The Bar Council has expressed concern that transferring anti-money laundering supervision to the Financial Conduct Authority could disproportionately burden barristers with increased costs and regulation, urging the government to proceed cautiously with expanding the financial regulator’s powers.
Bar Council Raises Concerns Over Proposed FCA Supervision
The Bar Council has warned that making the Financial Conduct Authority the sole anti-money laundering watchdog for professional services firms could disproportionately affect barristers with more regulation and increased costs. The representative body has called on the government to tread carefully with any proposed increase in the financial regulator’s powers.
As reported by Law360, the Bar Council stated that the move to one new model for all professional service firms risks losing sector-specific expertise and could reduce the efficacy of supervision, whilst simultaneously increasing costs and imposing a disproportionate burden on barristers. The organisation has expressed disappointment that HM Treasury decided to make the FCA the sole supervisor, though it remains resolved to work with the Bar Standards Board, HM Treasury, and the FCA to help ensure the new regime is as effective, proportionate, and risk-based as possible.
The Bar Council noted that the current system works well, with the organisation discharging regulatory and anti-money laundering/counter-terrorism financing supervisory functions to the Bar Standards Board. Under the new regime, barristers will be supervised by two regulatory regimes: that operated by the FCA in respect of AML/CTF, and the BSB in respect of conduct.
Government’s Decision on AML Supervision Reform
On 21 October 2025, HM Treasury announced the outcome of the consultation initiated by the previous government in 2023 on reforming the supervisory regime. The government has decided to proceed with the creation of a single professional services supervisor, which will be the Financial Conduct Authority. The FCA will assume responsibility for supervising all legal, accountancy, and trust and company service providers for AML/CTF purposes.
As reported by Legal Futures, the Financial Conduct Authority is to take over responsibility for supervising lawyers’ anti-money laundering and counter-terrorism financing activities. The long-awaited decision went against the preference of the profession, whilst the Solicitors Regulation Authority’s bid to become the sole supervisor for all lawyers was rejected.
Under the current regime, the Office for Professional Body Anti-Money Laundering Supervision oversees nine legal and 13 accountancy AML supervisors, including the law societies and bar councils of the three UK jurisdictions, called professional body supervisors. The Treasury said it and the FCA would work with professional body supervisors to minimise duplication in registration processes, fee payments, and other administrative matters.
Concerns About Costs and Funding
The Bar Council has remained concerned at the limited consideration given to the question of fees and funding, and the lack of any reference to the need for such fees to be levied in a way which takes account of the risk profile of specific sectors and the degree to which their activities will require regulatory activity by the FCA. The organisation has expressed particular concern that the new regime does not impose disproportionate costs on barristers.
According to HM Treasury’s consultation document, once established in its new role, the FCA will fund its supervisory activity through fees charged to supervised firms on a cost-recovery basis, as they do with their current supervised population. HM Treasury is providing Economic Crime Levy funding for implementation.
The Bar Council has emphasised that the Bar’s low AML/CTF-risk profile and the fact that the burden of filing significant amounts of documentation would fall upon self-employed barristers as sole practitioners necessitates a very careful approach. The organisation has referenced HM Treasury’s statement in its 2011-12 annual supervision report regarding the practical implementation of a risk-based approach to supervision.
Proposed Powers and Duties for the FCA
HM Treasury launched a consultation on 6 November 2025 seeking views on the powers, duties, and accountability mechanisms the FCA will need to be an effective supervisor. This consultation will run until 24 December 2025. The government has invited responses on the specific questions raised throughout the consultation document, which can be sent to [email protected].
As detailed in the consultation document, HM Treasury proposes to equip the FCA with relevant powers over its expanded population like those currently available to other public sector AML/CTF supervisors under the Money Laundering Regulations. However, further powers could improve upon the current regime without increasing burdens on firms, so that the FCA in its extended AML/CTF supervisory role can provide more effective supervision.
The government proposes that the FCA could have the power in relation to professional services firms to impose civil penalties, suspensions, prohibitions, and public censures, and to initiate criminal proceedings for breaches of the Money Laundering Regulations, in line with existing FCA and HMRC powers. It is stated this should support more dissuasive action against non-compliance with the regulations.
Registration and Risk Assessment Requirements
HM Treasury proposes that the FCA could receive and process registrations from professional services firms, as it already does for financial services firms. The FCA will be required to take a risk-based approach to supervision, adopting a supervisory approach that reflects their understanding of the risks within and across the sectors it supervises.
The consultation document states that HM Treasury proposes that the FCA be provided with the powers necessary to carry out effective interventions across its population and to gather up-to-date information on risk from relevant authorities to inform this. Both firms and supervisors are required to take a risk-based approach under the current regime.
According to the Bar Standards Board, the organisation is responsible for the supervision of barristers and BSB entities under the Money Laundering Regulations. Regulation 46 requires the BSB to adopt a risk-based approach and approve self-employed barristers and owners and managers of BSB entities to carry out work under the regulations.
