The Solicitors Regulation Authority (SRA) has issued updated guidance on combating money laundering within the conveyancing sector, emphasising the critical role that property transactions continue to play in criminal exploitation risks. According to the SRA, property matters remain among the highest-risk areas for money laundering, a position reinforced by the 2025 National Risk Assessment (NRA) which again rated the legal sector’s exposure as high. Conveyancers are now urged to shift from a tick-box mentality towards a more nuanced, risk-based approach in managing potential money laundering challenges.

The SRA's updated directives particularly highlight the necessity for rigorous matter-specific risk assessments, requiring firms to clearly substantiate why a client or transaction has been classified as high, medium, or low risk. Enhanced due diligence measures are mandated in cases featuring higher risk indicators, such as overseas purchasers, complex ownership structures, or unorthodox sources of funding. Crucially, the regulator stresses that source of funds and source of wealth verification must extend beyond a mere review of bank statements to a thorough understanding of the money’s origins. Detailed record-keeping is also emphasised to ensure decisions are transparent and defensible if scrutinised. Training and supervision programs must be robust enough to enable staff to detect warning signs such as unusual purchasing patterns or inconsistent client profiles, reinforcing the importance of frontline vigilance.

This guidance arrives at a time when government insights, such as those from HM Government’s NRA, signal heightened concern over financial crime risks in the legal sector. The NRA identifies factors like increased use of offshore companies to obscure beneficial ownership and complications stemming from breaches in client account rules, which augment vulnerabilities in legal firms. New working practices also present emerging risks; for example, reliance on e-verification technology and consultancy models without centralised oversight can lead to lapses in anti-money laundering (AML) controls.

The SRA warns that poor compliance with AML obligations could lead to severe repercussions beyond regulatory penalties, including commercial impacts like refusal of funds by banks or insurance exclusions. Good AML practices, therefore, are positioned not as regulatory burdens but as essential components of sound risk management safeguarding firm reputations, insurers' support, and client trust. Simon Harbord, senior associate at Teal Compliance, points out that many firms mistakenly treat AML as a formality at best, but complacency leaves them vulnerable to significant risks.

To align with the updated guidance, conveyancing firms are advised to conduct audits of recent transaction files focusing on the clarity and adequacy of client and matter risk assessments, with particular attention on comprehensive source of funds checks. Firms should also update their overarching risk assessments to reflect the latest NRA findings and property-specific risks. Finally, ongoing training must ensure staff understand how to apply AML measures practically rather than simply in theory.

The SRA’s guidance is part of a broader regulatory landscape. Additional resources from the SRA and the Legal Sector Affinity Group (LSAG)—whose AML guidance, approved by HM Treasury, becomes mandatory from April 2025—offer firms detailed support to maintain compliance. This includes guidance on reporting breaches and handling suspicious activity reports. The SRA also regularly collects data on firms’ AML and sanctions activities to monitor compliance trends and emerging risks, reflecting an increasingly proactive regulatory stance.

Overall, the SRA’s updated guidance signals a firm regulatory intention to intensify scrutiny of money laundering risks within conveyancing. Legal professionals involved in property work are reminded that AML diligence is integral not only to regulatory compliance but to upholding the integrity of the property market itself.

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Source: Noah Wire Services