Key AML Laws & Guidance for Property Lawyers Explained

Property transactions carry particular money laundering risks. High transaction values, complex ownership structures and cross-border buyers can make property an attractive route for moving or concealing illicit funds.

For property lawyers, understanding the legal framework governing these risks is essential. This guide explains the key AML laws and regulatory instruments that apply to property transactions in England and Wales, from the Money Laundering Regulations 2017 and the Proceeds of Crime Act 2002 to the Register of Overseas Entities.

Understanding these requirements is only the starting point. Property firms must also ensure their risk assessments, AML procedures and matter files meet regulatory expectations. At PDA Legal, we provide AML consultancy and bespoke firm-wide risk assessment support to help firms develop and maintain an approach tailored to their individual practice.

The focus here is on what the law requires and how these rules work together. For practical guidance on identifying potential signs of financial crime, see our dedicated article on AML risks for property professionals.

Key Takeaways: AML Obligations for Property Lawyers

• MLR 2017 sets the systems firms must have: a firm-wide risk assessment, risk-based CDD and EDD, an MLRO, training and record-keeping.
• POCA 2002 creates the criminal offences. Sections 327 to 329 carry up to 14 years' imprisonment, and failure to disclose (s330) carries up to five years.
• LSAG guidance is HM Treasury-approved. Courts and supervisors take it into account, so any departure must be justified and documented.
• The Register of Overseas Entities means HM Land Registry will not register a caught disposition without an Overseas Entity ID or a valid exemption. Check ROE status at the start of the matter.
• The SRA and CLC supervise conveyancing firms now, with the FCA expected to take over towards the end of 2028. The underlying obligations do not change.
• Conveyancing presents the greatest inherent money laundering risk to the legal sector, according to the SRA, making robust source of funds and wealth checks particularly important.

Contents

1. The Money Laundering Regulations 2017 (MLR 2017)
2. The Proceeds of Crime Act 2002 (POCA)
3. Legal Sector Affinity Group (LSAG) Guidance
4. The Register of Overseas Entities (ROE)
5. SRA & CLC Supervision & Enforcement
6. How Property Lawyers Can Work Towards Greater Compliance
7. Get Practical AML Support With PDA Legal

1. The Money Laundering Regulations 2017 (MLR 2017)

The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, commonly known as the MLR 2017, provide the core framework for anti-money laundering obligations applying to relevant persons, including solicitors and conveyancers undertaking regulated property work.

The regulations require firms to take a risk-based approach to preventing money laundering and terrorist financing. For property lawyers, this means understanding the risks presented by the client and transaction and applying checks that are proportionate to those risks.

What Do the MLR 2017 Require?

Among the key requirements are:

• Customer Due Diligence (CDD): Firms must identify and verify clients, understand beneficial ownership where relevant, and obtain information about the purpose and intended nature of the business relationship.
• Enhanced Due Diligence (EDD): Additional measures must be applied where a client or matter presents a higher level of money laundering or terrorist financing risk.
• A Written Firm-Wide Risk Assessment: Firms must identify and assess the money laundering and terrorist financing risks they face and maintain appropriate written policies, controls and procedures to address them.
• An MLRO (Nominated Officer): Firms must appoint a Money Laundering Reporting Officer to receive internal disclosures and determine whether a Suspicious Activity Report should be made to the National Crime Agency. The supervisory authority must be notified of the appointment within 14 days.

Why Does This Matter in Property Transactions?

Conveyancing is recognised as a high-risk area for money laundering by the SRA and OPBAS, reflecting the significant sums involved and the potential for criminals to use property transactions to move or legitimise illicit funds.

Property transactions can involve additional risk factors, including:

• High transaction values, which can make property an attractive vehicle for criminal funds.
• Third-party funding, such as money provided by family members or other individuals, requiring the underlying source of those funds to be understood.
• Overseas involvement, which can introduce additional geographic and ownership risks.
• Complex ownership structures, including companies and other arrangements that can make the individuals ultimately controlling funds or property less straightforward to identify.

This is why due diligence on a property purchase should not simply confirm who the client is. Where necessary under the risk-based approach, the firm must also scrutinise where the money being used for the particular transaction has come from. 

The MLR 2017 therefore forms the foundation of a property firm's AML procedures, setting out the risk assessment, due diligence, governance, and monitoring requirements that must be built into day-to-day practice.

For the full statutory requirements, see the Money Laundering Regulations 2017 and the Law Society's Quick Guide to the MLRs.

2. The Proceeds of Crime Act 2002 (POCA)

The Proceeds of Crime Act 2002 (POCA) sits alongside the MLR 2017 as a central part of the UK's anti-money laundering framework. While the MLR 2017 set out the systems, controls and procedures firms must have in place, POCA creates the criminal offences of money laundering and establishes obligations to report suspected money laundering in the regulated sector.

For property lawyers, this distinction is important. AML procedures are not simply an administrative requirement: failing to act appropriately where criminal property is involved can create direct criminal liability.

The Key Money Laundering Offences Under POCA

Sections 327 to 329 are the principal substantive money laundering offences. Section 330 deals specifically with the failure to disclose by people working in the regulated sector, which includes relevant legal professionals.

What Are the Penalties?

The consequences can be serious. A conviction on indictment for an offence under sections 327, 328, or 329 can result in up to 14 years' imprisonment, a fine, or both. The section 330 failure-to-disclose offence carries a maximum of five years' imprisonment on indictment, as well as a fine.

This means a property lawyer's exposure under POCA is not limited to the firm's internal AML procedures. Individual conduct during a transaction can also have criminal consequences.

Why Does POCA Matter in Property Transactions?

For conveyancers, the section 328 arrangements offence is particularly relevant. It can apply where a professional becomes involved in an arrangement that they know (or suspect) facilitates another person's acquisition, retention, use, or control of criminal property. The CPS expressly notes that the offence can apply to legal advisers and other professionals.

In a property transaction, this makes understanding the source of the money being used to purchase the property especially important. If funds raise concerns about their criminal origin, a conveyancer cannot simply treat the transfer of those funds as another routine part of completion.

The same principle explains why section 330 matters directly to property lawyers. Where information obtained in the course of regulated business gives rise to the required knowledge, suspicion, or reasonable grounds for suspicion of money laundering, it must be disclosed to the appropriate nominated officer as soon as practicable. 

For the full statutory provisions, see the Proceeds of Crime Act 2002 and the Crown Prosecution Service's guidance on money laundering offences.

3. Legal Sector Affinity Group (LSAG) Guidance

The Legal Sector Affinity Group (LSAG) brings together the UK legal sector's regulatory and representative bodies to produce anti-money laundering guidance for legal professionals. Its guidance is approved by HM Treasury and is intended to help legal practices understand and apply the requirements of the MLR 2017. Legal-sector AML supervisors, including the SRA and CLC, consider compliance with the guidance when carrying out their supervisory functions.

Is LSAG Guidance Legally Binding?

The LSAG guidance is not legislation in its own right, but that does not make it something firms can simply disregard.

The Law Society explains that legal sector supervisors will consider whether a legal professional has followed the guidance when assessing compliance. Under section 330(8) and section 331(7) of the POCA 2002, and regulation 86(2)(b) of the MLR 2017, a court must also consider compliance with relevant approved guidance when assessing whether an offence has been committed or whether reasonable steps and due diligence were taken. 

In other words, firms should be able to explain and evidence their approach where it differs from LSAG guidance, rather than treating the guidance as something that can simply be disregarded.

Why Is LSAG Guidance Important for Property Lawyers?

The value of LSAG guidance is that it translates the wider AML framework into practical guidance for legal practice. Rather than relying on generic AML principles, property lawyers can use it to understand how those requirements apply to the risks they encounter in real transactions.

The guidance addresses matters including:

• Risk assessments, including the risks associated with particular services and transactions.
• Client and matter risk assessments, with conveyancing specifically identified as an example of a higher-risk service.
• Client due diligence and enhanced due diligence, including when additional checks may be appropriate.
• Source of funds and source of wealth, including the circumstances in which enquiries need to go further.
• Beneficial ownership and complex structures, which can be particularly relevant to property transactions involving companies or other entities. 

This matters because the risk-based approach is not the same across every area of legal practice. The risks associated with a high-value property purchase, for example, can look very different from those arising in litigation or family law. LSAG guidance helps firms apply the underlying regulations to the circumstances of the work they actually undertake. 

Is LSAG Guidance Regularly Updated?

Yes, LSAG guidance is subject to change, reflecting developments in legislation, regulation, and emerging financial crime risks. The latest major revision took effect on 23 April 2025 after approval by HM Treasury. This included information on the Economic Crime Levy, a funding mechanism that applies to certain larger regulated entities.

The April 2025 update also included new or updated guidance on areas such as:

• Register of Overseas Entities (ROE) requirements.
• Supply chain risk.
• Beneficial ownership and identification and verification.
• Enhanced due diligence and other changes arising from the Economic Crime and Corporate Transparency Act 2023. 

For property lawyers, this makes keeping up with the current version particularly important: the guidance is not a static explanation of the MLR 2017, but a practical reference that develops as the regulatory framework and risks change.

