The decision of the UK government to transfer oversight of anti-money laundering and counter-terrorism financing supervision to the FCA (Financial Conduct Authority) has raised concerns within the professional services sector.
The Solicitors Regulation Authority (SRA) served as a Professional Body Supervisor (PBS) for AMLCT (Anti money laundering counter terrorism) for law firms across England and Wales while for the accountancy sector, the HMRC plays the supervisory role.
The government believes that having the watchdog (FCA) oversee professional services firms is the most effective approach. The FCA was chosen for its existing expertise, as it already supervises financial institutions on anti-money laundering and counter terrorism financing.
Minister, Lucy Rigby MP explained: “This change will align the supervision of professional services with other similar parts of the economy which already have a public sector supervisor.”
The government initiated a consultation in 2023 to reform the system and align it with its Economic Crime Plan. After two years, the decision is to create a Single Professional Services Supervisor (SPSS), with the Financial Conduct Authority (FCA) taking on this new role.
However, the move to transfer power to the FCA has been met with disappointment from the legal sector, as well as the accountancy sector, including CIMA and ICAEW.
A spokesperson for the SRA said: “We have made significant progress in recent years, increasing and improving our approach to anti-money-laundering supervision, making sure we are proactive and targeted, while supporting compliance. We are disappointed we won’t be able to build on that work.”
The Law Society expressed concern that the government had opted for a system that comes with challenges. It notes solicitors will face significant change following the move, as the role of the SRA “will be significantly reduced.”
“The government must carefully manage the cost implications of implementing an SPSS model and avoid increasing regulatory burdens that could undermine the competitiveness of our world-beating legal services sector, especially given the extensive changes required,” said Mark Evans, president of the Law Society.
Over the years, the SRA’s interest in AML cases increased as its enforcement had surged. Its annual report, published in November 2024, revealed that while the number of reports of potential AML breaches (235 reports in 2017/18 and 227 reports in 2023/24), the number of AMI related matters determined by the Authority over the same period increased sevenfold, from ten cases 2017/18 to 74 in 2023/24.
Colette Best, director of Kingsley Napley, said: “The FCA is not a natural supervisor for legal services and there are a lot of questions to be answered.”
While Simon Morris, partner at CMS, highlighted: “Handing the FCA another 60,000 firms to oversee more than doubles its remit, dwarfing the flawed transfer a decade ago of consumer credit regulation from the Office of Fair Trading (OFT) to the FCA.”
“This is a welcome step if there is a disciplined transition,” said Ali Ishaq, Partner, Reed Smith. He stressed: “We need an FCA legal-sector AML strategy with measurable metrics and thematic priorities as well as embedded legal specialists, practitioner panels to shape guidance, analytics to identify network risks, and feedback loops with law enforcement on suspicious activity reports and joint operations.”
Lloyd Hatton, member of the APPG Anti-Corruption and Responsible Tax and of the Public Accounts Committee, also stated: “To ensure that this reform drives higher standards in our professional services, we must ensure that the FCA is given the resources and the powers to crack down on wrongdoing.”
The implementation is still subject to the passage of enabling legislation, and the Treasury will publish a separate consultation on the new supervisor’s powers. But the coming months will be crucial as the sector seeks clarity on the future of AML supervision.
Andy Jalil
The writer is our foreign correspondent based in the UK
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