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Anti-money laundering guidance for the legal sector

This guidance is designed to help legal professionals and firms comply with the Money Laundering Regulations 2017 (as amended).
23 Apr 2025
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In April 2025, the guidance was updated to reflect HM Treasury's approval of the Legal Sector Affinity Group's (LSAG) updates.

See the schedule of amendments to find out what's changed.

The revised guidance does not reflect any potential changes that may be appropriate given World Uyghur Conference and our views on adequate consideration and proceeds of crime. Discussions are ongoing with LSAG.

The guidance has two parts:

2b and 2c are to be read alongside part one of the guidance. 2a is designed to be read independently of part one.

The Legal Sector Affinity Group (LSAG) is made up of the legal sector’s regulatory and representative bodies:

  • the Law Society of England and Wales
  • Bar Standards Board
  • Chartered Institute of Legal Executives
  • Council for Licensed Conveyancers
  • Faculty of Advocates
  • Faculty Office of the Archbishop of Canterbury
  • General Council of the Bar
  • General Council of the Bar of Northern Ireland
  • Law Society of Northern Ireland
  • Law Society of Scotland
  • Society of Scrivener Notaries
  • Solicitors Regulation Authority

Schedule of amendments

Strikethrough: deletion

Underline: addition

2025 amendments and updates
Paragraph Amendment
4.2.2 Changed “25% or more” to “more than 25%”
4.7 Added information regarding the economic crime levy:

You must also register to pay the economic crime (anti-money laundering) levy (ECL) if your annual turnover exceeds £10.2 million pounds.

The ECL is payable to HMRC and falls due each year your turnover exceeds the threshold amount. You must register and pay online.

If you are dual-regulated by the FCA and a professional body supervisor, you must register using your FCA credentials.

Further guidance, and a link to register, can be found here.
5.1.1 Added information on supply chain risk:

A supply chain refers to the end-to-end activities/actions involved in the provision of a service/product to the end customer or beneficiary.

A simple supply chain could involve only a few individuals / companies while a more complex supply chain could involve multiple service providers.

Understanding the purpose of the service you are providing and who is ultimately benefiting from it is important in being able to identify and manage any supply chain risks. This could involve making preliminary enquiries of your client to help you understand the purpose of the whole instruction and how your instructions fit into the overall supply chain. If necessary, you should also look beyond your own instruction to understand the totality of the transaction and identify any risks. This may include taking steps to understand the role of other professionals in the supply chain, eg accountants or company formation agents, and ensuring that these services fit with your understanding.
5.6.2.1 Amended to remove a reference to Schedule 3ZA and substitute the new definition of high-risk third countries:

Regulation 33(3)(a) defines high-risk third countries (HRTCs) as those which appear on the following lists maintained by the Financial Action Task Force (FATF):
• jurisdictions under increased monitoring
• high-risk jurisdictions subject to a call for action

These lists are set out here.

You will need to make sure that you stay up to date with these lists. Any amendments will be made in February, June or October each year at the conclusion of a FATF plenary session. You can check and diarise the exact dates on FATF’s events calendar. LSAG members may also alert their regulated populations to changes.
6.14.1 Clarificatory note that ECCTA will not affect regulation 28(9):

The Economic Crime and Corporate Transparency Act 2023 (ECCTA) brought in a number of changes to the way that companies are registered and what information must be declared on an ongoing basis. These increase the volume and detail required on registration and in annual returns. While this information will be very useful in assessing risk and completing due diligence, regulation 28(9) is not affected.
6.14.4 Amended text as follows:

To do this you should obtain either documents that verify name, address and date of birth, for example:

  • one government document which verifies either name, or address or name and date of birth; or
  • a government document which verifies the client's full name and another supporting documents which verifies their name and either their address and or date of birth.

You may consult a variety of documents to identify and verify your client. Where government-issued documents are not available, you may consider alternatives such as those set out at 6.14.7 below.
6.14.10 Amended text as follows:

Regulation 28(3A) states that where the customer is a legal person, trust, company, foundation or similar legal arrangement the relevant person must identify (having identified and verified the customer in line with regulation 28(2)) and take reasonable measures to understand the ownership and control structure of that legal person, trust, company, foundation or similar legal arrangement. This is a wider concept than simply identifying the beneficial owners.

“Reasonable measures” means taking steps that are risk-based, proportionate and effective in mitigating on of the identified money laundering and terrorism financing risks inherent in the client or matter being undertaken. When considering this test of reasonableness, you should consider whether the information is likely to assist in addressing the money laundering risks and that you are comfortable that you would be able to demonstrate and evidence the extent to which you have sought such information and verification, to your supervisor upon request. It should not be misinterpreted as an allowance to not fulfil your duty to understand the full overall ownership and control structure of the client.

