The Legal Sector Affinity Group (LSAG) have approved an addendum to the LSAG main guidance.
The initial Legal Sector Affinity Group Anti-Money Laundering Guidance for the Legal Sector
2023 can be found here.
CLC have made clear that this addendum is still subject to approval by HM Treasury, and recommend that practices review it prior to that approval.
The CLC have highlighted the following as important updates in the addendum, which they published:
Economic crime levy
This is a new payment that must be made to HMRC if a practice or firm’s annual turnover exceeds £10.2 million. The CLC has already informed affected and potentially affected practices of this.
Discrepancy reporting
The obligation to report discrepancies has altered somewhat from an onerous obligation (i.e. every difference you spot in CDD) to a more reasonable one – only ‘material discrepancies’ need be reported, which necessitates a link between the discrepancy and money laundering or terrorist financing or concealing details of the business of the customer.
Register of overseas entities
This was brought in to reveal anonymous foreign ownership of UK property. The addendum contains some details of the requirements of registration and some fundamental details.
Economic Crime and Transparency Act 2023
This Act received royal assent on 26 October 2023 and introduces a number of changes – for example an increase in the amount and type of information that companies house will hold and display on the register.
Supply chain risk
This risk refers to the end-to-end activities of a service provider to the end customer/beneficiary. The addendum provides some details of this money laundering risk and ensuring for example, that you understand the nature of the service you are providing, which could include understanding the role of other professionals in the chain.
Further source of funds guidance
Helpful guidance in relation to a third party’s underlying Source of Funds – for example if they are contributing a gift to a conveyancing transaction. It also advises that you must understand the source of wealth of third party giftors in high risk situations.
Approach to client due diligence (CDD)
This clarifies guidance on what information should be obtained for both natural persons and non-natural persons. Some interesting points are: you should verify the identity of beneficial owners to the same standard as that applied to clients who are natural persons.
Read the full Addendum here.
