AML Supervision Moves to the FCA: What Is Settled, What Is Not, and What to Do Now

The noise, and the decision

Scarcely a week passes without another message announcing that the Financial Conduct Authority is about to descend upon the legal profession, and that heavy fines will follow for all concerned. That part is conjecture. The reality is more measured, though it is also more interesting than the alarm suggests, and it does call for attention rather than anxiety. What follows is an attempt to separate what has been decided from what has merely been predicted.

What has actually been decided

On 21 October 2025 HM Treasury published its response to the consultation on reforming anti money laundering and counter terrorism financing supervision. It selected what the consultation called the Single Professional Services Supervisor model, and named the FCA as that supervisor.

The reform captures legal service providers, accountancy service providers, and trust and company service providers. All twenty two private sector professional body supervisors lose their anti money laundering functions, nine of them in the legal sector, and HMRC's supervision of accountancy, trust and company service providers transfers to the FCA as well. Something in the order of 6,500 firms regulated by the Solicitors Regulation Authority fall within the scope of the Money Laundering Regulations 2017, and every one of them is affected.

It is worth recording, for the sake of accuracy, that this outcome did not follow the profession's own preference. The SRA had bid to become the single supervisor for all lawyers, and was unsuccessful.

What the powers consultation added

A second consultation, on the powers the new supervisor should hold, followed in November 2025, and the Treasury published its response in June 2026. That response confirmed the direction of travel and supplied some of the machinery: a public register of supervised firms, the enforcement powers under the 2017 Regulations extended to the FCA, and funding on a full cost recovery basis, with a separate consultation on the structure of fees still to come.

The most consequential point in that response is one that received little attention. Respondents pressed the government to legislate on regulatory primacy, so that a firm could not face two regulators over the same conduct. The government declined. In its place we are offered an ongoing information sharing regime and a permanent obligation on regulators to cooperate. The practical consequence is that a solicitor will answer to the FCA on anti money laundering and to the SRA on everything else, with the boundary between the two managed by cooperation rather than by statute.

When will this happen?

The honest answer is that nobody yet knows, and any adviser who gives you a firm date is guessing. The Treasury has said that the commencement date is heavily dependent on the availability of parliamentary time, that implementation will inevitably take several years, and that the transfer will be phased across sectors so that supervision is never interrupted. Primary legislation is required before anything else can proceed, and OPBAS continues to oversee the existing supervisors in the meantime.

The estimate of 2028 to 2029 now circulating widely is a reasonable inference from those statements. It is not, however, a published date, and it should not be treated as one.

What is not changing

Here is the reassurance, and it is a real one. The Money Laundering Regulations 2017 are not being rewritten by this reform. Your obligations on client due diligence, on your firm wide and matter level risk assessments, on record keeping and on reporting remain exactly as they are today. What changes is who supervises you, and how. There is nothing in this reform that requires a firm to dismantle a compliance framework that already works.

What is changing

Three things deserve your attention. The first is supervisory culture. The FCA is a rules based, formal and data led regulator, accustomed to reading evidence rather than listening to explanations. A file that a professional body supervisor might have accepted on the strength of a partner's account of it will need to speak for itself. The second is cost. Full cost recovery means the profession pays for its own supervision, and the fees consultation, when it arrives, is the document to read closely. The third is the dual regulation described above, which is likely to prove the most difficult feature of the new landscape in practice.

A note for notarial practices

One dimension of this reform is easily overlooked. The Faculty Office of the Archbishop of Canterbury is among the professional body supervisors whose anti money laundering function transfers. Notaries are therefore caught by the same reform as solicitors. For a practice that is both a firm of solicitors and a notarial practice, as ours is, the result is a single anti money laundering supervisor across both, which is arguably a simplification rather than a burden.

What is worth doing now

Not a compliance revolution. A short and candid gap analysis will serve you better. Would a client due diligence file on your system persuade a stranger who has never met the client and will not take your word for anything? Is your firm wide risk assessment current, dated, and demonstrably reviewed rather than merely present? Do your matter level assessments exist, and do they connect to it? If a regulator asked today who in the firm is accountable for anti money laundering, would the answer be immediate and the same from everyone you asked?

Record keeping deserves particular thought. The Regulations already require retention for five years, so this is not a new duty. The question is whether what you hold is retrievable, legible and complete, because a supervisor who works from data will ask for it in a form you may not currently produce.

None of this is wasted effort if the timetable slips, and all of it is work you would want done in any event.

About the author: Dr Aamir Nawaz, LLB (Hons), LLM, PhD, Solicitor, Barrister (np) and Notary Public.