Tim Barnett
In the summer of 2023, the UK Government launched a major consultation on the future of the UK’s anti-money laundering (AML) supervisory framework.
While there were multiple options tabled, at the heart of the debate was a fundamental question: is the current system that involves 22 private sector professional body supervisors (PBSs) still fit for purpose?
After over a year of consultation, the Government announced a decision that caught many by surprise. Rather than reforming or consolidating the existing PBSs, it opted for module 3 out of 4 potentials. which was the creation of a Single Professional Services Supervisor (SPSS). A model that would transfer all AML supervision responsibilities to a single government led body, to which the government chose the Financial Conduct Authority (FCA). This includes responsibilities currently held by the Solicitors Regulation Authority (SRA) and the Council for Licensed Conveyancers (CLC), effectively removing their AML supervisory powers.
This decision has sent shockwaves through the legal sector, which now faces significant uncertainty about how this transition will work in practice. With few operational details released, speculation is rife about what this means for firms and practitioners.
The Potential Benefits
Greater standardisation of guidance
Under the current regime, each supervisor interprets any AML legislation independently, creating inconsistencies in how rules are communicated and enforced. A single regulator could lead to more consistent and unified guidance, ensuring firms across all sectors operate to the same expectations. A lot of time is currently wasted repeating the same ID and AML checks often because different regulators have different guidance and different approaches. Greater standardisation should help law firms reduce the amount of time and effort it takes to train staff and ensure they are being compliant.
Faster adoption of new legislation
Criminals and money launderers adapt faster than regulation can keep up. With less regulators, the UK could respond more swiftly to emerging risks, close loopholes sooner, and ensure compliance frameworks evolve at the same pace as criminal methodologies. One of the key benefits outlined by the government is that centralising supervision will allow the FCA to “Police the perimeter” more effectively so those firms that don’t easily fall into one of the current PBSs don’t escape the net.
Improved data and intelligence sharing
The current fragmented supervisory landscape can make it harder to identify cross sector patterns or trends. A unified FCA-led model could enhance intelligence sharing, helping connect the dots between suspicious activity across law, finance, and other regulated sectors.
The Potential Drawbacks
Dual regulation and overlap
For legal professionals, this move raises serious questions about dual regulation. The SRA and CLC would remain responsible for professional conduct, and many other functions, while the FCA would oversee AML compliance. Without clear boundaries, firms could face conflicting expectations or duplicated reporting obligations, adding complexity rather than reducing it.
Increased costs
Expanding the FCA’s remit will inevitably come at a price. The Government has made it clear that supervisory costs will be recovered from the firms the FCA will regulate. This means law firms could face additional FCA supervision fees, on top of existing SRA or CLC membership fees, with no guarantee that these fees will be reduced to reflect the proposed changes.
More reporting and administrative burden
The FCA’s regulatory model is data-driven, and firms may need to meet stricter reporting and disclosure requirements than they currently do. Smaller practices could find these new expectations challenging to resource and manage. Law Firms will also still be subject to file reviews by the SRA/CLC and unless there is some cross-regulator agreement, it will mean twice the work.
Risk of over-standardisation
The legal profession operates very differently from banks or accountants. While standardisation will help reduce the administrative burden law firms currently experience, a one-size-fits-all approach could risk eroding the sector-specific nuances that make current supervision effective. The FCA will need to ensure it has the expertise and flexibility to apply AML standards appropriately across very different industries.
What’s next?
The Government has now launched a follow-up consultation to gather views on the proposed powers, duties, and accountability mechanisms for the FCA as the UK’s single AML supervisor. This consultation will run from 6 November to 24 December 2025, and will shape these sweeping reforms before they are implemented. What’s next?
You can read the full consultation document here: