Money Laundering Red Flags for Accountants: A Practical Guide

Money laundering rarely announces itself. For an accountant it usually shows up as a detail that does not quite fit: a client who will not meet you, a payment from someone you have never heard of, or accounts that look too neat. This guide sets out the warning signs that professional bodies and supervisors point to, groups them so they are easy to use in a file review, and explains what to do when you spot one. It draws on ACCA's May 2026 article on common AML red flags, which cites the National Crime Agency (NCA) and HMRC, and on HMRC's Economic Crime Supervision Handbook. A single red flag does not prove criminal activity, and many have innocent explanations, so treat this as a prompt to ask questions. This is general information, not legal advice.

Why red flags matter

Your firm-wide risk assessment sets out where your firm is exposed, but red flags are what you notice on a live client file. They connect your policies to your daily judgement, and they feed the decision about whether to raise an internal report with your money laundering reporting officer (MLRO). ACCA stresses that multiple red flags, or unexplained transactions, should prompt further enquiry, and that no single indicator implies wrongdoing by itself.

Warning signs in client behaviour

According to ACCA, these include:

• avoiding face-to-face meetings or being reluctant to provide information;
• frequently changing advisers, or imposing unreasonable deadlines;
• appearing to act for undisclosed third parties; and
• instructing the accountant to leave questionable entries unchanged.

Pressure to skip checks is itself a signal. A client who cannot or will not complete due diligence also triggers regulation 31, which we cover in our guide to client risk rating, acceptance and exit.

Warning signs in transactions and payments

ACCA lists the following indicators:

• cash-intensive trading, unexplained wealth, and payments from unrelated third parties;
• use of virtual assets or unusual payment methods;
• over-invoicing, under-invoicing, multiple invoicing, and false descriptions of goods or services;
• large one-off receipts, or ongoing receipts from one overseas account with no commercial rationale;
• circular payments, and sudden international fund flows without commercial expansion; and
• profits that rise sharply with no clear explanation.

HMRC's handbook treats similar changes in the size, frequency or geographic origin of transactions as a prompt to review the client's risk rating. Our guide to ongoing monitoring and periodic CDD review explains how to build that review into your routine.

Warning signs in structures and jurisdictions

The same article points to:

• high-risk or non-resident connections, and offshore structures with limited transparency;
• nominee shareholders, shell companies, trusts and unnecessarily complex ownership that seems designed to obscure beneficial ownership;
• foreign investment partnerships used to hide who owns what; and
• related overseas entities controlled by a UK company's owners without a formal group link.

Our guide to ultimate beneficial ownership for accountants explains how to trace and record the people behind a structure.

Warning signs in documents and records

ACCA's case studies highlight missing receipts, no supporting contracts or invoices, rounded or suspiciously consistent takings that may indicate manipulated records, and entries misclassified in the accounts. These are particularly relevant for bookkeepers and accounts preparers, who see the raw records.

Warning signs in the business itself

Staffing, payroll or opening hours that are out of line with the size of the business or its reported profit can indicate that the reported figures are not genuine. ACCA also names sectors that need extra care, including money service businesses, virtual asset providers, casinos, betting operators, precious metals and jewellery dealers, and some charities. It gives a barber shop as an example in one case study, so a modest-looking business is not automatically low risk.

What to do when you spot one

1. Do not ignore it or explain it away. Make a short file note of what you noticed and when.
2. Ask a neutral question. A normal commercial query often resolves an innocent flag. Do not hint that you suspect crime.
3. Escalate. Pass the matter to your MLRO, who decides whether it amounts to knowledge or suspicion. Our guide to suspicious activity reports explains the decision and the tipping-off rules.
4. Review the risk rating. A confirmed flag may justify enhanced checks.
5. Keep records. Your notes show your supervisor that your procedures work in practice.

Red flags are easiest to spot when your team has seen examples. Our CPD courses can help build that experience.

Frequently asked questions

Does one red flag mean I must make a report?

No. ACCA says a single indicator does not imply criminal activity. Treat it as a prompt for questions and tell your MLRO if the answers do not resolve it.

Which sectors carry extra risk?

ACCA names money service businesses, virtual asset providers, casinos, betting operators, precious metals and jewellery dealers, and some charities.

Should I tell the client I am concerned?

Not if you suspect money laundering. Telling a client about a report or investigation can be tipping off, so take advice from your MLRO.

Where should I record a red flag?

On the client file, with the date, and in your internal reporting log if you escalate it.