The UK government has announced that the FCA will become the single AML and CTF supervisor for all regulated legal professionals.
The decision, revealed on 21 October 2025, transfers AML oversight from professional body supervisors such as the Solicitors Regulation Authority (SRA) and Bar Standards Board to the FCA, claims KYC360.
The move is part of a broader government strategy to simplify and strengthen the UK’s AML framework by consolidating supervision across key professions, including accountancy, trust, and legal services.
Under the new arrangement, the FCA will assume supervisory responsibility for lawyers subject to the Money Laundering Regulations 2017 (MLRs). While law firms will continue to be regulated by their existing professional bodies for conduct and professional standards, the FCA will focus exclusively on AML compliance. The SRA’s proposal to become the sole AML supervisor for the legal sector was rejected. HM Treasury has said it expects this consolidation to bring more consistent oversight, reduce fragmentation, and reinforce the overall resilience of the UK’s financial crime defences.
However, key details remain unresolved. The government has yet to confirm the legislative pathway, enforcement powers, or exact timing for the transition. It is unclear whether the FCA will be able to impose fines, suspend firms, or revoke practice rights, or how it will coordinate with existing professional bodies when AML breaches intersect with misconduct issues. Questions also remain about whether Money Laundering Reporting Officers (MLROs) and Money Laundering Compliance Officers (MLCOs) will need FCA authorisation, and how supervisory fees will be collected from firms. A public consultation is expected in November 2025 to address these issues and finalise the implementation roadmap.
The legal sector’s reaction has been mixed. The SRA warned that “regulation by the FCA will feel very different,” highlighting the potential clash between the FCA’s rules-based approach and the legal profession’s principles-driven framework. SRA CEO Paul Philip also questioned whether FCA personnel possess the specialised understanding required for legal practice. The Law Society has voiced concerns about higher costs and administrative complexity, while the Council for Licensed Conveyancers (CLC) warned of possible regulatory overlap. Conversely, transparency advocates such as Spotlight on Corruption have welcomed the change, arguing that the FCA’s independence and investigative reach could strengthen AML enforcement.
For law firms, the shift signals a tougher supervisory landscape. HM Treasury has already indicated that the FCA will be empowered to take “strong enforcement action where necessary,” suggesting more formal inspections, audits, and compliance testing. Smaller firms may face particular challenges adapting to the FCA’s stricter protocols and cost structures. In practice, firms could experience dual scrutiny where AML breaches also raise professional conduct issues, requiring clearer coordination between the FCA and existing regulators.
To prepare, firms are advised to begin reviewing their AML frameworks, identify technology and resource gaps, and engage actively in the forthcoming consultation. Investing in compliance technologies such as automated KYC, ownership mapping, and risk intelligence systems will be critical for meeting FCA expectations. Firms that embed compliance strategically into governance and culture will be better positioned to adapt to the regulator’s higher evidential and operational standards.
The transition to FCA oversight marks a defining moment for the legal sector’s AML regime. As the UK continues its efforts to align with global best practices, law firms that act early to modernise their compliance frameworks will gain a competitive edge under the new supervisory environment.
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