The Legal Sector Affinity Group (LSAG), a collective of UK AML regulators, has recently announced the ratification and publication of updated guidance following suggestions made to HM Treasury.
LSAG has been proactive in advocating for nuanced adjustments to the anti-money laundering regulations. The latest LSAG updates aim to empower legal professionals with a clearer understanding of their responsibilities, facilitating more confident and effective compliance. Among the recent updates now in effect are subtle yet significant modifications to the Know Your Business (KYB) framework, particularly concerning the scrutiny of ownership and control structures.
This is the second of three articles exploring these crucial tweaks and their implications for law firms when conducting KYB checks.
LSAG Updates: Ownership and Control Structure
So, another subtle tweak made by LSAG is surrounding assessments of businesses and company structures. LSAG are keen for firms to understand ownership and control structures of businesses so that can they understand exactly who they are working with. They are pushing for greater obligations on firms when it comes to assessing ‘the ownership and control structure’ of the legal person, trust, company, foundation or a similar legal arrangement such as non-natural persons.
The thinking behind this is to emphasise that validating the ownership and control structure is more than just confirming who the Ultimate Beneficial Owner (UBO) is. Firms must take a proactive stance and validate the whole structure of a company so they firstly know who they are working with, but can also protect their own firm and report any suspicious activities and concerns should they present themselves during the checking process.
KYB checks are an integral part of the due diligence process, so it’s essential you understand exactly who you are working with. As well as validating the overall ownership and control structure, it is your obligation to confirm other aspects, including address information and financial position.
What Has Prompted LSAG Changes?
The impetus behind these regulatory refinements is, in large part, a response to the escalating number of penalties imposed on legal firms for shortcomings in their AML and compliance procedures. The Solicitors Regulation Authority (SRA), a constituent member of LSAG, has observed a concerning trend of firms failing to adequately meet their obligations in preventing money laundering. This has resulted in the issuance of substantial fines and sanctions.
Throughout 2023 and continuing into 2024, fines exceeding £550,000 were levied against law firms for AML and compliance failures. This alarming increase has persisted into 2025, and with the SRA wielding greater fining authority, their commitment to ensuring firms adhere to legal requirements is clear.
Crucially, LSAG’s role also highlights a commitment to supporting the sector through targeted regulatory amendments. These adjustments are intended to provide greater clarity and facilitate a more comprehensive understanding of client entities. With AML regulators focused on both enforcement and education, the ratified amendments, particularly the emphasis on thoroughly assessing ownership and control structures, will empower firms to more effectively meet their legal obligations and build more robust KYB processes.
