@Surojit, below is my complete code.
 

public static list<Account_Transfer__c> insertAccountTransfer(
        Account_Transfer__c accTrans,
        List<string> selectedPoliciesSet,
        string selPolicies,
        Office__c toOffice,
        Office__c fromOffice,
        User selectedUser
    ) {    
       List<Account_Transfer__c> AccountTransfersList = new List<Account_Transfer__c>();
	List<AggregateResult> PolList = [Select District_Acct_Code__c from Policy__c WHERE ID IN :selectedPoliciesSet GROUP BY District_Acct_Code__c];
        try {
            Account_Transfer__c acTran = New Account_Transfer__c();
				for(AggregateResult ar : PolList) { 
            
            acTran = accTrans;
            acTran.Owner_for_Reporting__c = UserInfo.getUserId();
            
            acTran.Submitted_Date__c = Date.today();
				AccountTransfersList.add(acTran );
				}
				insert AccountTransfersList; 
            if (selPolicies != null) {
                List<string> selPols = new List<string>();
                selPols = selPolicies.split(',');
                linkPoliciesAndHandleApprovalFlds(
                    selPols,
                    accTrans,
                    toOffice,
                    fromOffice,
                    selectedUser
                );
            }
			
            return AccountTransfersList; 
        } catch (Exception e) {
            throw new AuraHandledException(
                'Error in Client Request Transfer****' +
                e.getMessage() +
                'at ' +
                e.getLineNumber()
            );
        }
    }
    // Client Requested

   private static void linkPoliciesAndHandleApprovalFlds(
    List<string> selectedPoliciesSet,
    Account_Transfer__c accTrans,
    Office__c toOffice,
    Office__c fromOffice
) {
    Map<Id, Account_Transfer__c> AcctransMap = new Map<Id, Account_Transfer__c>(); 
    String districtAccountCode = '';
    List<Policy__c> selectedPolicies = new List<Policy__c>(
        [
            SELECT
                Id,
                District_Acct_code__c,
                Account_Transfer__c,
                Plan_Code__c
            FROM Policy__c
            WHERE ID IN :selectedPoliciesSet
        ]
    );
    List<Account_Transfer_Policy__c> accTransferPolicy = new List<Account_Transfer_Policy__c>();
    for (Policy__c pol : selectedPolicies) {
        Account_Transfer_Policy__c atp = new Account_Transfer_Policy__c();
        atp.Account_Transfer__c = accTrans.Id;
        atp.Policy__c = pol.Id;
        accTransferPolicy.add(atp);
      
        
    }
    accTrans.District_To__c = districtAccountCode;
    AcctransMap.put(accTrans.id, accTrans);
    
    update AcctransMap.values();
    
    insert accTransferPolicy;
    
    Approval.ProcessSubmitRequest req = new Approval.ProcessSubmitRequest();
    req.setObjectId(accTrans.Id);
    req.setSubmitterId(UserInfo.getUserId());
    Approval.process(req);
    
}

I am inserting Account_Transfer__c records in my insertAccountTransfer method and later updating them in linkPoliciesAndHandleApprovalFlds. 

The issue here is that, I could not able to update the records which are inserted in the first method.
Could you please help me with this.