The government has confirmed a landmark reform to the country’s anti-money laundering (AML) and counter-terrorism financing supervision framework, designating the Financial Conduct Authority (FCA) as the new AML supervisor for the legal and accountancy sectors.
This marks a decisive shift in the UK’s approach to tackling economic crime and regulatory inconsistency, moving away from a fragmented supervisory regime to one led by a single, data-driven and enforcement-minded regulator. The decision follows years of consultation and criticism of the patchwork system overseen by multiple professional body supervisors (PBSs), and repeated calls for greater coherence, accountability and effectiveness.
Response to systemic weaknesses
In its statement, the government emphasised that the reform seeks to address ‘inconsistency, inefficiency, and potential vulnerabilities’ in the current framework – vulnerabilities that have been laid bare in recent years.
There have been several high-profile examples of how law firms can be drawn into allegations that they have facilitated complex fraud and money laundering schemes. Whether through inadequate due diligence, weak internal controls, or misplaced reliance on client privilege, such failings have reinforced the perception that the UK’s professional services AML supervision has lacked the robustness applied elsewhere in the financial system. Similarly, parts of the accountancy and trust and company service provider (TCSP) sectors have been criticised for enabling opaque offshore structures that obscure beneficial ownership and asset provenance. While not inherently unlawful, these arrangements create systemic vulnerabilities that can be exploited by bad actors, exposing weaknesses in the current, multi-supervisor regime.
If this reform proceeds as expected, it will reshape not just compliance processes, but the culture of the legal profession itself. Until now, AML supervision for law firms has been handled by the SRA, Bar Standards Board and the Council for Licensed Conveyancers, each balancing enforcement with education and professional discretion. The FCA brings a very different mindset: one that is quantitative, data-led and uncompromisingly risk-weighted.
Under the FCA’s stewardship, law firms and accountancy practices are likely to face a much more rigorous approach to client due diligence, with a clear expectation that reliance on client assurances or subjective professional judgement will be replaced by tangible, verifiable evidence. The FCA’s emphasis on data-driven processes means that traceability and auditability will be paramount, rendering traditional dependence on client reputation or longstanding relationships inadequate. Governance requirements are also set to tighten, with the possible introduction of clear lines of individual accountability, echoing the principles of the Senior Managers and Certification Regime. This shift will make specific individuals within firms directly responsible for AML compliance.
At the same time, a significant challenge looms over the issue of legal privilege, as the FCA’s demand for transparency must be balanced against the legal profession’s commitment to client confidentiality. How this tension is resolved could shape the regulatory landscape for years to come. Firms should also be prepared for increased public scrutiny, as the FCA’s enforcement strategy includes the possibility of making examples through public actions and substantial fines, marking a departure from the more discreet oversight previously experienced.
One can only speculate how the FCA will adapt its methods to a sector built on professional independence and client trust. But what is clear is that the traditional notion of ‘light-touch, guidance-based supervision’ will not survive intact.
From autonomy to regulatory intensity
Predictably, the reform has met resistance. Many in the legal and accountancy professions argue that the FCA’s financial markets mindset does not fully account for the nuances of legal advice or the bespoke nature of accountancy work. That may be true, but the FCA’s track record in risk-based supervision and data analytics represents a quantum leap in capability compared to most existing PBSs.
Where the FCA’s approach differs is in its intensity. Its culture of proactive monitoring, thematic reviews and data-led intervention stands in contrast to the more interpretive, principles-based oversight to which many firms in the professional services sector have become accustomed. The FCA’s arrival signals a shift from guidance to governance, from self-attestation to evidence-based assurance. Both sides face a learning curve.
The FCA will need to adapt its methodologies to accommodate the realities of professional practice – smaller firms, partnership governance models and client privilege constraints. Meanwhile, law firms, accountants and TCSPs must prepare for a supervisory style that places greater emphasis on governance, documentation, management accountability and demonstrable effectiveness of controls.
Wealth and banking sectors
It is easy to view this transition with apprehension, but the FCA’s long-standing experience supervising AML in the banking and wealth management sectors offers valuable lessons. These sectors have evolved under a risk-based approach – the cornerstone of the FCA’s regulatory philosophy. Rather than enforcing rigid, box-ticking compliance, the FCA expects firms to deploy their resources where the risks are highest, and to justify their approach with evidence and ongoing assessment.
This model rewards intelligent prioritisation. Firms that understand their client base, their transaction patterns and their exposure to high-risk jurisdictions can focus their AML energy where it truly matters – achieving greater efficiency while simultaneously enhancing controls.
Especially within the wealth management sector, firms have discovered that enhanced knowledge of a client’s financial circumstances and anticipated behaviour not only strengthens AML compliance but also improves client service. When a firm truly understands a client’s financial profile – their typical transaction patterns, investment objectives and source of wealth – it becomes far easier to distinguish legitimate activity from red flags, while tailoring services that meet client needs more effectively.
The legal sector can learn from this. A shift toward a risk-based culture could transform AML compliance from a reactive obligation into a strategic advantage. By embedding risk awareness into client onboarding, transaction monitoring and matter management, firms can not only deter money laundering more effectively but also protect themselves from the regulatory, reputational, and financial fallout of being caught up in illicit activity.
Moreover, adopting the wealth sector’s approach to data analytics, client segmentation and ongoing monitoring could help law firms modernise processes that have historically relied too heavily on manual review and professional instinct.
Far from being bad news, the FCA’s arrival may actually catalyse innovation, encouraging firms to use technology and risk intelligence to streamline due diligence while strengthening control.
What happens next?
No implementation date has been set. The transition will depend on enabling legislation, funding approvals and the development of a detailed transition plan. However, firms should not be lulled into complacency.
When the FCA assumes responsibility, it will expect AML compliance frameworks to meet the same standards applied to banks, wealth managers and financial advisers. That means:
1. Enhanced risk assessments – comprehensive, data-driven and regularly reviewed.
2. Governance structures – clear accountability, with defined senior management oversight.
3. Ongoing monitoring – robust transaction, client, and relationship monitoring processes.
4. Management information and escalation – evidence that AML risk is being actively managed, not passively monitored.
This shift will demand investment in compliance capability, systems and culture – particularly for mid-tier firms that have historically viewed AML as a legal or procedural obligation rather than a core business risk.
A turning point
The government’s decision is not a mere administrative reshuffle; it is a statement of regulatory intent. The UK is signalling that professional enablers – no matter how reputable – will now be held to the same standard of oversight as financial institutions.
For firms committed to ethical practice, transparency and client integrity, this reform presents an opportunity to strengthen trust and differentiate through compliance excellence. For others, whose operating models depend on opacity or minimal oversight, this may mark the end of an era.
In summary, the FCA’s assumption of AML supervision represents one of the most significant shifts in the regulatory landscape for professional services in decades. It will challenge firms to adapt, modernise and embrace a culture of demonstrable accountability, transforming AML from a compliance function into a cornerstone of professional integrity.
Ian Stott is head of financial services and Gregor Gottlieb is director of financial services regulatory compliance at Konexo, an Eversheds Sutherland business that provides alternative legal and compliance servicesRegulation and compliance
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