You should also bear in mind that under regulation 33(6)(a)(vi) corporate structures which are unusual or excessively complex given the nature of the company's business, are noted as a specific risk factor. This may in turn require enhanced due diligence which could include, among other things, seeking additional independent, reliable sources to verify information provided to you, pursuant to regulation 33(5)(a).

Regulations 28(3) and (4) set out that you must obtain and verify the client’s registered details and, subject to regulation 28(5), identify the beneficial owner (where there is one). You must also (subject to regulation 28(5)) take reasonable measures to:
  • determine and verify the law to which the body corporate is subject, its constitution and the full names of its board of directors or equivalent, and the senior persons responsible for the operations of the body corporate; and
  • verify the identity of the any beneficial owner so that you are satisfied that you know who the beneficial owner is

Again, subject to regulation 28(5), you must also take reasonable measures to understand the ownership and control structure of the client entity (as per regulation 28(3A) noted above) and of the beneficial owner if it is a non-natural person. This does not simply mean looking at percentages of ownership but also identifying individuals with control and directing power, as outlined in regulations 5 and 6. You should document your overarching understanding of the individual’s background, circumstances and nature of the transaction.

Under regulation 28(18)(a), “verify” means confirmation based on documents or information obtained from a reliable, independent source.

Regulation 28(5) sets out the measures that do not apply where the client is a company listed on a regulated market.
Under regulation 28(18)(a), “verify” means confirmation based on documents or information obtained from a reliable, independent source.

Under regulation 28(18)(b), documents issued by an official body are considered independent, even if provided or made available by the client or on their behalf. This might be significant, for example, where a register was only accessible to the client.

Where applicable having regard to the circumstances, you should verify the identity of the beneficial owner(s) to the same equivalent standards as that applied to clients who are natural persons, as described in 6.14 and/or 6.14.4. In other, lower risk situations and in limited circumstances (such as when the relevant person already knows and has previously verified the identity of the beneficial owner) taking reasonable measures to verify the beneficial owner may mean, for example, taking verification information from non-independent sources (e.g. non certified documents or information from reputable websites). To evidence why verification of beneficial owners through personal identity documents is not undertaken, it is important to document your overarching understanding of the individual’s background, circumstances and nature of the transaction.

It is important to note that you are seeking to verify the beneficial owner’s identity, not simply that the identity in question is a beneficial owner. You may consider a range of sources to do this provided they are appropriate to the risk posed by the client or matter.
6.14.11.4 Added new subsection:

6.14.11.4 The register of overseas entities

Overseas entities wishing to buy, sell or transfer property or land in the UK must now register with Companies House. An overseas entity is defined as a legal entity governed by the law of a country or territory outside the UK.

This requirement applies to overseas entities who own real property in the UK and have done so since:
  • in England and Wales, on or since 1 January 1999
  • in Scotland, on or since 8 December 2014
  • in Northern Ireland, on or since 5 September 2022
Regulation 28(9) does not exclude the ROE as a register on which you can rely on for the purposes of verification under 28(4). Nonetheless, it is important not to rely solely on this or any other register. Regulation 30A, for example, introduced a discrepancy reporting requirement for the ROE which indicates that inconsistency may occur. The information provided by such registers should be verified independently.

Entries on the register of overseas interests are not public but copies may be obtained on application to Companies House.

More information is available here.
6.16.2 Changed “25% or more” to “more than 25%”
6.17.2.1 Removed a paragraph, substituted two new paragraphs, and further amended one paragraph on source of funds:

In circumstances where a client declares that they have been given funds for a transaction from a third party you may wish to record information relating to that original transaction too. You may verify this by requesting bank statements and other relevant documentation relating to this transfer.

In circumstances where it becomes known that a third party is to contribute to funds for a transaction, you should consider also seeking to understand and obtain evidence relating to the third party’s underlying SoF, in the same way you would on the client themselves, with the extent of such measures increasing with risk level. Whether and the extent to which you should obtain, review and evidence third party SoF is dependent upon the risk profile of the client or matter, bearing in mind that accepting payments from unknown or unassociated third parties is a specific risk factor pursuant to 33(6)(b)(iv).

The need for and extent of source of funds checks should be informed by your ongoing assessment of client and matter risk under regulations 28(11) to (13), and in turn inform future assessments. You must also bear in mind your obligation under regulation 28(16) to demonstrate that the measures you have taken to carry out due diligence are appropriate, with reference to both your PWRA and the relevant sectoral risk assessment.

