Guidance and Sectoral Risk Assessments

Legal Sector Anti-Money Laundering Guidance

The Legal Sector Affinity Group (LSAG) has reviewed and redrafted the UK legal sector AML Guidance, which has been approved by HM Treasury.

The updated version expands upon the previous AML guidance released after the implementation of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 and incorporates subsequent amendments implemented via:

The LSAG has published an addendum to the guidance on 1 December 2023.  This is awaiting HM Treasury approval.

The LSAG has also provided further guidance for specialist areas of legal practice. This guidance – known as Part 2 – has been published in three sections:

Parts 2b and 2c are intended to provide supplementary information in addition to the main Part 1 AML guidance, in order to help those working in these specific areas and should be read in conjunction with Part 1.

Part 2a is not relevant for those under the AML supervision of CILEx Regulation.

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.

LSAG advisory note on changes to ways of working

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 advisory 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

Guidance on transfers of funds from China

The LSAG has provided further guidance exploring the key risks arising from the legal and illegal use of IVTS in the Chinese context, along with the circumvention of Chinese foreign currency controls. It also provides practical measures to help you mitigate these risks.

Sectoral Risk Assessment

We are required to set out information on money laundering and terrorist financing risk that we consider is relevant to those we supervise. We have identified and assessed the international and domestic risks of money laundering and terrorist financing to which you are subject. The information in this sectoral risk assessment is designed to assist our firms in carrying out their own money laundering and terrorist financing risk assessment.

National risk assessment of money laundering and terrorist financing 2020

The 2020 National Risk Assessment, carried out by HM Treasury and the Home Office, identifies risks around services, sectors and entities and encourages vigilance in the higher areas of risk. It sets out the key money laundering and terrorist financing risks for the UK, how these have changed since the UK’s last NRA was published in 2017, and the action taken since 2017 to address these risks. Firms should refer to this in preparation of their own risk assessments, so they can understand both the general threats that the UK faces, as well as those specific to the particular areas of work that they carry out.

Mutual Evaluation Report of the United Kingdom’s AML/CTF regime 

On 7 December 2018 the Financial Action Task Force (FATF) published its mutual evaluation report (MER) of the United Kingdom’s Anti-Money Laundering/Counter-Terrorist Financing regime (available here). The report recognises that the UK’s AML/CTF regime is the strongest of any country assessed to date. It also recognises the private sector’s extensive engagement in the production of the two National Risk Assessments (NRAs) and the success of the Joint Money Laundering Intelligence Taskforce (JMLIT).

Tax Adviser Guidance

Since 10 January 2020, the definition of a tax adviser under the money laundering regulations has changed and become wider in scope. This guidance may help you determine whether work you carry out is now within the scope of the regulations.

Pooled Client Accounts

The Joint Money Laundering Steering Group (JMLSG) published in August 2020 new guidance to financial institutions on the operation of pooled client accounts. This guidance may have significant implications for legal firms in terms of their AML arrangements, the operation of their client accounts, and the obligations/restrictions imposed upon them by their banking providers. Firms should study the guidance which is on the menu to on the left of this page, and consider how they may respond to any requests from a bank.

Guidance on reporting AML breaches

This reporting breaches guidance document may help you to understand your requirements under the regulations, to report breaches and determine the circumstances in which breaches must be reported. Visit our Economic Crime web page to find out more about your AML obligations.