The Legal Sector Affinity Group (LSAG), a body representing the UK’s AML regulatory authorities, has recently announced the official ratification and publication of updated guidance following its recommendations to HM Treasury.
LSAG has been proactive in its efforts to introduce refined adjustments to the anti-money laundering regulations. The latest LSAG updates are intended to provide legal professionals with a clearer understanding of their mandatory duties, thereby enabling more assured and effective compliance. Among the recent changes that have now been implemented are nuanced yet vital updates to the Know Your Business (KYB) framework, specifically addressing the clarity of customer due diligence requirements.
This is the final article discussing these significant refinements and their implications for law firms in their approach to KYB checks.
LSAG Updates: New Customer Due Diligence Information
Among the many other legislation tweaks by LSAG, another KYB—and certainly KYC-focused change is clarity around customer due diligence. The due diligence process is crucial for all law firms looking to validate not just identity information but financial information for transactions and establish facts about a business, such as Ultimate Beneficial Owner, company structure and address details.
Based on current legislation in place, LSAG have introduced the following statement with the aim of offering transparency and expectancy for firms when completing customer due diligence:
‘The name, date of birth and current address of a natural person should all be identified, and practices may use government photo-card identification (including passports or driving licenses) to verify these details. To do this, you should obtain documents that verify name, address and date of birth.’
While the statement confirms exactly what solicitors and conveyancers need to identify during the checking process, it also offers the expectation that this is what they must confirm, and this will help them fulfil their legal obligations. LSAG’s amendments give firms much-needed guidance and assurance that their client onboarding processes are up to the regulatory standards.
What Has Prompted LSAG Changes?
The underlying reason for these regulatory updates is, to a significant extent, the increasing number of sanctions issued to legal practices for deficiencies in their AML and compliance protocols. The Solicitors Regulation Authority (SRA), a key member of LSAG, has observed a concerning trend of firms failing to adequately comply with their responsibilities in preventing money laundering. This has resulted in the imposition of substantial financial penalties and other sanctions.
Throughout 2023 and extending into 2024, fines exceeding £550,000 were levied against law firms for AML and compliance shortcomings. This worrying upward trend has continued into 2025, and with the SRA’s enhanced fining powers, their commitment to ensuring firms meet their legal obligations is unambiguous.
Ultimately, LSAG’s role also demonstrates its commitment to supporting the legal sector through targeted regulatory clarifications. These adjustments are intended to provide greater clarity and facilitate a more standardised approach to verifying client information. With AML regulators focused on both enforcement and support, the ratified amendments, particularly the explicit guidance on essential customer due diligence information, will empower firms to more effectively meet their legal requirements and foster more consistent compliance practices.
