Rick Kent, anti-money laundering policy manager at the Law Society, looks at the key changes introduced by the revised Legal Sector Affinity Group (LSAG) anti-money laundering guidance for the legal sector.
Why is it important?
The LSAG guidance was reviewed following the introduction of regulations that implemented the EU’s 5th Money Laundering Directive.
The regulations came into force on 10 January 2020, amending the current Money Laundering Regulations.
LSAG published a summary of changes to the regulations to help firms comply with the new requirements.
As amendments to the guidance around the January 2020 changes were required, LSAG took the opportunity for a more root and branch review resulting in a full review of the guidance – which has expanded significantly.
The Legal Sector Affinity Group (LSAG) (which includes the Law Society and all the legal sector supervisors named in the anti-money laundering regulations) have completed an extensive revision and redraft of the UK AML guidance for the legal sector.
The guidance project has been led by the Law Society of Scotland (LSS) and the Solicitor’s Regulation Authority (SRA), with review and input from all UK legal sector professional bodies and supervisors through the LSAG forum.
Content has also benefitted from extensive practitioner review and input from the Law Society of England and Wales Money Laundering Taskforce (MLTF).
The MLTF is a group consisting of legal practitioners from a variety of backgrounds with significant specialist expertise, background and experience in AML/proceeds of crime matters.
This replaces previous versions of the guidance and has been published in draft form, pending approval by the Treasury.
What’s in it?
The updated version builds on the previous AML guidance released after the implementation of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.
It incorporates subsequent amendments implemented by the Money Laundering and Terrorist Financing (Amendment) Regulations 2019.
LSAG had previously issued a summary of changes to the regulations to help firms comply with the requirements of these amendments – this has been incorporated into the new version of the guidance.
The guidance also incorporates changes brought by Brexit through the Money Laundering and Terrorist Financing (Amendment) (EU Exit) Regulations 2020.
What are the key changes?
Key changes include
- A revised, more granular contents section with embedded links
- Introduction of ‘Key AML Compliance Principles’
- Expanded guidance on source of funds and source of wealth
- A new section on technology – acknowledging the implications of the global pandemic and addressing the need for firms to understand the technology they have in order to use it effectively
- Fully revised and expanded guidance on risk assessments – firm-wide, client and matter emphasising their importance to firms
- A revised section on legal professional privilege
- Revised, updated and expanded AML Governance and Internal Controls sections
- Updated training section
- Discrepancy reporting to Companies House and other relevant registries following the new duty/obligations introduced in January 2020
- Clarifications on:
- high-risk sectors
- accepting cash into the client account
- customer due diligence (CDD) on referrals from another legal practice
- timing of CDD/exceptions
The Law Society will be hosting a series of webinars around the new guidance to support members. You can also check the Law Society AML hub for regular updates.