat the report's findings as a ready-made risk-based checklist for the annual compliance review.

The combination of more reviews, better overall outcomes, and dramatically higher fines in serious cases is not contradictory: it reflects a supervision model that is becoming more sophisticated. Firms that engage with that model proactively, using the available guidance, helpline, and training, are consistently the ones that avoid the formal end of the spectrum.

Frequently Asked Questions

What was the total value of ICAEW AML fines in 2025/26?

ICAEW issued 53 fines totalling £1,052,619, up from £197,706 across 41 fines the previous year. The increase was driven by a small number of serious cases, with the largest single fine reaching £735,000.

Which AML area had the highest failure rate in ICAEW reviews?

Ongoing customer due diligence had the highest problem rate at 7.8% of reviews, down from 11.6% the prior year. Firms must check, document, and update CDD information regularly, particularly when trigger events occur such as new directors or a client becoming a politically exposed person.

When will the FCA take over AML supervision from ICAEW?

Practical preparations are expected during 2027 and 2028, with firms transferring to FCA supervision in tranches from late 2028. Much of the enabling framework will be set through secondary legislation under the Financial Services and Markets Act.

What should a firm do if it committed to improvements after an ICAEW review?

Follow through on those commitments before any follow-up contact from ICAEW. A failure to deliver on promised remediation is treated as an aggravating factor and is likely to result in formal regulatory action. Document your progress internally with dates and evidence.

Does the ICAEW report apply to firms supervised by other professional bodies?

Yes, in a practical sense. The types of failures identified, particularly around CDD, beneficial owner identification, and ongoing monitoring, are not unique to ICAEW-supervised firms. The findings are a useful benchmark for any UK accounting firm regardless of which professional body supervises it.

Source: AccountingWEB