The UK government has announced that the FCA will become the single AML and CTF supervisor for the legal sector.
The decision, revealed on 21 October 2025, marks a major shift in the country’s regulatory landscape, transferring oversight responsibilities from the Solicitors Regulation Authority (SRA) and other professional bodies to the FCA, claims KYC360.
The move forms part of a broader government plan to consolidate the UK’s fragmented AML supervision across professions such as accountancy, trust services, and legal services.
The government confirmed that under the Money Laundering Regulations 2017 (MLRs), the FCA will oversee all regulated lawyers’ AML compliance. The SRA’s competing proposal to act as the single supervisor was rejected. However, law firms will continue to be regulated by their existing professional bodies, such as the SRA and Bar Standards Board, for conduct and other non-AML matters. The FCA will work closely with HM Treasury, the Office for Professional Body AML Supervision (OPBAS), and existing regulators to ensure a smooth transition. HM Treasury believes this change will provide more consistent oversight, reduce duplication, and strengthen the overall AML framework.
Key details of the transition remain unclear. The timing, enabling legislation, and scope of the FCA’s legal powers are still being finalised. It is not yet certain whether the FCA will have authority to impose fines or suspend practice rights under frameworks like the Financial Services and Markets Act (FSMA). The government has stated that stronger enforcement is anticipated but will depend on future consultation outcomes. Similarly, the potential requirement for Money Laundering Reporting Officers (MLROs) or Compliance Officers (MLCOs) to gain FCA authorisation remains unresolved. The funding structure and mechanisms for collecting supervisory fees from law firms are also yet to be defined.
Reaction from the legal profession has been mixed. The SRA expressed concern that FCA regulation will “feel very different”, warning that the watchdog’s rules-based approach may clash with the legal sector’s principles-driven regulatory culture. SRA CEO Paul Philip questioned whether FCA staff have the necessary understanding of legal practice. The Law Society also cautioned that the reform could increase costs and complexity for firms, while the Council for Licensed Conveyancers (CLC) raised concerns about potential regulatory overlap. Conversely, anti-corruption advocates such as Spotlight on Corruption have welcomed the move, citing the FCA’s stronger investigative capacity and independence as key advantages for closing loopholes in the current AML regime.
For law firms, the implications are substantial. FCA oversight is expected to bring tougher enforcement, with higher penalties and more formal scrutiny. Firms could face more rigorous AML inspections, data requests, and control testing aligned with the FCA’s supervisory standards across financial services. Smaller practices may feel the strain of higher compliance costs and resource demands, particularly during the transition. Dual oversight could also lead to overlapping investigations when AML issues intersect with professional conduct matters.
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