The guidance has two parts:
part 1: anti-money laundering guidance for the legal sector
part 2: specific anti-money laundering guidance for
trust or company service providers (2b)
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) AML guidance is designed to help legal professionals and firms comply with the Money Laundering Regulations (MLRs) 2017.
From 1 April 2023, the Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022 introduce changes to the MLRs 2017, including:
• a requirement to carry out proliferation financing risk assessments
• changes to the duty to report discrepancies to company registries
LSAG has reviewed and updated the AML guidance in the light of this new legislation, to help you stay compliant and mitigate your firm's money laundering risk.
What is proliferation financing?
“Proliferation financing” is broadly defined in regulation 16A(9) of the Money Laundering Regulations 2017 as:
“the act of providing funds or financial services for use, in whole or in part, in the manufacture, acquisition, development, export, trans-shipment, brokering, transport, transfer, stockpiling of, or otherwise in connection with the possession or use of, chemical, biological, radiological or nuclear weapons, including the provision of funds or financial services in connection with the means of delivery of such weapons and other CBRN-related goods and technology, in contravention of a relevant financial sanctions obligation.”
From 1 April 2023, firms must carry out proliferation financing risk assessments – either as part of the existing practice-wide risk assessment or as a standalone document.
Practice areas that have been identified as higher risk include trade finance, commercial contracts and Duty to report discrepancies to company registries
From 1 April 2023, the duty to report discrepancies to company registries only applies if:
• the business relationship being established is with:
• a company
• a limited liability partnership
• a Scottish partnership
• a trust which is required to register with HMRC’s trust registry
• an overseas entity that needs to register due to ownership of UK real property
• the discrepancy is “material” – not a typo or minor spelling mistake
• the discrepancy “by its nature and having regard to all the circumstances, may reasonably be considered” to:
• be linked to money laundering or terrorist financing, or
• conceal details of the customer’s business
Section 12.6 of the guidance sets out your obligations in more detail.
Here are links
Link to this guidance from the Law Society: https://www.lawsociety.org.uk/topics/anti-money-laundering/anti-money-laundering-guidance
Link to the summary by the SRA of changes brought in in July 2022: https://www.sra.org.uk/globalassets/documents/solicitors/firm-based-authorisation/lsag-aml-guidance-update-july-2022.pdf?version=49f433
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