AML/CTF supervision reform: duties, powers and accountability – Law Society response

The proposals

HM Treasury is consulting on proposals to reform the supervision of AML/CTF compliance among professional services businesses.

The UK government has decided the Financial Conduct Authority (FCA) should take over responsibility for AML/CTF supervision of:

• legal service providers
• accountancy service providers
• trust and company service providers

For solicitors, this means that AML/CTF supervision and regulation will be removed from the Solicitors Regulation Authority (SRA) and undertaken by the FCA.

The SRA will retain its non-AML/CTF supervisory and regulator roles.

The consultation sets out proposals for the key duties, powers and accountability mechanisms for the FCA to be an effective supervisor of professional services businesses.

It also includes proposals for the legislative changes to enact these.

Our view

These reforms risk greater fragmentation, not simplification.

The speed at which government is consulting on this is concerning, as these changes will fundamentally reshape AML/CTF oversight across all sectors.

The single professional services supervisor model:

• introduces major operational and strategic risks for the profession
• offers no proven benefits
• fails to resolve fundamental challenges created by dual regulation

Any shift of supervision from the SRA to the FCA must avoid unnecessary cost and additional regulatory burden.

They must be grounded in proportionate, risk-based oversight that reflects the realities of legal practice. The proposals do not yet demonstrate how this will be achieved.

We remain committed to working constructively with HM Treasury to deliver effective, proportionate and sustainable reform.

However, meaningful reform cannot be achieved through undue haste. Careful consideration is essential to ensure the integrity of legal sector supervision and the smooth implementation of any changes.

Changes to FCA information-sharing powers must safeguard client confidentiality, avoid duplication and be supported by clear, sector-specific guidance.

We strongly oppose proposals to give supervisors direct access to suspicious activity reports (SARs) for supervisory purposes, which risks compromising confidentiality, undermine the Proceeds of Crime Act regime, and significantly increase security and misuse risks. The integrity, confidentiality and safety of the SARs system must not be weakened.

To prevent duplicate oversight, the transition must include grandfathering, phased implementation and close coordination between the FCA, SRA and HM Treasury.

The persistent issues arising from overlapping disciplinary powers are not addressed in this consultation.

We call for practical, proportionate, sector-aware supervision grounded in practitioner expertise, which is essential in the drafting of guidance, coordinated regulation, strong protection of privilege, and transparent, risk-based enforcement.

As drafted, the proposals fall short and risk adding complexity without delivering meaningful reform.

What this means for solicitors

The FCA will supervise firms that carry out activities within scope of the MLRs as legal, accountancy, and trust and company service providers.

The reform is still subject to “the passage of enabling legislation, confirmation of funding arrangements, and development of a detailed transition and delivery plan”.

This means the date the FCA will start supervising the professional services sector will be “heavily dependent on the availability of parliamentary time”.

Next steps

The consultation closes on 24 December 2025.

Read the consultation on GOV.UK.

We urge HM Treasury to consider whether further consultation is warranted, allowing supervisors, professional bodies and practitioners to contribute before any final decision is made.

We will work to make sure:

• our members are not adversely affected by the changes to the AML supervisory regime
• there is an informed understanding of the sector and level of risks