ICAEW changes to high net worth individual definition and compliance requirements

From November 2025, the Institute of Chartered Accountants in England and Wales (ICAEW) has updated its definition of a High Net Worth Individual (HNWI). This change significantly broadens the scope of individuals who fall into this category and has implications for anti-money laundering (AML) compliance.

What has changed?

Under the revised ICAEW guidance, an individual is now considered a HNWI if they meet either of the following criteria in any of the last three years:

• Annual income of £200,000 or more, or
• Net assets of £2 million or more (excluding primary residence and pension benefits).

This replaces the previous threshold of £20 million in assets, meaning many more clients will now be classified as HNWIs.

Why does this matter?

The Money Laundering Regulations (MLR 2017) require firms to adopt a risk-based approach to client due diligence. HNWIs are considered higher risk because of the complexity and scale of their financial affairs. As a result:

• Enhanced Due Diligence (EDD) may apply.
• We may need to gather additional evidence to understand your financial position.

What information might we request?

To comply with these obligations, we may ask for:

• Source of Wealth (SOW): How your overall wealth was accumulated (e.g., business sale, investments, inheritance). Evidence could include sale agreements, probate documents, or investment statements.
• Source of Funds (SOF): Where the money for a specific transaction or engagement originates. This may involve bank statements or loan agreements.

These checks are not about questioning your integrity—they are a legal requirement designed to protect all parties from financial crime and ensure compliance with UK regulations.

What does this mean for you?

• If you meet the new HNWI criteria, we may need to complete additional checks during the next annual review that we undertake of your affairs.
• You may notice requests for documents that we have not previously asked for. This is part of our commitment to meeting regulatory standards and safeguarding your interests.

Our commitment

We understand that these requirements can feel intrusive, and we aim to make the process as straightforward as possible. Our team will guide you through what is needed and why, ensuring transparency and efficiency at every step.

If you have any questions about these changes or what they mean for you, please contact James Alesbury on 023 8046 1222 or email James Alesbury.