SoF can often be It may be difficult to determine the SoF without some basic understanding of the source of wealth underlying SoW of the individual. This can particularly be the case where the funds for a transaction have become mixed with other funds in an account. Here, to understand the SoF, you may need to have an awareness of the underlying SoW of the individual, although your level of confidence in the SoW in such a case, should be considered on a risk-based approach (see 6.17.3 and 6.18.3 for further guidance on SoW).
6.19.1 Amended to reference the new definition of high-risk third countries:

HRTCs are defined by the regulations as high-risk jurisdictions subject to a call for action or jurisdictions under increased monitoring by FATF.
6.19.3.1 to 6.19.3.3 Updated links to FCA guidance on the treatment of politically exposed persons to reflect changes to domestic PEPs.

Added additional text at 6.19.3.3 to reference new regulation on domestic PEPs:

Since 10 January 2024, the regulations state that in relation to domestic PEPs, that is, those entrusted with prominent public functions by the United Kingdom:
  • the starting point for the assessment is that the client or potential client presents a lower level of risk than a non-domestic PEP, and
  • if no enhanced risk factors are present, the extent of EDD measures to be applied in relation to that client or potential client is less than the extent to be applied in the case of a non-domestic PEP
12.6 Added links to guidance on discrepancy reporting:

Detailed guidance on when a discrepancy needs reporting can be found in the following places:
13.4.3 Removed redundant footnote
16.4 Added two defences introduced in ECCTA:
  • the transaction is exempt due to the amount of criminal property being valued at less than £1,000 and the transaction taking place in the regulated sector
  • in certain circumstances, the proceeds of crime were part of a mixed-property transaction (see 16.4.5 below)
The Home Office has produced guidance on these defences.
16.4.4 New subsection:

16.4.4 De minimis exemption
ECCTA has amended the Proceeds of Crime Act 2002 so under certain circumstances an offence will not be committed in the following circumstances65:
  • criminal property is used, acquired or possessed under section 329(1)
If the transaction:
  • takes place in the regulated sector
  • involves money or property valued at less than £1,000
  • involves transferring or handing over to the client money or other property which belongs to or is owed to the client
  • is made for the purpose of exiting the relationship with the client, and
  • if the firm have complied with their duty to carry out CDD
65 Note that these provisions do not apply where property is concealed (section 327(1)(a)), disguised (section 327(1)(b)), or removed from the jurisdiction (section 327(1)(e)).
16.4.5 New subsection:

16.4.5 Mixed-property transactions

ECCTA also provides a further exemption to the above offences in the case of transfers where:
  • the firm is carrying on business in the regulated sector; and
  • the firm makes the transfer in connection with holding any money or assets for the client66; and
  • there is knowledge or suspicion that part but not all of the money or assets is criminal property (the suspect part being the relevant criminal property); but
  • it is not possible, at the time the transfer takes place, to identify the part of the funds or property that is the relevant criminal property; and
  • the value of the funds in the account or accounts, or of the property which continues to be held by the firm, is not, as a direct or indirect result of the transfer, less than the value of the relevant criminal property at the time of the transfer
As with the 'paying away' exception described above, if all these conditions apply then there would be no need to seek appropriate consent in order to make such a transfer. However, a reporting obligation under s.330/331 (ie an information SAR) would still arise if a suspicion has been formed in the course of regulated sector work, subject to privilege considerations.
Again, this is a very particular set of circumstances and LSAG would strongly caution against any attempt to enter into a transaction in anticipation of using these exemptions.

If you are unable to determine whether this section would apply to funds or assets you or your firm are handling, we recommend you submit a defence against money laundering SAR in the usual way.
66 This also applies to acts done in operating an account which a client holds with a firm, but this unlikely to be relevant in the legal sector.
16.7.4 Added text on jurisdictional issues:

An illustration of this is where a Chinese citizen, resident in China, wishes to transfer a sum of money in excess of $50,000 from their local bank account to one in the United Kingdom. Evasion of Chinese currency controls is not a crime in the UK, and has no equivalent in UK law, and so these funds are not automatically the proceeds of crime. The means used to effect the transfer, however:
  • may obscure the ultimate origin of the funds
  • may involve criminal activity
LSAG has produced additional guidance on this point.

In this scenario, you should also have regard to the risk posed by the jurisdiction involved, which is identified by the National Risk Assessment (p.34) as being high risk.
16.18.1 Changed “less than 25% ownership” to “25% or less ownership”
16.18.2 Changed “ownership thresholds below 25%” to “ownership thresholds to 25% or less”
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