AML supervision reform: what's changing, what we know, and what firms should do now
Anne Austin
Director
A practical guide to the transfer of AML/CTF supervision from the SRA to the FCA.
It won’t have gone unnoticed by our readers that in October 2025, HM Treasury confirmed that the Financial Conduct Authority will become the single AML/CTF supervisor for legal, accountancy, and trust and company service providers. The FCA will replace the current system of 22 professional body supervisors, including the Solicitors Regulation Authority, and take on certain aspects of HMRC’s AML role. For solicitors, this means AML supervision and regulation will be removed from the SRA entirely and undertaken by the FCA, while the SRA retains its non-AML regulatory functions. Around 6,500 SRA-regulated firms fall within scope of the Money Laundering Regulations 2017, alongside roughly 60,000 professional services firms across the legal, accountancy and TCSP sectors nationally. We first covered this decision when it was announced, and much of what we anticipated then has since been confirmed.
This is the most significant structural change to legal sector AML oversight since the Money Laundering Regulations 2017 came into force, and it follows several years of groundwork. HM Treasury’s 2022 review of the UK’s AML/CTF regime, prompted in part by the Financial Action Task Force’s (FATF) 2018 evaluation, concluded that supervision under the existing 22-body model remained inconsistent and fragmented, despite the Office for Professional Body Anti-Money Laundering Supervision’s (OPBAS)’ efforts since 2018 to improve consistency across supervisors. A 2023 consultation set out four possible reform models, ranging from strengthening OPBAS’s powers to appointing a single supervisor for all AML-regulated sectors. The government’s October 2025 decision settled on the most far-reaching of those options: one supervisor, the FCA, for the entire professional services population.
What the FCA’s supervision will actually look like
A November 2025 consultation, running to 24 December 2025, set out the duties, powers and accountability mechanisms proposed for the FCA in this expanded role. Firms will be required to register with the FCA to carry out AML/CTF-regulated activity, and the FCA will maintain a public register of supervised firms. Where the SRA currently applies regulation 26 checks on beneficial owners, officers and managers, focused mainly on criminal records, the FCA will apply the more extensive regulation 58 “fit and proper” test, assessing integrity, competence and compliance history as well. The FCA will also gain powers to gather information, inspect firms, take enforcement action, and identify businesses operating outside the regulated perimeter, funded through fees charged to supervised firms on a cost-recovery basis.
"All supervisors work from exactly the same AML rules, but the approach is different. There will be big issues for the profession about how they work with the FCA."
That distinction between shared rules and different approach is the crux of what firms should expect. The substance of the Money Laundering Regulations does not change. What changes is the regulator applying them, and the SRA’s own leadership has been candid that the FCA’s model is likely to feel materially different in practice.
A decision made without the profession’s preferred outcome
The SRA had lobbied to become sole AML supervisor for the legal sector, an outcome the Law Society had also backed in principle, without specifying which body it should be. That bid was rejected in favour of the FCA. Legal Futures reported that the SRA was not given advance notice of the announcement, despite being the body most directly affected by it. As we noted in our earlier analysis of the reform, this pattern, decisions taken centrally with limited sector consultation, has been a consistent feature of how this reform has unfolded.
"I'm disappointed by the government's decision. There's been plenty of comment about the fact that our fines are increasing as the months go by because we're finding more and more non-compliance. I think the FCA will continue that, and their whole model of regulation is rules based as opposed to principles based."
That shift from a principles-based to a rules-based supervisory culture is one of the more concrete, practical changes firms can plan for now, independent of how the legislative timetable unfolds. It suggests firms should expect less scope for judgement calls to be accepted on their own terms, and a greater premium placed on documented, evidenced decision-making.