For further learning, see the LSAG Anti-Money Laundering Guidance for the Legal Sector and the Law Society's AML Guidance for the Legal Sector.

4. The Register of Overseas Entities (ROE)

The Register of Overseas Entities (ROE) was introduced by the Economic Crime (Transparency and Enforcement) Act 2022 to make the ownership of UK property by overseas entities more transparent. An overseas entity that owns, or wants to acquire, dispose of, transfer, lease or charge certain UK land must register with Companies House and provide information about its registrable beneficial owners or managing officers. 

For property lawyers, the ROE is particularly important because it is directly linked to whether a transaction can be registered at the Land Registry.

What Does the ROE Require?

An overseas entity must register with Companies House if it owns relevant UK land or wants to undertake certain transactions involving it. Once registered, it receives an Overseas Entity ID, which is used when making the relevant application to the Land Registry.

The register is designed to identify the individuals or entities behind overseas ownership structures. This is particularly important where property is held through companies, trusts or more complex chains of ownership. 

Why Does The ROE Matter in Conveyancing?

The ROE is not simply a disclosure exercise. It creates a practical registration requirement that property lawyers need to address during the transaction.

Since 5 September 2022, restrictions have applied to relevant dispositions of UK land involving overseas entities. In England and Wales, an overseas entity generally needs to be registered on the ROE and provide its Overseas Entity ID before a relevant transaction can be registered at HM Land Registry, unless an applicable exemption applies. HM Land Registry requires the Overseas Entity ID, or evidence of an exception or exemption, when registering a caught disposition. 

This means checking the ROE status should form part of the conveyancing process before the transaction reaches the point where registration is required. If the overseas entity has not complied with the requirements, the restriction can prevent the disposition from being registered, creating a significant obstacle to completing the transaction as intended.

What About Complex Ownership Structures?

The ROE's beneficial ownership requirements have also been strengthened. The Economic Crime and Corporate Transparency Act 2023 expanded the rules around trusts and corporate trustees, including situations where trustees appear within a chain of ownership.

The changes are intended to prevent complex structures from obscuring the people ultimately connected with an overseas entity. Where a trust forms part of the ownership chain, additional information may therefore need to be disclosed to Companies House. 

For conveyancers, this means that identifying an overseas entity is only the starting point. Understanding who ultimately owns or controls it, including where trusts or other entities sit within the structure, is also important.

What Happens if the Requirements Are Not Met?

Non-compliance with the ROE is a criminal offence and can result in fines or imprisonment. There are also restrictions on an overseas entity's ability to buy, sell, transfer, lease or charge UK property or land. 

This gives the ROE real significance in a property transaction. It is both an economic crime transparency measure and a practical conveyancing requirement: failing to establish whether the overseas entity has complied can leave a transaction unable to proceed to registration.

For further information, see the Register of Overseas Entities: approach to enforcement and the Companies House article on how the ROE helps to tackle economic crime.

5. SRA & CLC Supervision & Enforcement

For legal professionals carrying out property work in England and Wales, AML supervision depends on the type of practice. The Solicitors Regulation Authority (SRA) currently supervises solicitors and law firms for AML purposes, while the Council for Licensed Conveyancers (CLC) supervises licensed conveyancers and CLC-regulated practices. Both are professional body AML supervisors under the MLR 2017.

The SRA uses a risk-based approach to AML supervision, including desk-based reviews, inspections and investigations. The CLC likewise carries out risk-based AML supervision of the conveyancing practices and individuals it regulates.

For property professionals, this distinction is worth understanding: the regulator overseeing your practice may differ, but the underlying AML obligations remain grounded in the same legislation and regulatory framework.

Why Is Conveyancing a Particular Focus?

The SRA's Sectoral Risk Assessment is clear about where the greatest money laundering exposure sits within legal practice.

It states that conveyancing continues to present the greatest inherent money laundering risk to the legal sector, with the SRA's MLRO reports consistently identifying conveyancing as the area generating the highest number of reports. The SRA highlights factors including:

• High transaction values
• The movement of substantial sums through client accounts
• Opportunities to conceal beneficial ownership
• The potential to convert criminal proceeds into an apparently legitimate asset
• The time pressure that can accompany property transactions.

The SRA's recent reporting reinforces this picture. In its 2024-25 AML reporting, 73% of the Suspicious Activity Reports it submitted to the National Crime Agency were linked to residential property transactions.

For property lawyers, this makes conveyancing an important area of AML scrutiny. A firm's approach to source of funds, client and matter risk assessments, beneficial ownership and ongoing due diligence needs to stand up not only in principle, but when the SRA reviews the underlying files and evidence.

What Is Changing In AML Supervision?

