The UK government announced reforms to consolidate AML supervision under the FCA, stripping the SRA and other professional body supervisors of their roles. This shift, detailed in HM Treasury’s November 2025 consultation, addresses Financial Action Task Force (FATF) concerns over fragmented oversight in legal and accountancy sectors. Full implementation targets completion before the FATF’s 2027 UK evaluation, though primary legislation may delay the handover until 2028.
The Money Laundering Regulations 2017 (MLRs) underpin these changes, mandating risk assessments, client due diligence, and ongoing monitoring for law firms handling high-risk transactions like property conveyancing. OPBAS, under FCA auspices, has criticized prior supervision gaps, prompting orders for improvements in risk-based approaches. Law firms must now anticipate FCA powers including inspections, skilled person reviews, fines, and fit-and-proper tests for managers.
Recent Enforcement Surge
The SRA ramped up activity in 2024-25, conducting 935 proactive engagements like onsite inspections and thematic reviews. Nearly one-third of examined firms were non-compliant, with 54% partially compliant, underscoring widespread AML weaknesses. Fines hit record levels in 2025; Simpson Thacher & Bartlett’s London office paid £300,000 for lacking firm-wide risk assessments, despite no proven laundering.
Gordons Partnership faced £77,784 for systemic policy gaps, while T G Baynes Solicitors incurred £63,869 over six years of breaches. In May 2025 alone, 12 firms were fined nearly £97,000, with Legal & Property hit hardest at over £19,000 for missing risk documentation. These penalties, based on turnover and breach duration, highlight regulators’ zero-tolerance for governance failures exposing firms to financial crime risks.
FCA Transition Challenges
The FCA takeover introduces a data-driven, assertive style contrasting the SRA’s approach, demanding robust evidence of compliant policies and monitoring. Concerns include “double jeopardy,” where firms face parallel probes by FCA and SRA without coordination, risking delays and inconsistent outcomes. The Solicitors Disciplinary Tribunal urged statutory evidence-sharing duties and prohibitions on duplicative actions.
Firms worry about FCA fees funding supervision, intrusive “fit-and-proper” checks overlapping professional regulation, and strains on smaller practices lacking sector expertise like conveyancing risks. Legal professional privilege protections must hold amid new intelligence-sharing with the National Crime Agency on suspicious activity reports. Transitional plans, expected in 2026, aim to retain SRA knowledge, but dual regulation burdens persist.
Preparation Steps for Firms
Law firms should conduct firm-wide AML risk assessments, update client/matter evaluations, and document due diligence rigorously. Enhanced training, technology for monitoring, and compliance cultures are essential, especially for high-risk areas. The SRA advises all firms expect imminent scrutiny, urging policy reviews and evidence of effective implementation.
Engage LSAG guidance on legal sector risks while preparing for FCA’s guidance takeover. Smaller high-street practices face heightened vulnerability, potentially raising client fees amid resource strains. Proactive remediation, as seen in fined firms, mitigates penalties; ongoing SRA cases may transfer to FCA.
Broader Economic Crime Context
These reforms tie into the Economic Crime and Corporate Transparency Act, targeting “professional enablers” like rogue lawyers laundering kleptocratic funds. A five-year strategy funds a coordinator to probe enablers, expand MLR activities, and boost intelligence. Government vows consistent oversight to fortify UK’s AML regime against dirty money flows.