AML Regulations and your obligations
Money laundering remains a significant threat to the UK economy. Legal professionals are particularly vulnerable to being targeted by criminals seeking to exploit their skills and services to hold or transfer money, often because of the perceived legitimacy that legal involvement provides.
Key Legislation
The UK’s anti-money laundering (AML) framework is governed by several key pieces of legislation:
- Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017): These regulations set out the rules for AML compliance and were updated by the Money Laundering and Terrorist Financing (Amendment) Regulations 2019 to reflect international standards and the EU’s Fifth Money Laundering Directive.
- Criminal Finances Act 2017: This Act introduced new powers for law enforcement, including Unexplained Wealth Orders, and created corporate offences for failing to prevent the facilitation of tax evasion.
- Proceeds of Crime Act 2002 (POCA): POCA remains central to the UK’s AML regime, setting out offences related to money laundering, and enabling the recovery of criminal assets.
Who Must Comply?
Under the AML Regulations, independent legal professionals who provide:
- Legal or notarial services
- Trust and company services
must be supervised for AML compliance by a professional body supervisor (PBS) such as CILEx Regulation, or by HMRC if no PBS applies.
CILEx Regulation expects all firms and individuals it supervises to:
- Understand their legal and regulatory obligations
- Report actual or potential breaches of the AML Regulations
- Implement appropriate policies, controls, and procedures
- Conduct risk assessments and provide staff training
Penalties for Non-Compliance
Failure to comply with AML obligations can result in:
- Fines
- Imprisonment
- Disciplinary action by your regulator
CILEx Regulation treats any involvement in assisting or facilitating money laundering as serious misconduct. This includes both intentional and negligent actions.
Your Responsibilities
Legal professionals must:
- Know their clients and understand the nature of their transactions
- Be alert to red flags and suspicious activity
- Submit Suspicious Activity Reports (SARs) where appropriate
- Maintain accurate records and conduct ongoing monitoring.
Legal Sector Affinity Group (LSAG*)
The Legal Sector Affinity Group (LSAG) published their Anti-Money Laundering (AML) guidance in April 2025, approved by HM Treasury. These updates reflect evolving risks and regulatory expectations across the legal sector. Below is a summary of key changes and clarifications:
Key Updates:
- Beneficial Ownership Threshold: The definition of a beneficial owner has been clarified: firms must now use “more than 25%” ownership when assessing control, rather than “25% or more”.
- Supply Chain Risk: Firms are expected to understand the end-to-end purpose of a transaction and the roles of other professionals involved. This includes assessing whether the service fits within a legitimate supply chain and identifying any red flags.
- High-Risk Third Countries (HRTCs): The Financial Action Task Force (FATF) grey and black lists now define HRTCs. Firms must stay up to date with these lists, which are revised following FATF plenary sessions in February, June, and October.
- Identity Verification (ID&V): Firms must verify a client’s name, address, and date of birth. A current photocard driving licence may satisfy all three if accurate, but best practice is to obtain an additional proof of address, such as a recent bank statement or utility bill.
- Ownership and Control Structures: Firms must go beyond simply listing Ultimate Beneficial Owners (UBOs). Where complex structures exist, firms must demonstrate a clear understanding of how ownership and control operate to address money laundering risks effectively.
- Domestic Politically Exposed Persons (PEPs): The guidance introduces a new framework for assessing domestic PEPs (UK-based). These individuals should be treated as lower risk, unless other risk factors are present. Firms should update their policies and training accordingly.
- Discrepancy Reporting and Register of Overseas Entities (ROE): Firms must follow current guidance from Companies House and the Trust Registration Service (TRS) when reporting discrepancies in beneficial ownership information.
- Economic Crime Levy (ECL): Firms with UK revenue exceeding £10.2 million must register and pay the ECL. This applies annually and is payable to HMRC. Firms regulated by both the FCA and a professional body must register using their FCA credentials.
These updates reflect the legal sector’s ongoing commitment to tackling financial crime. Firms are encouraged to review their Practice-Wide Risk Assessments (PWRAs), update internal policies, and ensure staff are trained on the latest guidance.
