Pooled client accounts: Proposed changes risk placing substantial new burdens on solicitors

News

The proposed changes to the draft Money Laundering, Terrorist Financing (Amendment and Miscellaneous Provision) Regulations 2025 (MLRs) Statutory Instrument (SI) risks placing substantial new burdens on legal practitioners as they manage pooled client accounts*, the Law Society of England and Wales warned today.

Responding to a HM Treasury consultation on the draft MLRs, the Law Society is 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

Law Society president Richard Atkinson said: “The Law Society strongly supports an effective, risk-based anti-money laundering regime (AML).

“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.”

Richard Aktinson added: “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.

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

“The result of which could mean increased cost, delays and reduced access to justice for the public.”

Richard Atkinson concluded: “To date 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 proposed amendment appears 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.”

Notes to editors

• * A pooled client account is a bank account firms use to hold funds for multiple clients simultaneously, rather than separate accounts for each client.
• Read HM Treasury’s proposed amendments to the Money Laundering Regulations – draft SI and policy note.
• Read our anti-money laundering guidance.
• Our consultation response is available upon request.