Red flags for accountants, lawyers and company formation agents
Gatekeepers form companies, hold client money and prepare the paperwork banks rely on. Most are honest; the red flags help the rest of the profession spot misuse.
A red flag is a reason to look closer, not a finding. The duty is to report suspicion to the national financial intelligence unit, never to confront a customer. See reporting and suspicious activity. Which techniques belong under which industry is an editorial grouping; each indicator below is reproduced from the technique page that sources it.
What supervisors and standard-setters expect
The FATF treats lawyers, accountants and company service providers as gatekeepers. Its 2019 risk-based approach guidance for legal professionals is non-binding, but it spells out the expectation that firms assess their own money laundering risk and identify and verify beneficial owners, with examples of simplified, standard and enhanced due diligence. Binding duties come from national law and differ sharply.
In the UK, the Money Laundering Regulations 2017 (regulation 8) cover auditors, insolvency practitioners, external accountants, tax advisers, independent legal professionals and trust or company service providers. In the EU, Regulation 2024/1624 (Article 3) reaches the same groups when they take part in buying or selling property or businesses, managing client money, opening accounts, or setting up companies and trusts. It applies from 10 July 2027. Article 19 requires due diligence when taking part in creating a legal entity or setting up a legal arrangement, whatever the value. Article 70 exempts privileged information from suspicion reporting, but not where the professional takes part in laundering or knows the client seeks advice for it. Canada is different: FINTRAC says lawyers are not reporting entities, apart from British Columbia notaries, and calls this a gap. Its October 2024 bulletin counts about 2,400 suspicious transaction reports in 2022-23 that referenced lawyers or law firms.
Supervisors mostly find paperwork failures. The Solicitors Regulation Authority's 2024-25 report rated 270 of 833 reviewed firms (32.4%) non-compliant, and 950 of 5,873 files (16%) had no client and matter risk assessment or an incomplete one. It expects one on every in-scope file, a firm-wide assessment tailored to the firm, and source-of-funds checks on higher-risk matters. In Canada, FINTRAC imposed $72,750 on the accounting firm DMCL on July 25, 2025, for three serious violations: compliance policies missing politically exposed person rules, a risk assessment covering only some required factors, and a program review gap from 2019 to 2023 against a two-year requirement.
Read together, the red flags on this page map onto specific duties. A client account used as a pass-through with no underlying work tests the source-of-funds and monitoring expectations. A structure with no commercial purpose, or one built on nominee directors and shared addresses, calls for the enhanced diligence and the firm-wide risk assessment that regulators fined firms for lacking. Reluctance to name a beneficial owner means the identification duty is unmet and should be escalated under the firm's reporting procedures. The enforcement record shows failures that are more often an assessment never written down or reviewed than a missed trick.
As of October 2026: Checked October 21, 2026 against the sources listed. The FATF guidance page and the SRA report summary were read in full; the FATF Recommendation 22 and 23 text and the Supreme Court of Canada ruling behind the lawyer exclusion could not be opened, so the Canadian position rests on FINTRAC's own October 2024 bulletin. EU Regulation 2024/1624 is not yet in application, and Canada's position on lawyers may change after the September 2026 FATF evaluation. UK reg 8 lists categories only; the definitions in regulations 10 to 14 were not read. SRA figures are for April 2024 to April 2025.
Red flags by technique
Professional enablers
- A lawyer's or agent's client account used to receive and pay out funds with no underlying legal work, sometimes called a pass-through
- A client who asks for a company, trust, or account structure that has no clear commercial purpose beyond secrecy
- Fees, loans, or invoices that do not match the services described, or that are paid by unrelated third parties
- Professionals who form hundreds of companies for one offshore client base, or who serve as nominee director on many of them
- Reluctance to identify the beneficial owner, or an intermediary who insists the client's identity cannot be shared
- Property purchases or private loans arranged through a professional for a buyer with no visible source of wealth
- A transaction whose complexity is the main product: many entities, several countries, and no reason a legitimate client would need them
Shell companies and nominees
- A registered-agent address shared by hundreds or thousands of unrelated companies
- Nominee directors whose names appear on dozens or hundreds of company boards
- A company with no staff, premises, or web presence moving sums far beyond any plausible business activity
- Ownership chains that pass through three or more secrecy jurisdictions before reaching a human being
- Circular ownership structures in which companies ultimately own themselves
- A corporate customer unable, or unwilling, to name its beneficial owner during bank onboarding
Bearer shares, trusts and hidden owners
- A company whose shares are in bearer form, or whose owners cannot be shown to the bank in any document
- Layers of companies and trusts in different countries that do not match the client's real business needs
- Nominee directors or shareholders, including relatives or close associates, with no clear reason and no named nominator
- A trust where the settlor keeps broad powers, such as the power to revoke it, or where settlor, trustee and beneficiary overlap
- A trust that holds a company, which opens a bank account and buys property, with nobody willing to explain the source of wealth
- A structure formed in a low-tax jurisdiction or by a service provider in another country for a client who has no link to that place
- Reluctance to give owner details, or reliance on legal privilege to avoid disclosing who the client is
Buying legitimate businesses
- An acquisition paid for by funds from an offshore or unexplained source that the buyer cannot document
- A buyer with no background in the industry who pays well above what the business seems to be worth
- Ownership held through a chain of shell companies, trusts, or nominees that hides who benefits
- A newly acquired company whose turnover suddenly rises or falls without a change in customers or products
- Loans, capital injections, or fees flowing between the business and unrelated parties with no clear service behind them
- A regulator, lender, or bank that cannot get straight answers about who ultimately owns or controls the company
Round-tripping and fake foreign investment
- "Foreign" investment from a tiny jurisdiction far larger than that jurisdiction's own economy
- An investor entity with no staff, premises, operations, or track record that funds a company in the customer's home country
- Ultimate ownership of the foreign investor that leads back to a resident of the country being invested in, or to the target company's own owner
- Funds that leave a customer's account as fees, loans, or investments and return, in a similar amount, from a related party abroad
- Foreign loans to a company with no clear commercial purpose, unusual terms, or repayment that flows back to the same people
- Investment made shortly after a large outflow, or timed to gain a tax, treaty, or exchange-control advantage
- Refusal to identify the beneficial owner behind the offshore investor
Golden visas and investor citizenship
- An applicant whose declared wealth cannot be matched to a documented, verifiable source, such as taxed income, a business sale, or an inheritance
- Funds routed through third parties, unregulated money transmitters or unrelated companies rather than the applicant's own bank account
- An investment priced well above market value, or where part of the money flows back to the applicant after the purchase
- An applicant, or a spouse or family member, who is a politically exposed person, is under investigation or sanctions elsewhere, or has changed name or nationality records
- Several applications by the same agent, developer or wealth manager that share the same funding pattern, accounts or documents
- Seeking multiple programmes in different countries, or applying only after adverse news or an asset freeze in the home country
Sources
- Guidance for a Risk-Based Approach: Legal Professionals (Financial Action Task Force, June 26, 2019).
- The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, regulation 8 (UK Government (legislation.gov.uk), Revised text current to October 2026).
- Regulation (EU) 2024/1624 on the prevention of the use of the financial system for money laundering or terrorist financing (European Union (EUR-Lex), May 31, 2024).
- Special Bulletin on the use of the legal profession in money laundering and sanctions evasion (FINTRAC, October 2024).
- Anti-Money Laundering Annual Report 2024-25 (Solicitors Regulation Authority, October 30, 2025).
- Notice of administrative monetary penalty: DMCL Chartered Professional Accountants (FINTRAC, October 9, 2025).