Your AML obligations

The Legal Sector Affinity Group (LSAG) is made up of both regulatory and representative bodies for legal services in the UK. It has produced guidance on the anti-money laundering (AML) regulations, which for firms supervised by the SRA for AML now constitutes official guidance. This guidance has been approved by HM Treasury.

The latest revision of the LSAG Guidance has now been approved by HM Treasury and takes effect from 23 April 2025.

Read the guidance, which is subject to change:

Amendments are set out in a schedule at the end of the document (p.221 onwards).

Part 2 of LSAG's guidance is divided into sections for specific areas of legal practice:

• 2a is for barristers (PDF 155 pages, 1.3MB)
• 2b is for Trust or Company Service Providers (PDF 10 pages, 260KB), and should be read alongside our guidance for this group
• 2c is for notaries (PDF 5 pages, 217KB)

2b and 2c need to be read alongside the main Part 1 AML guidance, and 2a will not be relevant for firms we supervise.

These Part 2 sections are intended to provide supplementary information which will help those working in specific areas.

Advisory notes for guidance

We have also helped produce guidance (PDF 5 pages, 162 KB) to ensure you remain compliant as ways of working change in the medium to longer term.

Chinese underground banking and funds from China

LSAG has produced guidance for those receiving monies on behalf of clients from China.

This guidance explains which activities fall under the scope of the money laundering regulations. If you provide these activities, you will need to be in compliance with the broader regulations.

We have produced case studies that help show you how to stay compliant with the regulations as you go about your day-to-day business.

We have published guidance on the financial sanctions regime to help the profession adhere to the fast-changing rules. This helps firms to make sure they understand their obligations and know what they need to do to play their part in keep suspiciously-earned funding out of the UK economy.

The 2020 amendments to the regulations change the definition of tax advice activities. Your firm might be now in scope of the regulations and you should take steps accordingly. We have produced guidance to help you determine your position.

We have produced specific guidance for Trust and Company Service Providers (TCSPs). This is because the process for approvals for TCSPs is different to other areas of work, and because it is at a relatively higher risk of money laundering generally.

Our Sectoral Risk Assessment is our view of the dangers and issues facing law firms when keeping the proceeds of crime out of the legal profession. It draws on the Government's National Risk Assessment and our experiences as a supervisor and applies this to legal services. Individual firms must take this assessment into account when producing their own firm-wide risk assessment.

How do you and your firm stay on top of reviewing high-risk third countries?

A high-risk third country (HRTC) refers to a country deemed to have significant deficiencies in its anti-money laundering measures.

Previously, HRTCs were set out by the European Union. Following the Brexit transition period, the UK began setting out its own list of HRTCs as set out in Schedule 3ZA of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017).

From 22 January 2024, the definition of HRTCs was amended to remove schedule 3ZA of the MLR 2017. It was replaced with the following definition:

'a country named on either of the following lists published by the Financial Action Task Force (FATF) as they have effect from time to time:

1. high-risk jurisdictions subject to a call for action
2. jurisdictions under increased monitoring.'

Countries on these lists are considered high-risk for money laundering which trigger the requirement to apply enhanced due diligence under regulation 33 of the MLR 2017. If a client is established in a HRTC, this triggers certain mandatory enhanced due diligence measures under regulation 33(3A).

However, geographical risk is not limited to HRTCs. Regulation 33(6)(c) sets out other matters you must consider when assessing whether a jurisdiction is high risk. These include:

• whether the country is subject to sanctions, embargos or similar measures issued by, for example, the European Union or the United Nations
• whether the country provides funding or support for terrorism
• whether the country has been identified by credible sources as having high levels of corruption or poor AML controls.

Credible sources might include:

• Transparency International Corruption Perceptions Index
• the Basel Institute of Governance AML Index.

Reviewing previous countries designated as high-risk

Even if a country is no longer considered high-risk, its past designation can indicate vulnerabilities or structural weaknesses when it comes to tackling money laundering.

A historic list of countries considered high-risk can help identify past risks and better understand patterns of financial crime.

An example of this is the Lao People's Democratic Republic (LAO PDR), which was previously designated as high-risk between July 2016 and May 2020. It has subsequently been redesignated as a HRTC as of February 2025. This demonstrates that countries removed from these lists can fall back into non-compliance.

