SRA enforcement action in this area has been significantly stepped up, and the regulator is imposing fines on firms for AML breaches.

But there is also raft of regulatory guidance to support ongoing AML compliance, which firms must make sure they are familiar with. Notably, the Legal Sector Affinity Group (LASG) last year released updated guidance on Your AML obligations.

SRA fines

Recent fines clearly suggest firms are not paying sufficient attention to the risks posed by financial crime. According to the SRA’s Anti-Money Laundering Annual Report for 2024 to 2025, there has been a steady rise in the number of reports of potential AML breaches since 2021 – with a significant jump from 227 (in the year to 2024) to 426 in 2025.

The top reasons were failing to risk assess a client/matter; failure to carry out a source of funds check; failure to have adequate or effective AML policies, controls and procedures; and lack of firm-wide risk assessments.

Where a breach is found, the SRA can impose fines of up to £25,000 on firms, but must refer a solicitor to the SDT if further action is necessary. Total fines in 2024 to 2025 amounted to more than £953,000. This is a significant rise on the total fines of £556,832 issued the year prior.

As SRA chief executive Paul Philip said in the report foreword: “We… continue to take decisive action against those who seek to exploit the legal sector for criminal purposes.”

LSAG guidance: what’s new?

The latest LSAG guidance, approved by HM Treasury, came into effect on 23 April 2025 – just two years on from the previous version. It is necessarily extensive and detailed, and still contains the case studies in the previous iteration of the guidance – but it reflects important regulatory changes.

The amendments (helpfully set out in a Schedule to the guidance) include, notably:

The change in definition of beneficial owner shareholders from ‘25% or more’ to ‘more than 25% of the shares or voting right’ in the body corporate.
A change in definition of ‘high-risk third countries’ – ie countries deemed to have significant deficiencies in its AML-money laundering measures. Previous references to Sch 3ZA MLR 2017 are replaced by a new definition, namely a country named on either of the Financial Action Task Force (FATF) lists as 1. high-risk jurisdictions subject to a call for action 2. jurisdictions under increased monitoring. These lists are periodically updated and should be monitored.
If a client is found to be based in a high risk third country, mandatory enhanced due diligence measures must be carried out (regulation 33(3A)). Apart from the FATF lists, a country or jurisdiction may be high risk for other reasons, for example if subject to sanctions by the EU or UN or is funding terrorism.
Information about Supply Chain Risks, the Economic Crime Levy and Overseas Entities are expanded
Small changes have been made to client due diligence and source of fund checks. This includes assessing the risk factors associated with a third party who is contributing funds for a transaction and checking the third party’s source of funds
Two defences (introduced by the ECCTA), as well as a de minimis exemption in certain circumstances.
What should we do?
Firms and individual solicitors should familiarise themselves with the 2025 LSAG guidance and associated regulatory guidance; and the FATF lists, other lists and resources.
Your firm wide risk assessments, and AML controls, policies and procedures should be kept under review and updated when required; and staff trained regularly to minimise the risk of breaching the AML regulations.
You can also find out more about the latest in our AML webinar update with Trevor Hellawell available here.
This is also included in the 2026 SRA Webinar Bundle - essential topics to support your continuing competency. Book here.