Tim Barnett
The UK legal sector is entering a period of significant regulatory and legislative change. While Anti-Money Laundering (AML) compliance has long been a core requirement for law firms, recent developments signal a clear shift toward tighter oversight and greater accountability.
Understanding this landscape is essential for firms looking to prepare for what comes next. Let’s go through the recent changes in the compliance landscape and how they are gearing up to support reusable compliance in the future.
Property market continues to pose high AML risks
In 2025, HM Treasury released their new National Risk Assessment, the first such assessment in five years. This document plays a crucial role in shaping how money laundering risks are understood across the UK economy. Despite increasing controls, legal services and especially conveyancing remain a high risk for money laundering. The report suggests that the legal sector remains a target due to the sector’s veneer of legitimacy, allowing fraudsters to use it to disguise their true actions. The use of moving money through client accounts to help obscure its origins has also been highlighted by the SRA, with some law firms fined for allowing them to be used as a quasi-banking facility, routing client funds to multiple parties.
A change in supervision and housing reforms
One of the most notable developments in the wider legal and professional services space is the change to AML supervision for the legal sector. The Financial Conduct Authority (FCA) is set to take over AML supervision for the legal sector from the Solicitors Regulation Authority (SRA). For more information on this check out this article AML Shake-up for the Legal Sector.
This move suggests a direction of travel toward more centralised and robust supervision, with higher expectations placed on regulated businesses. For conveyancers, it may set a precedent for tougher regulation in the future, particularly around how customer due diligence is carried out and evidenced.
Alongside this, the government’s housing reform agenda represents another major effort to tighten and improve the property market. While much of the focus is on supply, transparency, and consumer protection, compliance plays a critical supporting role. Stronger controls around identity, ownership, and transaction flows are increasingly seen as part of improving trust and resilience across the market.
Digital Identity moves into the mainstream
A key legislative development shaping the future of compliance is the Smart Data Bill. This bill effectively opens the door for government issued digital identity and marks a clear change in the direction of travel toward more digital, streamlined processes for identity verification.
Crucially, the Smart Data Bill provided a legal foundation and statutory backing for the Digital Identity and Attributes Trust Framework, commonly referred to as the DIATF. The DIATF sets out a defined set of rules, standards, and governance requirements for organisations that provide digital identity and attribute verification services in the UK.
Under this framework, providers can become certified to deliver digital identity checks that meet recognised standards. This is a significant step forward for regulated sectors, including legal services, as it creates greater consistency, trust, and accountability in how digital ID verification is delivered.
Rather than relying on a fragmented market with varying approaches to ID checks, the framework establishes a clear benchmark for what “good” digital identity verification should look like.
What comes next for AML regulation
Looking ahead, further change is already on the horizon. Draft AML regulations are expected to be laid before Parliament in 2026. These regulations are intended to strengthen the effectiveness of customer due diligence (CDD) as part of the UK’s wider AML framework.
In parallel, there is growing anticipation that the Data Use and Access Act in 2026 will provide clearer legislative guidance around the use of digital identity in AML processes. There is hope that this will give businesses more certainty around what they can and cannot accept from digital ID verification providers when conducting CDD.
For law firms, this could mark a turning point. Clearer rules, stronger frameworks, and better defined standards have the potential to remove ambiguity, reduce risk, and support more efficient compliance models, including reusable digital identity and compliance.
Taken together, these developments show a consistent trend. Regulation is becoming more structured, more digitally enabled, and more focused on the quality and reliability of customer due diligence. Firms that understand this shift and prepare for it will be better placed to adapt as reusable compliance becomes an increasingly viable and expected part of property transactions.