Law firms have been told they have nothing to fear from the Financial Conduct Authority when it takes over anti-money laundering regulation in just over two years.

The City regulator is due to assume the policing of money laundering regulations from the Solicitors Regulation Authority, and other legal and accountancy bodies, at the end of 2028.

That date will mark the start of a transition, with the handover expected to be completed by 2030. The Financial Services and Markets Bill, currently going through parliament, should receive royal assent early next year to kick-start the process.

There remains uncertainty among law firms about what they can expect from the FCA and what they should be doing to prepare. The issue is of vital importance to the legal sector: as of April 2025, 5,569 firms fell within the scope of the money laundering regulations. More than 1,000 of these firms had just one practising solicitor.

Speaking at the Law Society’s economic crime conference in London yesterday, Stephen Smart, FCA lead for financial crime, acknowledged that the organisation has yet to properly engage with firms and lawyers over the change, but that this will change significantly in the coming months.

Dealing with whether the FCA is equipped to regulate law firms, he pointed out the FCA is already a multi-disciplinary organisation with hundreds of its own lawyers.

‘We will not take a one-size-fits-all approach [and] we will not be overloading firms with requests and paperwork. We will be creating friction for criminals but letting everyone get on with their business… We can do it with a proportionate, predictable and technology-enabled approach.’

Smart said the FCA is committed to earning the trust of the legal sector through ongoing engagement, insisting that the regulator is not on a different side to law firms in the fight against money laundering.

Asked by lawyers how the new regime will differ, he added: ‘I hope you will feel it really is a partnership as opposed to an “us and them” approach [although] I am not saying it is like that now.

‘I am not saying there won’t be focus on compliance, but once you have the basics it shouldn’t be compliance that drives the partnership, it should be how we have the biggest impact.’

Smart reaching out to the legal profession is a signal that the FCA knows part of its task in the next two years is to reassure lawyers who will feel concerned about duplication in dealing with more than one regulator.

The Solicitors Disciplinary Tribunal warned earlier this year that law firms face the prospect of ‘double jeopardy’ if they are under investigation by multiple regulators.

Meanwhile, the government this week published its anti-money laundering strategy for the next three years, saying the future for regulated firms would be ‘more consistent, intelligence-led and outcomes-focused’. It promised that a simpler supervisory landscape and clearer expectations will help supervisors focus on the firms, products and behaviours that drive the greatest harm and scale their activity appropriately.

But enforcement is not going away. The Treasury plans to consult in the next three years on giving extra powers to the SRA and then FCA, including expanding supervisors’ powers to make unannounced visits to regulated firms and search premises for cash.

There will also be consultation on the case for further measures to address professional enablers linked to hostile states and corrupt elites who directly threaten the UK’s national security. The consultation will seek views on the nature and scale of the problem, the effectiveness of the current tools and whether additional powers are warranted. This will include exploring options to restrict the ability of individuals to provide certain services or operate within a particular profession in the highest-harm cases.

Responding to the strategy, Law Society president Mark Evans said the government is right to focus anti-money laundering efforts on the highest-risk criminal activity and improving the effectiveness of the regime, rather than simply increasing compliance requirements.

He added: ‘We urge the government to ensure reforms are supported with measurable outcomes that demonstrate how they help identify, disrupt and prevent crime, not by the volume of checks firms are required to undertake. Solicitors will expect to see a clear alignment between the strategy’s commitment to proportionate, risk-based regulation and the approach taken across the supervisory framework.’