What if you cannot complete CDD for an accountancy client?
Last updated: August 7, 2026
When customer due diligence (CDD) is incomplete, an accountancy firm must decide whether it can start work for a new client or continue acting for an existing one.
The decision affects both client handling and the AML record, especially if work is paused or the incomplete CDD requires internal escalation.
Until the necessary checks are finished, any missing information or verification should be managed as a controlled compliance issue rather than an informal onboarding matter.
The firm should record what remains missing and any client work approved before CDD is completed. Unresolved identity checks or any AML concern that has arisen should be escalated to the money laundering reporting officer (MLRO).
Key takeaways
- CDD must give the firm enough information to identify the client and assess the AML risk.
- A brief delay is only suitable if the remaining gap is minor and the client appears low risk.
- Routine deadline pressure is not a sufficient reason to carry on with unfinished CDD.
- If the required CDD cannot be completed, the firm should decline the client or end the relationship.
- Unclear ownership or unreliable documents could require MLRO escalation, particularly where the client pressures the firm to proceed.
- The AML record should show what was missing, how the client responded, and who approved the decision.
Limited circumstances for short CDD completion delays
CDD provides the information needed to identify the client and assess AML risk before the firm accepts or continues the relationship.
If a check remains outstanding, the firm must determine whether the information already obtained provides a reliable basis for acting on a controlled basis.
Any short delay must be justified by the risk position already recorded and should normally be limited to lower-risk cases where the outstanding check does not undermine the AML assessment.
When the firm already understands the company’s ownership and control, the outstanding check is often a specific administrative item, such as a certified copy from a travelling director.
In contrast, missing identity or ownership information changes whether the firm can justify a delay. If document reliability is also unclear, the firm lacks a sound basis for the AML assessment, so work should pause until the issue is resolved or escalated.
When a short extension is justified, it should be approved individually, with the reason and timeframe recorded.
A filing deadline or client pressure might explain the urgency, but neither normally justifies continuing with unfinished CDD. Any work approved during the extension should therefore remain limited until the checks are completed.
Failure to complete CDD and the requirement not to act
If the firm cannot apply the required CDD measures to a prospective client, Regulation 31 of the Money Laundering Regulations, as well as HMRC’s supervision handbook, indicate that it should not act.
An engagement letter does not override incomplete CDD; if the required measures cannot be completed, substantive work should not proceed and an existing relationship must be terminated.
The firm should then manage the disengagement carefully; the approved rationale must be retained with the client AML record.
Client communication can remain neutral and professional, for example by saying the firm is unable to continue acting because required onboarding or compliance information has not been completed.
That said, if there is any suspicion, the firm needs to avoid wording that could alert the client to possible reporting or investigation risk.
Incomplete CDD, suspicion, and MLRO escalation
Unresolved due diligence does not automatically make the client suspicious, so the firm should distinguish ordinary delay from behaviour that changes the risk assessment.
The risk becomes more significant if the client appears evasive, ownership remains unclear, documents or external records cannot be reconciled, or the client presses the firm to proceed before checks are complete.
The firm’s internal procedures should provide a clear route for concerns to reach the MLRO or nominated officer.
If, after reviewing the internal report, the MLRO also suspects money laundering or terrorist financing, an external suspicious activity report (SAR) must be made to the National Crime Agency.
Before the engagement continues, the firm should use its suspicious-onboarding process to decide whether the facts driving the MLRO’s concern affect client acceptance or any work already underway.
Decision records and onboarding process controls
After any decision to limit or stop work because CDD remains unresolved, the internal record should identify the outstanding CDD specifics and explain the approved outcome.
If the firm considered whether suspicion arose, the internal record should document that review, while client-facing communications should avoid unnecessary detail.
CCAB guidance says customer due diligence records, including non-engagement documents, should be retained for five years after the relationship ends. A disengagement letter or an unambiguous email can also evidence that the relationship has been terminated.
Recurring CDD issues should prompt a review of the onboarding process itself, including establishing clear criteria that distinguish routine follow-up from situations requiring escalation or a stop-work decision.
In summary
Treating incomplete CDD as a client acceptance or continuation issue means deciding whether any work can proceed and, if so, under what limits.
The firm’s chosen course of action should clearly limit any interim work and keep the AML file aligned with the approved approach.
Across accountancy practices of all sizes, the control framework should give staff a common basis for handling incomplete CDD.
A well-defined process should allow employees to manage minor delays reliably while ensuring that work pauses and the MLRO is involved when unresolved CDD raises wider AML concerns.
FAQs
A firm might be able to begin limited work while a minor CDD requirement is being resolved, but only when the available information supports a lower-risk assessment. The delay should be short, specific, and approved internally. A filing deadline on its own is unlikely to justify starting client work while CDD remains unfinished.
Missing ownership or control information is serious because it prevents the firm from understanding who owns or controls the client. The firm should pause affected work while seeking the missing information and escalating the matter internally. If the required information still cannot be obtained, the firm should reject the new engagement or terminate the existing relationship.
The MLRO should be involved when missing CDD raises concern about the client’s risk profile or the explanation for the gap. Escalation might be needed if ownership or document reliability remains unresolved, or when the client pressures the firm to continue work before checks are finished. The MLRO can then decide whether the unresolved concerns require external reporting.
Client communication should be brief and neutral; the firm can explain that it cannot keep acting because mandatory verification details are still outstanding. If there are concerns about suspicious behaviour, any response should avoid extra detail that could reveal an internal review or possible report.
Yes. To support that decision, the internal record should explain how the outstanding CDD and the client’s response led to the approved outcome, while identifying the approver. Any consideration of suspicion should be recorded internally rather than explained in detail to the client. A clear email or disengagement letter can also help show when the relationship ended.
References and Source Material
- Money Laundering Regulations 2017
- CCAB, Anti-Money Laundering and Counter-Terrorist Financing Guidance for the Accountancy Sector
- HMRC, Accountancy sector guidance for money laundering supervision
- HMRC, Risks common to accountancy service providers
- HMRC, Your responsibilities under money laundering supervision
- HMRC, Economic Crime Supervision Handbook (ECSH52625 and ECSH82791)
