Draft Money Laundering and Terrorist Financing Regulations 2025 – Law Society response

The proposals

HM Treasury published the draft Money Laundering and Terrorist Financing (Amendment and Miscellaneous Provision) Regulations 2025 for technical consultation.

The statutory instrument would amend the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs) and related legislation.

The draft legislation would amend provisions on:

• customer due diligence triggers for letting agents and art market participants
• onboarding of customers in bank insolvency scenarios
• enhanced due diligence:
  • high-risk third countries
  • complex and large transactions
• pooled client accounts
• information sharing
• currency thresholds and definitions
• regulation and sale of off-the-shelf companies by trust and company service providers
• registration and change in control for cryptoasset service providers
• Trust Registration Service
• exemptions for sovereign wealth funds
• exclusion of reinsurance contracts
• enhanced due diligence requirements for crypoasset businesses
• the list of recognised professional bodies
• FCA reporting requirements for FCA-supervised money service businesses or trust and company service providers

Our view

The proposals risk placing substantial new burdens on legal practitioners as they manage pooled client accounts.

We are concerned that:

• requiring full due diligence on pooled client accounts may result in delays, increased costs and reduced access to justice for the public
• full due diligence would be required on all clients, regardless of the assessed risk level and safeguards already inherent in pooled account structures
• by removing the possibility of simplified due diligence (SDD), the UK’s defences against economic crime would be undermined

We strongly support an effective, risk-based AML regime, which includes proportionate and risk-based regulations.

However, the proposed changes to pooled accounts risk undermining this goal by imposing blanket obligations that are disproportionate, operationally burdensome and inconsistent with previous policy.

By eroding the risk-based approach – where solicitors have the option of applying SDD in low-risk circumstances – the UK’s defences against economic crime would be undermined and compliances resources diverted away from higher-risk cases, while creating unnecessary work in low-risk contexts.

We urge HM Treasury to retain the option of applying SDD in pooled accounts, where the risk assessment supports it.

Law firms commonly use pooled accounts in conveyancing, probate and corporate matters.

These accounts have robust controls and oversight, with firms already required to conduct the appropriate due diligence on clients in line with the risk they present.

No compelling evidence has been provided that the current approach to pooled accounts presents a systemic risk to the UK’s AML regime.

Without clear evidence of abuse or regulatory failure, the proposals appear disproportionate and misaligned with the principles of better regulation.

By engaging further with the legal sector and practitioners, HM Treasury would be able to assess the practical and operational implications of the proposed changes before moving ahead.

We encourage HM Treasury to engage with stakeholders to ensure the final regulations strike the right balance between protecting the financial system and maintaining access to high-quality legal services.

What this means for solicitors

The draft amendments could impose significant and uncertain compliance burdens on legal practitioners, particularly in relation to:

• client due diligence (CDD)
• the operation of pooled client accounts

Full due diligence on pooled accounts would impose a significant administrative and financial burden on legal practices – particularly on small and medium-sized firms.

This could mean increased cost, delays and reduced access to justice for the public.

Next steps

The consultation closed on 30 September 2025.

The final statutory instrument is expected to be laid before Parliament in early 2026.

Read the full consultation on GOV.UK