Why Accountants Ask for Your ID: Understanding KYC and AML Rules

Accountants and accountancy practices in the United Kingdom operate within a tightly regulated environment, particularly in relation to anti-money laundering (AML) and Know Your Customer (KYC) obligations. These requirements are designed to ensure that firms act as an effective first line of defence against financial crime and money laundering. For clients, understanding why accountants collect certain information and how it is used can help to build confidence in the process and avoid delays in onboarding or service delivery.

The legal basis for these obligations is primarily the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (as amended), commonly referred to as the “MLR 2017”. These regulations implement the EU’s Fourth and Fifth Anti-Money Laundering Directives into UK law and remain in force post-Brexit, with updates periodically issued by HM Treasury. In addition, the Proceeds of Crime Act 2002 (POCA) imposes obligations on professionals to report suspicious activity. Together, these measures form the framework within which accountants must perform due diligence on their clients.

Under Regulation 27 of the MLR 2017, accountancy firms must undertake customer due diligence (CDD) before establishing a business relationship or carrying out occasional transactions above a set threshold. This includes verifying the identity of the client, establishing the nature of their business activities, and, where applicable, identifying the ultimate beneficial owners (UBOs). Enhanced due diligence (EDD) must be applied where there is a higher risk of money laundering, such as dealing with politically exposed persons (PEPs) or clients in high-risk jurisdictions. Accountants supervised by bodies such as the Institute of Financial Accountants (IFA) or ICAEW must also comply with their professional body’s AML guidance.

For clients, this means providing documents such as passports or driving licences, proof of address, and, for companies, details of ownership structures. It is not unusual for accountants to request additional information or clarification where risk factors are present. These measures are not discretionary but mandated by law; failure to comply can result in significant penalties for the accountant and can also mean that the accountant is legally unable to act for the client. The UK’s National Crime Agency (NCA) and HM Revenue & Customs (HMRC) are the principal enforcement agencies, and accountants have a statutory duty to submit Suspicious Activity Reports (SARs) where appropriate.

HMRC, which acts as the AML supervisor for many accountancy service providers, regularly updates its guidance on customer due diligence and AML obligations. Clients are therefore encouraged to be aware that requirements may evolve and to check for updates on the official HMRC AML guidance pages (gov.uk/guidance/money-laundering-regulations-accountancy-service-providers). Being proactive in supplying information can help ensure a smooth relationship with your accountant and minimise administrative delays.

By understanding the rationale behind KYC and AML requirements, clients can see that these procedures are not simply regulatory hurdles but integral to maintaining the integrity of the UK’s financial system. Proper compliance protects both the accountant and the client, helps prevent financial crime, and underpins the trust on which the professional relationship depends.

Article Added:29/09/2025