The current AML supervisory system is expected to change, with the Financial Conduct Authority (FCA) set to become the single AML/CTF supervisor for legal, accountancy, and trust and company service providers. However, the change still requires legislation and does not take effect immediately.

The FCA currently expects a phased transition to begin in late 2028, with the transfer completed around 2030. Until the transition takes place, firms should continue to work with their existing professional body supervisor, such as the SRA or CLC.

How Property Lawyers Can Work Towards Greater Compliance

Understanding the legislation is only the starting point. The MLR 2017, POCA 2002, LSAG guidance, and ROE requirements all have to translate into consistent actions and decisions in day-to-day practice.

For property lawyers, this means having systems that reflect the firm's actual risk profile, carrying out appropriate checks on each matter, and keeping a clear record of the work undertaken.

Carry Out a Firm-Wide Risk Assessment

The Firm-Wide Risk Assessment is not a document to complete once and then file away. Regulation 18 of the MLR 2017 requires firms to identify and assess the money laundering and terrorist financing risks to which their business is subject, document the steps taken and keep the assessment up to date. It must take account of factors including the firm's customers, geographic areas, services, transactions and delivery channels. 

Every firm has a different AML risk profile, so an effective FWRA needs to be written around the business that actually exists. For a firm handling a large volume of residential conveyancing, overseas transactions or corporate property work, for example, the assessment should reflect those particular risks rather than relying on a generic template.

It should also be reviewed when there are material changes to the firm's business, its client base, the services it provides, or the wider regulatory and risk environment.

Apply Risk-Based Due Diligence to Every Property Transaction

Property work requires more than a routine identity check. The MLR 2017 requires firms to apply CDD on a risk-sensitive basis, while the SRA identifies conveyancing as a high-risk area for money laundering. This makes a genuine understanding of the source of funds (SoF) particularly important on property matters.

Source of funds means understanding where the money being used in the specific transaction actually came from. This is not satisfied simply by confirming that the client has enough money in a bank account or that the funds have come through a UK financial institution. Firms are expected to scrutinise the evidence, consider whether it supports the explanation given, and make further enquiries where necessary. Third-party funding should be examined in the same way. 

Source of wealth (SoW) is distinct from source of funds. It concerns how a client's overall wealth has been accumulated. Depending on the client and matter risk, understanding the client's wider financial background may be necessary to make sense of the funds involved.

Importantly, this consideration is not limited to property purchases. Source of wealth can also be relevant when acting for a client selling a property, particularly where the circumstances or value of the transaction do not readily fit what is known about the client.

Check the Register of Overseas Entities Before Completion

Where an overseas entity is involved, ROE status should be established early in the transaction, rather than left until completion.

For transactions caught by the regime, HM Land Registry requires the relevant Overseas Entity ID or evidence of an applicable exception or exemption when the disposition is registered. Failure to meet the ROE requirements can therefore create a practical barrier to registration.

Checking this early gives the parties time to resolve any registration or beneficial ownership issues before they become a problem at the point of completion.

Keep Policies Aligned With Current LSAG Guidance

LSAG guidance develops as legislation, regulation and financial crime risks change. Firms should therefore review their AML policies and procedures regularly against the latest guidance and update them where necessary.

This should include checking that the firm's approach to matters such as CDD, source of funds and wealth, risk assessment, beneficial ownership and suspicious activity reporting remains consistent with the latest approved guidance.

Provide Regular & Role-Specific AML Training

AML training should be more than a generic induction exercise. Regulation 24 of the MLR 2017 requires relevant employees to receive regular training on recognising and dealing with transactions and situations that may relate to money laundering or terrorist financing, with the nature of the training reflecting the firm's size, business and risk exposure. 

The SRA expects firms to provide a comprehensive training programme that is relevant to the legal sector and specific to the firm's own risks. For fee earners working in conveyancing, that should include practical issues they are likely to encounter, such as source of funds and wealth, third-party payments, beneficial ownership, overseas entities and the firm's internal escalation and reporting procedures. 

Training should also be refreshed regularly, particularly when legislation, guidance, internal procedures or the firm's risk profile changes. Firms must keep written records of the training provided, including appropriate evidence of attendance and content.

Get Practical AML Support for Your Firm With PDA Legal

AML requirements for property law firms are extensive, and the regulatory framework continues to evolve. Keeping policies, risk assessments, training and matter-level procedures aligned with current requirements requires more than relying on generic templates.

PDA Legal provides bespoke AML support tailored to the way your firm actually operates. We help CLC and SRA-regulated firms understand their regulatory obligations, identify weaknesses in their current approach, and put practical systems in place to support ongoing compliance.

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