You should consider whether you have previously dealt with any clients/transactions involving LAO PDR and check for any red flags as part of your ongoing monitoring obligations under regulation 28(11) of the MLR 2017. Remember that:

• A country’s removal from the list does not automatically mean that previous laundered funds are now legitimate.
• Criminals in these countries may still be active and adapting to new regulations.
• It can take time for previous HRTCs to enforce new regulations.

Best practice

Apply the following best practice rules when you are considering HRTCs:

• Continue monitoring transactions involving previous HRTCs.
• Apply a risk-based approach to transactions with an overseas element.
• Keep your policy updated in line with FATF changes. FATF update their lists of HRTCs every February, June and October.

Following HM Treasury’s consultation response to the MLR 2017, the government has agreed to amend the mandatory EDD requirements to countries subject to increased monitoring. However, you will still be required to consider both lists when risk assessing client/matters under regulation 33(6)(c).

The table below contains dates when the UK made changes to HRTCs. This will be updated in line with changes made by FATF.

Timeline

14 July 2016 to 31 December 2020

High-risk countries were initially set out by the European Union.

1 January 2021 to 21 January 2024

Following the Brexit transition period, the UK began setting out its own list of high-risk third countries as set out in Schedule 3ZA of the MLR 2017.

22 January 2024

Definition of high-risk third countries amended to removed schedule 3ZA and replace with 'a country named on either of the following lists published by the Financial Action Task Force (FATF) as they have effect from time to time

1. high-risk jurisdictions subject to a call for action
2. jurisdictions under increased monitoring'

FATF lists are updated every February, June and October.

Late spring 2025

The definition of high-risk third countries will change to those subject to a call for action only.

Jurisdictions under increased monitoring will still need to be assessed for EDD under regulation 33(6)(c)(i) and (vi), but parties established in them will no longer trigger the mandatory measures at regulation 33(3A).

This list will be updated in line with FATF updates to ensure accuracy.

This guidance helps you assess all risks for your firm when it comes to preventing money laundering, including a template to use to create what is a key document in keeping money launderers out of the profession.

Guidance - Firm risk assessments

This guidance is about your obligations for reporting serious breaches of the Money Laundering and Terrorist Financing (Amendment) Regulations 2019 to us.

If you have a suspicion that your firm is being used to launder money, your Money Laundering Reporting Officer (MLRO) must submit a suspicious activity report (SAR) to the National Crime Agency (NCA). It’s important that everyone understands their responsibilities under the Proceeds of Crime Act 2002 and Terrorism Act 2000 and their firm’s processes.

The NCA have expressed concerns about the number and quality of SARs being submitted by law firms, and have produced guidance to help you, including:

• Chapter 1: Using the SAR Portal (PDF 23 pages, 976KB)  
• Chapter 2: Submitting a SAR (PDF 37 pages, 454KB)
• Chapter 3: Understanding DAMLs and DATFs (PDF 34 pages, 575KB)

Further information can be found in the UK Financial Intelligence Unit's Guidance Library.

We have published guidance on how your obligations under the money-laundering regulations differ compared to your obligations under the Proceeds of Crime Act.

We have produced regular videos over the years to support our AML work. You can catch up with those videos on our YouTube channel.

Events

• Compliance Officers Conference 2022: Complying with sanctions and financial crime regulations 
• Compliance Officers Conference 2021: AML – Anti-money laundering compliance for professions
• Compliance Officers Conference 2021: Anti-money laundering – a look to the future 
• Compliance Officers Conference 2020: AML – what you need to know
• Compliance Officers Conference 2020: AML – practical tips for managing risks
• Compliance Officers Conference, 2019, Tackling Money Laundering
• Compliance Officers Conference 2019, AML get it right for your firm
• LegalEx 2019 – Tackling Money Laundering

Webinars

• September 2023 - AML enforcement trends
• May 2023 - Government sanctions regime, how all firms can stay compliant
• June 2022 - How to do a firm-wide risk assessment
• February 2022 - AML officers, what they need to know
• May 2020 - What your firm needs to know
• February 2021 - what tax advisers need to know
• March 2021 - what we learnt from law firm visits

We have produced a downloadable checklist (PDF 6 pages, 370KB) to help you deliver training. This has been developed following our thematic review of anti-money laundering training. You can download this form and use as you see fit.

We provide information for consumers to help explain why identity and financial checks are required under the Money Laundering Regulations. You can share this with clients who want to understand why solicitors are required by law to carry out checks before providing certain legal services.