New LSAG Guidance April 2025

Highlights include:

• Definition of beneficial owner shareholders changed from ‘25% or more’ to ‘more than 25%’
  
  
• References to Schedule 3ZA removed and replaced by the new definition of high-risk third countries based on FATF lists. It’s essential to stay up to date with changes to the FATF lists, made in February, June or October each year after a FATF plenary session.
  
  
• Updated links to FCA guidance on the treatment of Politically Exposed Persons (PEPs) and additional text in reference to the new regulation on Domestic PEPs since 10 January 2024
  
  
• Added information on supply chain risk. A supply chain refers to end-to-end activities in service delivery: to identify and manage supply chain risks it’s essential to understand the purpose of the service you are providing and who is ultimately benefiting from it.
  
  
• Further information added about the Economic Crime Levy (ECL). You must register to pay if your annual turnover exceeds £10.2 million – guidance on the payment process
  
  
• New subsections relating to The Register of Overseas Entities (6.14.11.4), De minimis and mixed property transaction exemptions under the ECCTA
  
  
• The 2025 Guidance makes subtle changes to client due diligence requirements and source of funds checks on third parties:
  
  
  • CDD on Natural Persons. Changes to the wording of CDD requirements for natural persons (6.14.4), removing either/or options: you should obtain documents that verify name, address and date of birth, for example one government document which verifies name, address and date of birth; or a government document which verifies the client’s full name and supporting documents which verifies their address and date of birth.
    
    
  • CDD on Entities Widening the CDD requirements for entities (6.14.10): ‘R28(3A) states that you ‘must (having identified and verified the customer in line with R28(2)) take reasonable [risk-based, proportionate and effective] measures to understand the ownership and control structure of that legal person, trust, company, foundation or similar legal arrangement. This is a wider concept than simply identifying the beneficial owners … This does not simply mean looking at percentages of ownership but also identifying individuals with control and directing power, as outlined in regulations 5 and 6. You should document your overarching understanding of the individual’s background, circumstances and nature of the transaction.
    
    
  • CDD on Beneficial Owners You should verify the identity of beneficial owners to ‘equivalent standards’ as natural persons: you are seeking to verify the beneficial owner’s identity, not simply that the identity in question is a beneficial owner. The revised Guidance says you may consider a range of sources to do this provided they are appropriate to the risk posed by the client or matter.
    
    
  • CDD on Listed Companies Clarifying the measures that do not apply where the client is a company listed on a regulated market. ‘Under regulation 28(18)(a), “verify” means confirmation based on documents or information obtained from a reliable, independent source. Under regulation 28(18)(b), documents issued by an official body are considered independent, even if provided or made available by the client or on their behalf’.
    
    
  • Source of Funds Checks on third party contributions to transactions: Updated Guidance advising a more risk-based approach based on your client and matter risk assessment, and bearing in mind that accepting money from unknown third parties is identified as a specific risk factor in the Money Laundering Regulations 2017. ‘…You should consider also seeking to understand and obtain evidence relating to the third party’s underlying SoF, in the same way you would on the client themselves, with the extent of such measures increasing with risk level’.