The document provides an overview and summary of the key points of the LSAG AML Guidance, which is the largest update to UK money laundering regulations for legal sector firms. It highlights several important sections, including the high level compliance principles, risk assessments, client due diligence, use of technology, training requirements, and red flags. Firms need to read the guidance, update their risk assessments and compliance policies, ensure independent audits are conducted, and be aware of new record keeping or registration obligations. The guidance is extensive at over 200 pages and there is some concern it reverts to a tick box approach rather than being risk-based, as intended.

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The LSAG AML Guidance:
What you need to know

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Contents
● Introduction
● Acronym bingo!
● A brief overview of the LSAG Guidance
● Things that jump out
● What you need to do
● Tax advice and TCSPs
● Q&A

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Introduction
● What is the LSAG Guidance?
● Where to find it: https://bit.ly/3bCjGpV
● Why we need to care
○ SRA supervision - this is the biggest
reason
○ Offences, etc. - traditionally the stick
that was used to beat us into
compliance
● Over 200 pages
● 5 hours reading time
● It’s still technically draft and subject to HM
Treasury approval
● Only applies to firms caught by the
Regulations

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Acronym bingo
AML SAR SRA CDD PWRA
RBA EDD SDD PEP MLRO
MLCO BOOM NCA PCPs DAML
EID&V CFT FIU FATF JMLSG
KYC OFSI UBO SoW RA
See Law Society AML Glossary (https://bit.ly/38xwAn7)

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A brief overview of the LSAG Guidance
Section 1 and 2 - Background Section 11 - Suspicious Activity Reporting
Section 3 - High Level Compliance Principles Section 12 - Other Duties
Section 4 - AML Governance and Policies,
Controls and Procedures
Section 13 - Legal Professional Privilege
Section 5 - AML Risk Assessments Section 14 - Civil Liability
Section 6 - Client Due Diligence Section 15 - Supervision
Section 7 - Technology Section 16 - Money Laundering Offences
Section 8 - Training Section 17 - Terrorist Property Offences
Section 9 - Internal Controls Section 18 - Red Flags and Warning Signs
Section 10 - Record Keeping and Data Protection Aaaaaand…….relax

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These are the ones to look out for...

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Section 3 - High level compliance principles
● Compliance starts here!
● 36 requirements of the Money Laundering Regulations
● Audit
● Circulate to senior management

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Section 5 - AML risk assessments
● Compliance is all about the risk-based approach (‘RBA’)
● Very few hard-and-fast rules on what needs to be done on a case
● 3 levels of risk assessment:
○ Firm
○ Client
○ Matter
● You need to be doing all 3

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Section 6 - Client due diligence
● Largely unchanged (phew)
● Source of wealth
● Source of funds

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Section 7 - Technology
● Recognition of ‘RegTech’, biometrics and AI
● E-verification systems
● ID verification is one element of risk assessment and client due diligence
● Do you understand the underlying technology and data sources?
● Training
● Screen relevant employees (Regulation 21)

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SRA guidance: passing on costs to clients

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Section 12 - Other duties
● Registration of express trusts
● Discrepancy reporting to Companies House

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Section 18 - Red flags and warning signs
● Possibly the most important section
● Use it for training
● The client and parties
● Source of funds risks
● The transaction
● Trusts and estates, property, litigation, company/commercial, etc.

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Things that jump out
● “Must, should, may”
● It still feels like a draft
● Unrealistic assumptions
● AML compliance is becoming a
profession in its own right
● No recognition of the
commercial realities

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Things that jump out (2)
● Sustainable regulation?
● Reversion to tick box
approach?
● Firm-wide risk assessments are
the cornerstone

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What you need to do
● Read it (sorry)
● Flag the key compliance issues to
senior management
● Firm-wide risk assessment
● Independent audit (Regulation 21)
● Check registrations (inc. BOOMs
and TCSP status)
TRUST YOUR GUT

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The missing piece of the pie:
‘Tax advisers’
● When is tax advice not tax
advice?
See https://bit.ly/3ckRgQ9
● Some firms may be subject to
the Regulations for the first time
● Can pull in other areas of law

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Any questions?