The 2025 LSAG update: What your firm needs to do

A new look at beneficial ownership

First, there's a small but important change to the definition of a beneficial owner. The threshold has moved from anyone owning '25% or more' of an entity to 'more than 25%'. This means someone holding exactly 25% is no longer automatically a beneficial owner.

The bigger change is the new 'reasonable measures' test. You're now required to take "reasonable measures" to fully understand the ownership and control structure of your corporate clients. It’s less about ticking a box and more about genuinely understanding who's pulling the strings. These measures should be based on the risk you identify for each case.

Understanding the Economic Crime Levy

A key update for medium to large firms is the Economic Crime Levy. It's part of a wider government strategy to fund crime enforcement and applies to all firms with a UK revenue of over £10.2 million.

The fees are based on your firm's turnover:

• Medium firms (£10.2 million to £36 million): £10,000 a year.

• Large firms (over £36 million): £36,000 a year.

• Very large firms (over £1 billion): £500,000 a year.

If your firm falls into one of these brackets, you'll need to make sure you've registered correctly and factored the payment into your planning.

A new category for PEPs

The guidance has now caught up with legislation, officially splits Politically Exposed Persons (PEPs) into two groups: 'overseas PEPs' and 'domestic PEPs'.

Crucially, you should now treat domestic PEPs as 'lower risk' from the start, unless other risk factors pop up.

While this change is welcome, it does create some grey areas. As Jonathon noted in the webinar, the guidance is "pretty unhelpful" about what this means for your day-to-day EDD process.

What the SRA is focusing on now

With the SRA publishing fines of over £400,000 in June alone, we know enforcement is a major focus.

Jonathon observed a clear trend in the SRA's approach. They're shifting focus from looking at broad, firm-wide policies to penalising firms for breaches on individual files.

We know this is a big challenge. In our webinar poll, over half of you said that "ensuring file-level documentation is robust enough" was your single biggest AML headache.

As Jonathon warned, "You could have the most wonderful, beautiful AML policies... and if people aren't following it... it's for nought".

The message is clear: having great policies isn't enough. The SRA wants to see them working in practice, on every single file. The best thing you can do right now is focus on your internal file audits to make sure your day-to-day practice is watertight.

Conclusion

The main thing to remember with these key changes is the SRA’s shift in focus: it’s less about having perfect policies and more about proving you follow them on every single file.

Here are the key points to focus on:

• Beneficial Ownership: The threshold is now ‘more than 25%’, and you need to take ‘reasonable measures’ to understand a client's ownership structure.

• High-Risk Third Countries: Instead of a UK-specific list, you’ll now need to refer to the FATF’s ‘black’ and ‘grey’ lists to identify high-risk third countries.

• Domestic PEPs: UK-based Politically Exposed Persons are now considered ‘lower risk’ by default, and it’s up to your firm to define what that means for your processes.

• Third-Party Funds: The guidance is much stronger now. You ‘should’ be verifying the source of funds from third-party funders with the same care as you would your own client. Read more in our recent blog here.

By keeping these points in mind and focusing on making your day-to-day processes watertight, you can confidently meet the new requirements.