Money Laundering Regulations review
What’s changing
On 25 March, HM Treasury laid before Parliament the draft Money Laundering and Terrorist Financing (Amendment) Regulations 2026 (MLRs 2026).
The MLRs 2026 introduce targeted changes to make the UK’s anti-money laundering (AML) framework more contextual and proportionate.
These amendments are not wholesale reform of the Money Laundering Regulations 2017 (MLRs 2017).
Instead, the changes clarify key definitions, reinforce the risk-based approach and address unnecessary over-compliance.
Solicitors, law firms and legal businesses should act promptly to understand the changes and make sure policies, procedures and training are fully aligned.
Customer due diligence and enhanced due diligence
All monetary thresholds move from euros to sterling. For example, the 1,000€ threshold for occasional transactions becomes £800.
The trigger for enhanced due diligence (EDD) is narrowed.
It now applies only where transactions are “unusually complex or unusually large in each case given the nature of the transaction”.
Mandatory EDD for high-risk third countries is limited to jurisdictions on the Financial Action Task Force call for action list.
Practices that have applied EDD broadly – particularly in routine M&D or real estate transactions – will need to make sure their approach is proportionate and risk-based.
Pooled client accounts
Pooled client accounts (PCAS) are no longer treated solely under simplified due diligence (SDD).
Solicitors must implement structured, risk-based assessments and keep appropriate records.
Obligations to provide underlying client information (on request) are clarified, alongside protections for legal professional privilege.
Expect more scrutiny of client account structures.
You can prepare by making sure risk assessments are documented and client account structures have “look-through” capabilities where needed.
Trust Registration Service
Low-risk trusts are no longer required to register, with revised de minimis thresholds.
Certain non-UK trusts holding UK land are brought into scope.
Stamp duty reserve tax is removed as a registration trigger.
Private client and real estate practices should reassess trust portfolios and make sure Trust Registration Service processes reflect the updated scope.
Cryptoasset regulation
Cryptoasset firms are fully brought within scope of the AML regime.
From 1 February 2027, EDD becomes mandatory for crypto correspondent relationships (where banking services are provided by one bank to another), with a ban on dealings with shell banks.
A new ownership and control regime (aligned with Financial Services and Markets Act thresholds) introduces notification requirements and enforcement risk. Implementation will be phased through October 2027.
Practices advising crypto clients or handling crypto-related funds must strengthen onboarding, due diligence and governance frameworks.
Supervisory cooperation and data sharing
Companies House is formally integrated into the AML supervisory framework.
Information-sharing powers are expanded across regulators and investigators.
Confidentiality provisions are updated and extended to crypto firms.
Greater transparency and regulatory coordination will increase expectations around data accuracy, record-keeping and disclosure readiness.
Our view
Making the MLRs more proportionate, risk-based and workable for all sectors is a step in the right direction by the government.
However, these proposed changes will do little to ease the regulatory burden felt by the legal profession and others.
Some helpful clarifications have been made, but ultimately, this was a missed opportunity to drive meaningful reform.
We are disappointed no action has been taken to address the discrepancies in CDD timing, or to eliminate the risk of criminal liability associated with reliance on third-party checks.
This continues to be a source of frustration for lawyers and the public.
Our ability to shape these proposals was limited from the outset, as stakeholders were asked to comment only on a narrow set of provisions.
Our regulatory framework must be effective in combatting financial crime, but it must also be workable in practice for legal professionals and the wider economy.
Background
The MLRs 2026 follow HM Treasury’s (HMT) 2025 response to its 2024 consultation on improving the effectiveness of the MLRs 2017.
The consultation focused on four themes:
- making customer due diligence more proportionate and effective
- strengthening system coordination
- providing clarity on the scope of the MLRs
- reforming registration requirements for the Trust Registration Service
The amendments are intended to strengthen the risk-based approach at the core of the UK’s AML and counter terrorist-financing (CTF) regime.
It also addresses loopholes to enhance the integrity of the financial system.
The consultation followed HMT’s 2022 review of the UK’s AML regulatory and supervisory regime.
The 2022 review found that:
- the core requirements of the MLRs were mostly fit for purpose, but
- technical changes could be made to increase effectiveness and ensure proportionality for regulated firms and consumers
What we’re doing
July 2026 – we expect most provisions to come into force 21 days after the regulation is made
June 2026 – we expect the draft regulations to be debated in Parliament in early June, before being formally made (subject to parliamentary approval)
March 2026 – we are scrutinising the draft MLRs 2026 and explanatory memorandum
June 2024 – we called for any reforms to not place disproportionate and unnecessary obligations on the legal profession in our consultation response on improving the effectiveness of the MLRs
June 2022 – HMT published its review of the UK’s AML regulatory and supervisory regime and laid a draft MLRs statutory instrument in Parliament
October 2021 – we called for a risk-based approach to be adopted in our responses to the statutory instrument consultation (PDF 202 KB) and the call for evidence (PDF 332 KB)
Summer 2021 – we took part in a series of targeted engagement sessions with HMT to represent the views of the profession
Next steps
We look forward to helping develop and apply a proportionate regime that is effective in tackling economic crime and workable for solicitors.