Changes to anti-money laundering guidance submitted to HM Treasury have been formally ratified and published in the latest Legal Sector Affinity Group (LSAG) Anti-Money Laundering Guidance for the Legal Sector 2025.
LSAG, which is made up of the AML regulators in the UK including the Council for Licensed Conveyancers (CLC), Solicitors Regulation Authority (SRA) and the Law Society of Scotland, has published updated guidance for the legal community.
The guidance is provided specifically to the legal sector and serves two purposes say LSAG. It intends to provide practical information for legal practices to help with compliance, and second it expresses the expectations of the supervisory AML bodies for those they supervise.
The updated guidance is borne out of proposed addendums in December 2023 which outlined details of amendments related to turnover thresholds, the reporting of potential fraudulent activity, overseas entities, and supply chain risks.
The updated guidance now confirms
- Beneficial ownership is now “More than 25%” where previously it was “25% or more”
- Expectations around the extent of identity information a firm collects when conducting Customer Due Diligence have been stepped up with the inclusion of the statement:
- The name, date of birth and current address of a natural person should all be identified and practices may use government photo-card identification (including passports or driving licenses) to verify these details. To do this you should obtain documents that verify name, address and date of birth.
- Payment of the Economic Crime Levy (ECL) to HMRC where a firm’s turnover exceeds £10.2m.
- A new definition of high risk third countries in line with the “grey” and “black” lists which are maintained by the Financial Action Task Force (FATF) and which are updated throughout the year.
- Greater obligations on firms when it comes to assessing the “ownership and control structure” of the legal person, trust, company, foundation or similar legal arrangement (non-natural persons). The key point is that this obligation is wider than just identifying the beneficial owners.
- The introduction of a new subsection on the Register of Overseas Entities and the registration of entities intending to buy, sell or transfer property or land in the UK
- An onus on firms to conduct greater depth of Customer Due Diligence on third parties who contribute funds toward a transaction. Clarification of the extent of due diligence on third parties who are contributing funds towards a transaction.
- Acknowledgment of the lesser risk of a domestic Politically Exposed Person (PEP) compared to a non-domestic PEP.
The update comes in the months after the Solicitors Regulation Authority have issued tens of thousands of pounds of fines to firms with conveyancers facing the brunt of the regulator’s muscle.
Typical failures include not conducting client and matter risk assessments; failing to have and/or update specifically Firm Wide Risk Assessments; failure to properly assess clients and their sources of funds; and failure to document risk assessments for customer due diligence.
