In October 2025, the UK government confirmed that the FCA will become the single professional services supervisor (SPSS) for anti-money-laundering and counter terrorist financing (AML/CTF) supervision across the legal services, accountancy services, trust and company service providers sectors.
For solicitors and law firms regulated by the SRA, this means that supervision of their AML/CTF obligations under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the MLRs) will move to the FCA.
It’s important to emphasise: the underlying statutory AML obligations (under the MLRs) remain unchanged. What’s changing is who supervises and how the supervision is applied.
Why the change is happening
There are several drivers behind this reform:
- The UK government’s review of the AML/CTF supervisory regime found that oversight across multiple professional bodies (lawyers, accountants, trust and company service providers) led to inconsistent supervision and regulatory fragmentation.
- The reform aims to simplify the supervisory architecture, enhance risk-based supervision, and align professional services more closely with other sectors already supervised by the FCA.
- The government sees this as part of strengthening the UK’s overall defences against financial crime by ensuring stronger, more credible supervision of high-risk sectors such as legal services.
What this means for law firms
For firms under the SRA regime, here are the key implications:
- Dual regulation: Going forward, law firms will typically have two regulators: one for AML/CTF supervision (the FCA) and the existing professional regulator (e.g., the SRA) for other regulatory matters.
- Stronger enforcement culture: The FCA is experienced in financial services supervision and tends to emphasise evidence of operational effectiveness, not just policy documentation. Law firms will likely face increased expectations around demonstrating how their AML controls work in practice.
- Risk-based supervisory focus: Firms operating in higher-risk areas (e.g., property/conveyancing, trusts & companies, international clients) should anticipate more detailed scrutiny. Lower risk firms may benefit from proportionate supervision, but must still be ready.
- Transition period and preparation window: The move will not happen overnight, enabling legislation, funding agreements and a detailed transition plan are still required.
- No change yet to core obligations: Firms that already comply with the MLRs shouldn’t expect to overhaul their controls solely because of the change — rather, they should start preparing for how those controls will be supervised.
Practical steps for firms — how to get ahead
- Review your AML/CTF framework now
- Ensure your risk-assessment processes are robust, up to date and clearly documented.
- Verify that your client-due-diligence (CDD) and ongoing monitoring practices are effective and supported by data and audit trails.
- Confirm that your policies, procedures and controls are not just in place on paper, but are functioning consistently.
- Ensure your governance & oversight remain strong
- Senior management (or equivalent) should actively understand and oversee AML risks in the firm.
- Make sure there is clarity around roles and responsibilities for AML, especially given the forthcoming supervisory shift.
- Audit and testing of your controls should become part of your routine, not a one-off exercise.
- Embed a culture of compliance and evidence-readiness
- Train all relevant staff regularly on AML risks, red flags, internal escalation and reporting obligations.
- Maintain clear records showing how controls are applied and reviewed (this will help if supervision becomes more evidence-intensive).
- Monitor key metrics: number of high-risk clients, transaction volumes, monitoring outcomes, internal reviews. This positions you better under a more data-driven supervision model.
- Stay alert to the evolving regulatory timeline
- Keep track of the government consultation (scheduled for November 2025) and any subsequent legislative developments.
- Begin preparing for the transition even if the official hand-over is still some way off. Early movers will face less disruption.
Why law firms should treat this as an opportunity
While change can bring uncertainty, this transition offers benefits:
- A single supervisor (FCA) could yield greater clarity and consistency in supervisory expectations across the legal sector. This may reduce ambiguity in how AML/CTF compliance is interpreted and enforced.
- Firms that already have strong AML frameworks and can demonstrate effectiveness will likely be in a stronger competitive position, being seen as lower risk by clients, insurers and regulators alike.
- The move emphasises the importance of embedding AML/CTF into the firm’s core operations, which is consistent with good risk management and client-service reputational standards.
Key takeaways
- The shift of AML/CTF supervision for law firms from the SRA to the FCA is one of the most significant regulatory changes the legal services sector has seen in recent years.
- For now, the statutory obligations under the MLRs remain unchanged, but the supervisory lens is about to become sharper, more evidence-based and possibly more demanding.
- Firms that act now! Strengthening their AML frameworks, improving documentation, governance and training, will be best placed to navigate the transition with confidence.
