Changes to the UK anti-money laundering supervisory regime
The Financial Conduct Authority will become the single professional services supervisor for anti-money laundering and counter-terrorism financing (AML/CTF) supervision, significantly reducing the role of the Solicitors Regulation Authority.
What’s changing
The UK government announced in October 2025 that the Financial Conduct Authority (FCA) will be the single professional services supervisor.
This forms part of the government’s reform of the anti-money laundering (AML) and counter-terrorism financing (CTF) supervision regime.
The Financial Services and Markets Bill was introduced to Parliament in May 2026.
This bill includes clauses to enable the transfer of AML/CTF supervision from the Solicitors Regulation Authority (SRA) to the FCA.
In June 2026, HM Treasury published its response to the consultation on supervision reform: duties, powers and accountability.
It provides a clearer roadmap for the transfer of supervisory responsibilities from the Law Society and SRA to the FCA.
While detailed implementation arrangements remain to be developed, it sets out the broad framework for reform.
HM Treasury proposes extending the FCA’s existing powers under the Money Laundering Regulations 2017, rather than introducing new statutory obligations for regulated firms.
Emphasis has been placed on cooperation and information sharing between the FCA and existing supervisors, underpinned by a proportionate and risk-based approach to regulation and supervision.
Our view
The AML regime is highly complex.
A single professional services supervisor comes with many significant challenges for the legal sector.
While some of the proposed measures will raise concerns among solicitors, there is scope for the transitional arrangements to mitigate some of the more challenging impacts.
Supervision must be sector-specific
FCA oversight must be tailored to the realities of legal practice, reflecting solicitors’ ethical duties, professional training and legal professional privilege.
A one-size-fits-all model is inappropriate.
Preserving practitioner-led guidance
AML guidance must remain practitioner-led to reflect the profession’s unique regulatory and ethical obligations.
FCA-authored guidance would dilute essential sector expertise.
We welcome HM Treasury’s recognition of the value of practitioner-led guidance. AML guidance is most effective when developed by those with practical expertise and experience.
Strong support for practitioner-led guidance is a position outcome, albeit within a framework requiring FCA approval.
Protection of the SARs regime
The integrity and safety of the suspicious activity reports (SARs) system must not be weakened.
We welcome HM Treasury’s decision not to introduce additional SAR-sharing requirements for supervisory purposes, instead strengthening and enhancing existing information-sharing mechanisms.
Regulatory overlap and accountability
Expanded FCA powers could duplicate existing regulation, create double jeopardy and undermine access to justice.
Strong safeguards are needed for privilege, confidentiality, transparency and appeal rights.
There remains a lack of detail around transitional arrangements, including on how the risks of dual regulation to the legal sector will be managed.
Unproven case for expansion
With minimal evidence of money laundering in the profession, the proposals risk adding cost and complexity without delivering meaningful AML benefits, while damaging the UK’s competitiveness.
Proportionality and cost
The reforms risk imposing significant administrative burdens and higher costs without evidence of improved AML outcomes, with knock-on effects for consumer choice and legal fees.
The proposals point towards a materially increased regulatory burden for firms and sole practitioners, including:
- fit and proper person requirements
- broader supervisory and enforcement powers
- the potential use of skilled persons reports
These measures are likely to increase compliance obligations and regulatory scrutiny across the sector.
The role of the Law Society
As a named regulator, the Law Society holds statutory obligations under Schedule 1 of the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 (MLRs).
Although regulatory and enforcement powers have been delegated to the SRA, the Law Society retains an essential non-regulatory supervisory role, which includes:
- providing information, guidance and education on AML and economic crime compliance
- supporting best practice within the legal profession
- contributing to policy development, sector engagement and strategic reform
What this means for solicitors and firms
The FCA will supervise firms that carry out activities within scope of the MLRs as:
- legal service providers
- accountancy service providers
- trust and company service providers
The reform is still subject to “the passage of enabling legislation, confirmation of funding arrangements, and development of a detailed transition and delivery plan”.
This means the date the FCA will start supervising the professional services sector will be “heavily dependent on the availability of parliamentary time.”
Success under the new supervisory model will depend on firms’ ability to:
- maintain real-time understanding of client and matter risks
- integrate dynamic monitoring tools, rather than relying on annual reviews
- evidence effective governance, oversight and escalation pathways
- ensure SAR quality, particularly the articulation of suspicion
- keep pace with supervisory expectations for digital identity, online onboarding and AI-related risks
Timeline
June 2023 – HM Treasury consulted on four potential models for reform of the UK’s AML and CTF supervisory regime
October 2023 – we supported consolidating professional body supervisors but warned of the risk that legal sector-specific expertise could be lost in our consultation response (PDF 225 KB)
October 2025 – HM Treasury announced its reforms to the supervision regime
November 2025 – HM Treasury consulted on the key duties, powers and accountabilities the FCA will need to effectively supervise professional services businesses
December 2025 – we responded to the consultation and HM Treasury published its AML and CTF supervision report 2024/25, an audit of the old regime with detailed, sector-wide metrics, which the effectiveness of the new, consolidated regime can be measured against
June 2026 – ahead of the first debate on the Financial Services and Markets Bill in the House of Lords, we explained our concerns to peers in a parliamentary briefing (PDF 155 KB) and welcomed the publication of HM Treasury’s response to its consultation on key duties, powers and accountabilities
Next steps
Several important issues remain subject to further consultation and legislation.
We will work closely with the UK government and the FCA on the detailed design of transitional arrangements, drawing on the expertise of our specialist Economic Crime Committee and the wider profession.
By offering practical solutions, we will seek to influence the implementation of the reforms and make sure the interest of solicitors and their clients are properly represented.
We look forward to continuing to engage with HM Treasury, the FCA and others as the next phase develops.
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