The questions that remain open
Several important elements of the transition are still unresolved. HM Treasury’s consultation response, published in June 2026, confirmed that documents required for “routine AML supervision” will generally not be treated as privileged, a position Legal Futures has suggested is likely to be tested rather than accepted quietly, given how frequently privilege and AML obligations intersect in legal practice. The mechanics of information-sharing between the FCA and existing supervisors, and how firms will avoid duplicated fit-and-proper checks on the same individuals, have been left for the FCA and professional bodies to work out between themselves. The implementation date itself remains undetermined: it depends on the passage of primary and secondary legislation, and commentators now expect the transfer will not take effect before late 2028 at the earliest, entirely dependent on the availability of parliamentary time.
"This is not the outcome we had expected, because it will create a dual supervision regime and risks increasing the burden on the regulated community, and a financial burden that will be passed on to users of legal services."
"We are frustrated and disappointed with this decision, which imposes a finance-sector focused AML regulator on law firms. We do not believe the FCA will be able to replicate our knowledge of the legal sector, let alone improve oversight. It is difficult to see how a body overseeing banks and finance sector businesses with thousands of staff can also provide effective enforcement and support for single-solicitor law firms."
These concerns are worth taking seriously precisely because they come from the leadership of the bodies losing their supervisory role, rather than from firms speculating about a change they have not yet experienced. The recurring theme, cost, duplication and a loss of embedded sector expertise, is consistent across every regulator quoted here, and is echoed in the Law Society’s own formal consultation response, which called for AML guidance to remain practitioner-led rather than FCA-authored, and warned against a one-size-fits-all model that ignores solicitors’ ethical duties and professional training.
What firms can do while the detail is settled
None of this uncertainty changes what good AML compliance looks like today. The SRA’s AML Annual Report for 2024–25, which we summarised in detail here, recorded 935 proactive engagements, nearly double the previous year, and found that firms falling short were consistently those with generic firm-wide risk assessments, incomplete source of funds checks, or AML policies that existed on paper but were not embedded in day-to-day practice. That pattern is a reasonable proxy for what a more data-driven FCA supervisor is likely to expect, and firms that close those gaps now will be better placed regardless of when, or exactly how, the transition takes effect.
This mirrors what we see directly in our own audit work. In a recent multi-regulated engagement, detailed in our Begbies Traynor Group case study, the firms best prepared for overlapping or transitioning regulatory regimes were those with governance and evidence trails built for scrutiny from the outset, not retrofitted once a new supervisor arrived. That is the standard worth building towards now.
The most useful response to a settled destination and an unsettled route is to use the intervening years deliberately: strengthening governance, documenting the reasoning behind risk decisions, and building a compliance culture that does not depend on which regulator happens to be asking the questions. Firms that treat the transition period as a planning window, rather than waiting for the FCA’s rulebook to land before acting, will find the eventual handover considerably less disruptive than those who do not.
The bottom line
The direction of travel is fixed, and the concerns raised by the SRA, the CLC and the Law Society of Scotland are legitimate, well-evidenced and worth taking seriously as the transition unfolds. But the underlying compliance obligations are unchanged, and the firms that use this period to strengthen their AML frameworks now, rather than waiting for legislative certainty, will be the ones best placed for supervision under any regulator.
How Enderley Consulting can help
Preparing for a change of this scale is easier with a clear, independent view of where your firm currently stands. Enderley Consulting supports law firms and accountancy practices through exactly this kind of transition, drawing on direct experience of both SRA and FCA-style supervision. We can help you:
- Carry out an independent AML audit, benchmarked against what a data-driven supervisor will expect to see
- Review and strengthen your and firm-wide risk assessment and AML policies, controls and procedures so risks and decisions are properly evidenced, not just documented
- Deliver AML training that builds genuine confidence, not just box-ticking, in complex client and source of funds decisions
- Support you through the practical transition itself, as details of the FCA’s approach are confirmed over the coming months
There is no need to wait for legislative certainty to start closing the gaps that matter most. If you would like an independent view of how your firm’s AML framework would hold up under closer scrutiny, get in touch with the Enderley team and we will be glad to help