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Aipedia: Company formation and secretarial agents
AI tools can score formation and nominee clients for money laundering risk, but the duties under the Money Laundering Regulations 2017 stay with the agent. Weak due diligence can lead to supervisory action, and regulatory fines usually sit outside PI.
Part of: AI in Company formation and secretarial agents
In short
Formation agents are trust or company service providers (TCSPs) under the Money Laundering Regulations 2017, supervised by HMRC or by a professional body. Some may use AI tools to screen clients against sanctions and politically exposed person lists, search adverse media and produce a risk score. No AML supervisor has published AI-specific guidance for TCSPs. The tool supports the risk assessment; it does not carry it out on the agent's behalf. Supervisory action after weak due diligence is a business risk that PI usually does not cover, although some policies fund defence costs.
Formation, registered office and nominee services can give anonymity and credibility to a business, which is why they attract money launderers. AI risk tools are commonly used for the following tasks:
A score summarises the data the tool could see. It knows nothing about the client's real business model or about information that only a conversation would reveal.
Under the Money Laundering Regulations 2017, the agent must carry out customer due diligence, assess risk, keep records and report suspicious activity for its TCSP and formation services. Supervision sits with HMRC where no professional body supervises the agent, or with a body such as ICAEW, ACCA or the Law Society/SRA. Companies House also requires every ACSP to be AML-supervised, so AML failings can affect ACSP status as well. As at October 2026, HMRC and the professional bodies had published no AI-specific guidance for TCSPs.
Data protection adds a further layer. An automated client-acceptance refusal may be a solely automated significant decision under UK GDPR Articles 22A to 22D, which came into force on 5 February 2026 under section 80 of the Data (Use and Access) Act 2025. Safeguards, such as the ability to obtain human intervention, are then needed. The ICO's AI guidance explains how data protection law applies to AI systems.
How AML duties fit with the Companies House regime is outlined in AI in company formations: rules, risks and PI.
Illustrative scenario: an agent offering formations with a nominee director service relies on an AI risk score to approve orders automatically below a set threshold. A series of companies ordered through the same intermediary all score low because each order, viewed alone, looks ordinary. The pattern emerges during a supervisory visit, when the supervisor finds no evidence that anyone reviewed the intermediary relationship or the purpose of the companies. The agent faces a supervisory review, has to remediate its client book and must consider whether suspicious activity reports should have been made.
False positives cause harm too. A tool that wrongly matches a client to adverse media, with no human review, can lead to an unfair refusal and a data protection complaint.
PI is designed for civil liability to clients and third parties. Regulatory fines and penalties are commonly excluded, and some may be uninsurable as a matter of public policy, so an AML penalty would usually fall on the agent. Some policies include cover for defence costs in a regulatory investigation, with conditions. A separate civil claim, for example from a client whose formation was delayed by a wrongful refusal, may fall within PI, subject to the wording. See are fines and penalties covered by PI? and does formation agents' PI cover AI errors?.
These controls help show that the agent, not the tool, made the risk decision:
Apex arranges PI for TCSPs and formation agents. A broker explains what your policy does and does not do for AML investigations, including any defence costs cover, as part of reviewing your corporate services PI.
No. The Money Laundering Regulations 2017 place customer due diligence, risk assessment, record keeping and reporting on the agent. An AI score can support those steps, but someone at the firm must understand and stand behind each decision.
Formation agents are trust or company service providers. HMRC supervises them where no professional body does; otherwise their professional body, such as ICAEW, ACCA or the Law Society/SRA, is the supervisor. Companies House requires ACSPs to be AML-supervised.
It may be. A solely automated decision with a significant effect, such as refusing a client, engages UK GDPR Articles 22A to 22D, in force from 5 February 2026. Offering a route to human review is a practical safeguard.
Usually not. Fines and penalties are commonly excluded from PI or uninsurable. Some policies cover defence costs for regulatory investigations, and a client's civil claim arising from the same events may fall within cover, depending on the wording.
Tell us about your firm and the work you do. A broker will review how your current PI treats AI-assisted work, or arrange new cover. No fee for a quote. Or call 0117 325 0027.
Start a PI quote Request a callbackApex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales, company number 07014570. This page is general information about how AI is used in the profession and how insurance may respond. It is not legal, regulatory or insurance advice on your circumstances, and it does not guarantee that cover will be available or on what terms.