Dual Regulation Concerns Across Legal Sector
The introduction of FCA supervision means that all regulated lawyers covered by the Money Laundering Regulations 2017 will have two regulators: the FCA for AML activities and their existing regulator for everything else. Some 6,500 SRA-regulated firms are within the scope of the Money Laundering Regulations.
As reported by Clyde & Co, the Treasury acknowledges that once the FCA’s new AML role is fully operational, some firms may experience a degree of dual regulation with requirements to interact with their professional bodies for non-AML/CTF related matters and with the FCA for AML/CTF related matters. The Treasury, FCA, HMRC, and the professional body supervisors plan to work together on how to limit the burden of this dual regulation.
According to KYC360, the Council for Licensed Conveyancers echoed concerns about the dual regulatory model and the potential for regulatory gap between frontline professional regulation and AML oversight. Legal professionals have broadly expressed concerns about the loss of sector-specific expertise as AML supervision moves from specialist professional bodies to the City-watchdog model.
Implementation Timeline and Legislative Requirements
The transfer of AML/CTF supervisory functions to the FCA will require legislation, so will not take effect immediately, and there will be a transition period, with plans drawn up to transfer responsibility. Implementation is subject to the passage of enabling legislation, confirmation of funding arrangements, and development of a detailed transition and delivery plan.
As reported by Legal Futures, the Treasury stated that the date on which the FCA would take over supervision is heavily dependent on the availability of parliamentary time. The government believes that a public organisation overseeing professional services firms is the most effective approach to AML/CTF supervision of the sector.
The government has stated that integrating professional services into the FCA’s AML/CTF supervisory framework will bring professional services in line with all other sectors in scope of the Money Laundering Regulations, which are already overseen by public bodies, and it will simplify a highly complex regulatory regime. The FCA will continue to be operationally independent of HM Treasury and political control, and it will remain accountable to HM Treasury and Parliament.
Potential Benefits and Enhanced Enforcement
Whilst the legal profession has raised concerns, some commentators see potential benefits in the transition. As reported by KYC360, campaign group Spotlight on Corruption called the FCA’s stronger investigative capacity and independence a positive shift that could close loopholes in legal-sector AML supervision.
According to KYC360, whilst HM Treasury has emphasised that the reform will not change firms’ obligations under the Money Laundering Regulations, the government has signalled the FCA will be empowered to take strong enforcement action where necessary, suggesting potential for higher financial penalties and tougher supervisory action under FCA oversight. Firms should expect a step-up in enforcement posture.
The FCA’s use of its powers will be appealable to the courts, ensuring judicial oversight consistent with the current regime for the FCA. The government seeks views on whether the proposed powers, duties, and accountability mechanisms for the FCA are sufficient and appropriate to achieve the primary aim of AML/CTF supervision reform, which is supervisory effectiveness.
Consultation on Guidance and Approval Mechanisms
The HM Treasury consultation includes questions about whether responsibility for issuing AML/CTF guidance for the legal, accountancy, and trust and company service provider sectors should be transferred to the FCA. The consultation also asks whether the Money Laundering Regulations should be amended to transfer responsibility for approving AML/CTF guidance to the relevant public sector supervisor, with HM Treasury retaining a right of veto.
As reported by the Bar Standards Board, the organisation publishes guidance for barristers to explain their obligations and illustrate best practice for AML/CTF compliance, and will be looking to add further guidance as the situation develops. The Bar Council is content that the BSB should and does have the power to require submission of information by barristers to aid risk assessment.
Under the proposal detailed by Clyde & Co, it is envisaged that the various existing professional members bodies and regulators will no longer have AML/CTF supervisory oversight, whilst continuing to operate their other existing functions. The Bar Standards Board encourages everyone to respond to the consultation, particularly those who will become subject to the new regime.
Wider Professional Services Sector Impact
The reforms affect not only the legal sector but also accountancy and trust and company service providers. As reported by the Tax Professional Body, HM Treasury issued their response to the consultation on 21 October 2025, with the decision made to move entities currently supervised in relation to accountancy services and trust and company service provider work by the professional bodies and by HMRC to the Financial Conduct Authority.
The Treasury said the FCA, as a public corporation, had the appropriate degree of independence from ministers, addressing a concern raised by the legal sector in particular. Where applicable, existing duties and powers in the Money Laundering Regulations may be extended and may need to be strengthened to address gaps or inconsistencies in the regulations.
As reported by the Law Gazette, proposals to hand over anti-money laundering regulation to the Financial Conduct Authority have prompted calls from the Law Society to put the plans on hold, with solicitors fearing the burden of dual regulation. The professional bodies across the legal sector have consistently expressed concerns about the transition to FCA supervision and its potential impact on practitioners.