HM Treasury approval for AML guidance for the legal sector

HM Treasury has approved updated anti-money laundering (AML) guidance developed by the Legal Sector Affinity Group (LSAG).

The group, which is made up of both regulatory and representative bodies for legal services in the UK, produced the guidance on the anti-money laundering regulations which, following the Treasury's approval, constitutes official guidance by practices supervised by the Law Society for AML.

Guidance, such as this, is a fundamental constituent of the UK AML regime and is intended to convey the wider intention, risk-based nature and spirit of the money laundering regulations to practices regulated for AML purposes.

The guidance can help legal professionals understand how to comply with their AML obligations by offering more focused, practical advice, guidance, and support across all the main aspects of the UK’s anti-money laundering regime.

A summary of the changes to the guidance is outlined below. 

LSAG Guidance summary of changes

The guidance now contains several minor amends to the previously published LSAG guidance. These are mainly corrections and/or formatting changes but the key areas of change to note are:

1. Updated content around the verification of the identities of beneficial owners (Section 6.14.10) which underlines the expectations of supervisors and HMT for new beneficial owners to be verified, in general, to the same standard as you would apply to a client that is a natural person.
2. Redirecting away from the old EU High Risk Third Country lists and towards the UK’s own list (Section 5.6.2.1 which relates to risk assessments and Section 6.19.1 which relates to EDD).
3. Small clarifications to the section on Legal Professional Privilege, particularly where it may not apply as you know or suspect a money laundering offence has occurred, invoking the need to make a Suspicious Activity Report (Sections 13.4.2 and 13.4.3)
4. Clarification on what is not “an arrangement” for the purposes of POCA (Section 16.3.6) and further clarification on the “adequate consideration” defence (Section 16.4.2)

Additional guidance changes and advisory notes

From time to time, the LSAG group issues advisory notes. While they do not have the same standing as the LSAG guidance (as they are not approved by HM Treasury), they still contain useful content and express the expectations of the Legal Sector Professional Body Supervisors.

At the beginning of the Covid-19 outbreak, LSAG issued an advisory note on changes to risk caused by the different ways of working, the need to social distance and the changes in the market.
In view of the permanence of some of the changes to ways of working LSAG have revised this note so it continues to be relevant. In time we will seek to wind elements of this into the formal LSAG guidance.

This content is split into two notes:
1. Remote Working, Client Interaction, and associated use of AML technology
2. Impacts of economic instability

Updated LSAG Guidance and the advisory note have now been published on the AML pages of our website and can be found within the Guidance section of our AML Toolkit.