Risk-Based Supervision

The LSSA adopts a risk-based approach to supervision by allocating resources to areas of higher ML/TF/PF risks. Different law firms will pose higher or lower risk depending on factors such as services, products, customers, geography, preventive measures and the strength of the firm’s compliance programme. This approach considers a firm’s vulnerability to financial crime, the potential impact if that firm were exploited for illicit purposes, as well as the extent to which firms have effectively mitigated these risks.

Supervision Process

The supervisory process begins once a firm of attorney-at-law registers with the LSSA. Registration is mandatory under the Anti-Money Laundering Regulations (AMLRs), and failure to comply may result in administrative fines.

Following registration, the LSSA collects relevant information on the firm’s business operations and its AML/CFT/CPF compliance program. This is primarily done through the Annual AML Return, which must be completed by all supervised firms.

The AML Return is designed to help the LSSA assess inherent risks of ML/TF/PF at both the individual firm level and across the legal sector. It also enables us to determine the scope, frequency and focus of onsite and desk-based supervision according to the risks identified.

The AML Return gathers detailed information on the nature of the firm’s relevant financial business, including the types of legal services provided, client profiles, transaction types, jurisdictions involved, and how services are delivered. This data supports the LSSA’s risk-based supervisory approach, allowing resources to be directed where risks are highest.

It is important that firms complete the AML Return thoroughly and accurately. If any concerns arise from the information provided, the LSSA may follow up with a request for further clarification or supporting documentation.

The LSSA carries out its supervisory responsibilities through a combination of the following methods:

  • Desk-based reviews are off-site evaluations of a firm’s AML/CFT/CPF systems and controls. As part of this process, the LSSA may request copies of AML/CFT/CPF policies and procedures, along with a sample of client files.

  • On-site inspections involve visiting the firm’s premises to conduct interviews with key staff, review client matter files, and assess how AML/CFT/CPF controls are implemented in practice.

  • Thematic reviews target specific areas of heightened risk or emerging concern within the sector. These reviews allow the LSSA to gain broader insights into sector-wide vulnerabilities and best practices

If your firm is selected for an on-site inspection, desk-based review, or thematic review, you will be contacted in advance by the Supervision Department, who will provide full details of the process and requirements.

If you have any questions regarding the supervisory process or your firm’s obligations, please do not hesitate to contact the LSSA.