Anti-money laundering rules apply to everyone. That includes small businesses, not just the large institutions in banking or financial services.
The issue is that most SMEs don’t have the same budget, time or in-house expertise to keep up with everything. But regulators don’t lower the bar just because a company is smaller.
And the risks are significant. Missed red flags. Poor documentation. No formal reporting process. Fines are only part of the problem, reputational damage can be much harder to repair.
For HR managers and compliance leads, AML might not always feel like a top priority. But it’s part of responsible business practice, particularly in regulated sectors such as accountancy, property, or finance.
This article explores some of the most common AML challenges faced by SMEs.
1. Limited Access to Quality AML Training and Awareness
AML training is essential, yet in smaller organisations it’s often neglected or reduced to a brief induction session. This leaves staff underprepared.
Most employees aren’t looking for signs of money laundering. Without the right guidance, they won’t know what to report or when to speak up.
Many SMES depend on a small number of individuals who “just know what to do.” That creates risk if they leave or are unavailable. Everyone across the business, not just the finance team, should have a basic level of understanding.
An anti money laundering training course can help staff understand what suspicious activity looks like, why due diligence is important, and how the reporting process works. It doesn’t turn them into compliance experts, but it ensures they know enough to act when needed.
2. Inconsistent Risk Assessment Procedures
Risk assessments are often treated as tick-box exercises. They are sometimes only done when a client raises questions or when a regulator visit is expected.
But a proper risk assessment is the starting point for AML compliance. Without it, everything else, from checks to reporting, loses context.
Many SMEs complete risk assessments once and leave them untouched for years. Others have no clear process at all. That leaves the business vulnerable.
Each client brings different risks. Their location, the nature of their business, and the complexity of the transaction all influence what steps are needed. Without a structured method, high-risk cases may slip through with basic checks.
Templates and checklists can help standardise the process. But someone needs to take ownership and ensure assessments are completed consistently. This is not something to review after a problem occurs — it should be done from the beginning.
3. Lack of Dedicated Compliance Resources or Personnel
Large businesses usually have entire departments focused on compliance. They have trained Money Laundering Reporting Officers (MLROs) and regular internal audits.
Most SMEs don’t have that.
In smaller companies, AML responsibility is usually shared across roles. HR might handle the onboarding. Accounts might verify identities. Directors might review large transactions. But no one fully owns the AML process.
This causes delays and confusion. When something looks suspicious, there’s often no clear procedure for reporting or escalating. Time-sensitive cases may be missed entirely.
Appointing a single person to manage AML — even as part of another role — makes a big difference. That individual can oversee training, review checks, and know how to submit a suspicious activity report (SAR) if required.
Responsibility doesn’t mean additional headcount. But it does mean clarity. Without it, errors are more likely and compliance is harder to prove.
4. Struggles with Document Management and Record-Keeping
AML compliance requires solid documentation. This includes customer ID, due diligence records, risk assessments, and transaction histories.
But many SMEs lack formal systems. Files are stored on desktops. Scans are emailed without tracking. Paperwork is saved under inconsistent names or not saved at all.
These habits make it difficult to maintain clear records. They also make audits stressful and increase the chance of non-compliance.
UK law requires businesses to retain key AML documents for five years. That means being able to produce evidence of checks and approvals quickly and accurately.
The solution doesn’t need to be expensive. Even basic document management works, as long as it’s structured. Central folders, access controls, and consistent naming conventions go a long way.
What matters is being able to show what was done, by whom, and when. If those records are missing, it’s hard to prove that compliance steps were followed at all.
5. Keeping Up with Regulatory Updates and Sector-Specific Risks
AML regulation is not static. Thresholds shift. Guidance changes. New threats emerge.
For smaller businesses, staying up to date can be challenging. There’s limited time to monitor updates from regulators, and professional bodies don’t always provide clear summaries.
Yet compliance depends on knowing what has changed. This includes updates from HMRC, the Financial Conduct Authority (FCA), or relevant trade bodies.
Recent laws, such as the Economic Crime Act, have introduced new powers and expectations. The changes might affect which clients are considered high-risk, what checks are needed, or when a report must be filed.
It helps to schedule quarterly reviews of policies and assign someone to scan for updates monthly. Subscribe to relevant alerts or bulletins. Even five minutes of reading can prevent bigger problems later.
Falling behind is not a defence. Regulators expect proactive compliance — even from small firms.
Wrapping Up
AML compliance is not just a problem for banks and financial institutions. Small and medium enterprises face the same legal obligations, often with fewer resources and less support.
That creates real pressure. With smaller teams and tighter budgets, SMEs have to make smart choices to stay compliant without overcomplicating their processes.
Getting the basics right makes a big difference. A clear training plan. A consistent risk assessment process. A single person responsible for oversight. These are realistic, affordable steps that protect the business and its reputation.
Good record-keeping and regular reviews complete the picture. It’s not about perfection. It’s about creating a system that works — one that can respond when risks arise.
In AML, what you miss matters more than what you catch. A missed red flag, an incomplete check, or a misplaced file could lead to serious consequences.
That’s why a small investment in structure and awareness can pay off significantly, keeping the business compliant, credible and protected in the long run.
