The Solicitors Regulation Authority will update practitioners ‘as soon as possible’ after the government responded to a 2024 consultation on overhauling the Money Laundering Regulations 2017 (MLRs).

The 47-page HM Treasury document ‘signals a clear intent to streamline compliance, reduce regulatory friction, and enhance the UK’s resilience to economic crime’, according to Ben Cooper, head of risk and financial crime at commercial firm TLT.

Changes to the MLRs will encompass enhanced due diligence on both complex transactions and high-risk third countries; due diligence on pooled client accounts; and due diligence ‘triggers’ for certain non-financial firms.

In its industrial strategy last month, the Treasury promised ‘clearer and more proportionate’ AML rules as part of plans to boost the professional services sector. AML is commonly perceived to be the biggest regulatory burden facing law firms.

Since then, however, the government’s first comprehensive review of money laundering since 2020 concluded that solicitors remain at ‘high risk’ of being exploited by criminals.

Lawyers are mentioned only briefly in the Treasury response, which promises to implement reform through a draft statutory instrument by the end of the year ‘if parliamentary time allows’.

During the consultation, the legal sector ‘highlighted a lack of clarity regarding what source of funds checks might materially constitute in the case of legal transactions and lawyer-client relationships’. The government said it will retain the current wording of the MLRs in respect of source of funds checks to ‘preserve flexibility’, but ‘work with supervisors and relevant industry bodies to improve sector-specific guidance’.

Alexandra Jones, director of AML at the SRA, said: ‘We welcome the government taking further steps to make the current Money Laundering Regulations more effective and efficient. This includes providing more clarity on source of funds checks and a more risk-based approach to high-risk countries.

‘We will now work with other supervisors, and HM Treasury, to put these changes into action, and look forward to engaging with the government as they work to further streamline the regulations. Using legal services for financial crime is a very real risk to our society, security and economy, and regulations must remain constantly under review if we are to stay ahead of the criminals.’

Solicitors will be updated by the regulator as soon as possible, a spokesperson said.

TLT’s Cooper added: 'The Treasury’s response is a welcome step towards a more intelligent AML regime—one that balances the UK’s global leadership in financial services with its commitment to tackling illicit finance. As always, the devil will be in the detail, and firms should prepare for further guidance and secondary legislation in the months ahead.'