For full details and practical resources, please explore the links provided on this page.
Economic Crime Levy guidance
The Economic Crime Levy (ECL) is an annual charge for entities supervised under the Money Laundering Regulations (MLR) with UK revenue exceeding £10.2 million per year.
The levy is collected by one of three authorities:
- Financial Conduct Authority (FCA)
- Gambling Commission (GC)
- HMRC (collection authority for most entities supervised by CILEx Regulation)
For more details on collection authorities, visit https://www.gov.uk.
What you need to do
If HMRC is your collection authority:
- Register for the ECL (only once)
- Submit a return annually
- Pay the levy annually if liable
Deadline – return and payment must be submitted by 30 September each year.
How to Register
Register using the HMRC online service: https://www.gov.uk
You’ll receive an access code to complete registration. You will need:
- UK revenue for the last financial year
- Date AML-regulated activities began
- Contact details (name, role, email, phone)
- Business sector
Once registered, you’ll receive your ECL registration number.
Do I need to pay an Economic Crime Levy? If your UK revenue exceeds £10.2M, firms must use HMRC’s online service to register, submit a return and pay by 30 September for each year it is liable. For clarity, there are 4 bands based on UK revenue:
- Small Entities: Up to £10.2M
- Medium Entities: Over £10.2M and up to £36M.
- Large Entities: Over £36M and up to £1BN.
- Very Large Entities: Over £1BN.
Small entities are not required to pay the levy however:
- Medium Entities must pay £10,000
- Large Entities must pay £36,000
- Very Large Entities must pay £500,000
Please see UK Government guidance here for further information.
Our Annual AML Supervision Report
CRL AML Supervision Report [2024-25]
HM Treasury AML Supervision Report 2024-25
In December 2025, HM Treasury published its Anti-Money Laundering and Counter-Terrorist Financing Supervision Report 2024-25. The report provides an overview of the activities of the UK’s 25 AML/CTF supervisors, including CILEx Regulation (CRL), and highlights ongoing efforts to strengthen the UK’s response to money laundering, terrorist financing and wider economic crime.
Reform of the AML Supervision Regime
A key announcement in the report is the Government’s decision to reform AML supervision for the legal and accountancy sectors. Following consultation, HM Treasury has confirmed its intention for the Financial Conduct Authority (FCA) to become the future AML/CTF supervisor for professional services firms, including those currently supervised by professional body supervisors. The transition remains subject to legislation, funding arrangements and implementation planning, with no commencement date yet confirmed.
More information can be found on our website here: AML Supervision Change – FCA consultation 2025.
Other Key Themes
- Changes to the Money Laundering Regulations (MLRs): Following a public consultation, the Government has announced planned amendments to the MLRs designed to close loopholes, clarify regulatory requirements and ensure customer due diligence requirements remain proportionate and focused on higher-risk activities. The changes will also strengthen information-sharing and cooperation between supervisors and public authorities involved in tackling economic crime.
- National Risk Assessment 2025: The report highlights the publication of the UK’s fourth National Risk Assessment of Money Laundering and Terrorist Financing in July 2025. The assessment reflects changes in the UK’s money laundering and terrorist financing risks and supports the continued use of a risk-based approach across supervised sectors.
- Preparing for FATF’s next Mutual Evaluation: FATF has commenced its fifth round of assessments, and the UK is preparing for an in-depth evaluation, with the final Mutual Evaluation Report expected in 2028. The new FATF methodology places greater emphasis on effectiveness, risk and outcomes, meaning supervisors and regulated firms will face increasing scrutiny regarding how AML controls operate in practice.
- Improved Data, Metrics and Transparency: HM Treasury has expanded the range of supervisory data collected from AML supervisors. New measures include greater reporting on supervisory interventions, enforcement activity, Suspicious Activity Reports (SARs), persistent non-compliance, risk categorisation, training activity and information sharing. These enhancements are intended to improve oversight of the AML supervisory regime and demonstrate effectiveness ahead of the UK’s next FATF assessment.
