The Legal Sector Affinity Group (LSAG), a group made up of AML regulators in the UK, have announced that recent AML guidance changes suggested to the HM Treasury have been ratified and published. LSAG have pushed for subtle changes to the regulations to ensure firms understand their legal obligations and can fulfil them confidently and effectively. Included in the LSAG updates, which have now been passed, are subtle but important tweaks to KYB and, in particular, KYB checks.
This is the first of three articles discussing these tweaks and what they mean for firms when completing KYB checks.
LSAG Changes: Ultimate Beneficial Owner Percentages
One of the notable changes within the latest LSAG updates is how beneficial ownership is recognised. Identifying the Ultimate Beneficial Owner (UBO) is a crucial step within the KYB checking process, given that you must validate the ownership structure of a business and who is in charge. Before the newest updates, in the guidance, beneficial ownership was defined as ‘25% or more’, but the wording has changed with the updates that have come into place.
HM Treasury have ratified LSAG’s change to ‘More than 25%’, meaning that defining who the beneficial owner is has to be higher than 25% when previously it could be 25%. This should help law firms with transparency and give them a clear picture of the ownership of their clients’ businesses. This should help identify, ultimately, who the beneficial owner is, as business structures can be complex and challenging to define a true directorship and structure.
What Has Prompted LSAG Changes?
The simple fact is that there has been a significant rise in the number of fines given to firms for AML and compliance failings. The Solicitors Regulation Authority (SRA), which is part of LSAG, has seen a large number of firms failing to meet their compliance obligations regarding money laundering. Consequently, the SRA has distributed significant fines and sanctions.
Across 2023 and through into 2024, over £550,000 in fines were given out to law firms for AML and compliance failings. It’s an alarming rise, and there have been further fines distributed in 2025, and with the SRA having increased fining powers, they are determined to ensure firms meet their legal requirements.
However, their role in LSAG also emphasises their determination to help firms by offering subtle amendments to regulations, which are, in theory, designed to offer clarity and make the process of validating information much easier. With AML regulators determined to support and educate when needed, the ratified amendments will help firms meet their legal obligations. The subtle change in wording surrounding UBO percentages should give firms a clear picture of how to determine exactly who the beneficial owner is.