What this means for Regulated Firms
Firms supervised by CRL should:
- Monitor developments relating to future AML supervisory reform.
- Review and strengthen their AML/CTF policies, controls and procedures.
- Ensure risk assessments remain up to date and reflect current threats.
- Maintain effective customer due diligence, monitoring and reporting processes.
- Remain alert to changing regulatory expectations ahead of the UK’s next FATF evaluation.
CRL will continue to support its regulated community through guidance, training and resources to help firms understand and comply with their AML obligations.
Meeting your obligations- additional AML resources
To support firms and individuals in meeting their anti-money laundering (AML) obligations, several national and international bodies provide valuable guidance and frameworks. Below are two key resources that help shape AML standards across the legal and financial sectors.
Joint Money Laundering Steering Group (JMLSG)
The Joint Money Laundering Steering Group (JMLSG) produces detailed guidance for the financial services sector, which is also widely used across other regulated professions. The guidance is approved by HM Treasury and helps firms understand and apply the Money Laundering Regulations in practice.
Key features of the JMLSG Guidance include:
- risk-based approaches to customer due diligence
- sector-specific advice for different financial services
- practical examples to support compliance
- updates aligned with evolving threats and regulatory changes
You can access the full guidance on the JMLSG website.
Financial Action Task Force (FATF)
The Financial Action Task Force (FATF) is an inter-governmental body that sets global standards for combating money laundering, terrorist financing, and the financing of weapons of mass destruction. FATF’s work is recognised internationally and informs national legislation and supervisory practices. FATF’s key contributions include:
- The 40 Recommendations: A comprehensive framework for AML/CTF compliance adopted by countries worldwide.
- Mutual Evaluations: Peer-reviewed assessments of how effectively countries implement AML/CTF measures.
- Guidance Documents: Practical tools for regulators, supervisors, and firms to strengthen their AML systems.
FATF’s standards are designed to be flexible and risk-based, allowing countries to tailor their approach while maintaining global consistency. For more information, visit the FATF website.
Financial Sanctions – linked to your AML responsibilities
Financial Sanctions are a critical part of the UK’s efforts to combat financial crime and are closely linked to your anti-money laundering (AML) responsibilities. Legal professionals must ensure they understand and comply with the UK’s sanctions regime, as breaches can result in serious consequences, even if unintentional.
What Are Financial Sanctions?
Financial sanctions are restrictions imposed by the UK Government or United Nations to achieve foreign policy and national security objectives. These measures can include:
- asset freezes
- restrictions on financial services
- prohibitions on dealing with designated individuals or entities .
Sanctions are enforced under the Sanctions and Anti-Money Laundering Act 2018, and compliance is overseen by the Office of Financial Sanctions Implementation (OFSI).
Your responsibilities as a Legal Professional
As part of your AML obligations, you must:
- screen clients and transactions against current sanctions lists
- report any matches or suspicious activity to OFSI
- understand ownership and control structures to identify indirect links to sanctioned entities
- stay up to date with changes to sanctions regimes and guidance.
Why it matters
Failure to comply with financial sanctions is a strict liability offence, meaning intent is not required for enforcement action. Even inadvertent breaches can result in:
- regulatory penalties
- criminal prosecution
- reputational damage
Firms are encouraged to implement robust screening tools, conduct staff training, and maintain clear internal procedures to mitigate risk.
Support from CILEx Regulation
CILEx Regulation provides specific guidance to help firms and individuals meet their financial sanctions obligations. This includes:
- signposting to OFSI’s general guidance
- practical advice on sanctions screening and reporting
- updates on relevant legislation and enforcement actions.
Additional resources to help you deal with the risks of being targeted for money laundering
- Do I need to be supervised?
- Guidance and Sectoral Risk Assessments
- How to spot risks
- Templates to help with policies and procedures
- Suspicious Activity Reports
- Whistleblowing
- Financial sanctions and your AML responsibilities
- Economic Crime – find out more
If you have any queries please contact: info@cilexregulation.org.uk
*CILEx Regulation is a member of the Legal Sector
Intelligence Sharing Expert Working Group (ISEWG).
