Last month after a major consultation on the future of the UK’s anti-money laundering (AML) supervisory framework that started in 2023, the government announced that the Financial Conduct Authority (FCA) would be replacing the Solicitor Regulation Authority (SRA) as the single professional services supervisor for anti-money laundering (AML) and counter-terrorism financing supervision for the legal sector.
As the reform is still subject to the passage of enabling legislation, confirmation of funding arrangements, and development of a detailed transition and delivery plan, there are no solid details on what this means for the legal sector or what will change. However, the change caught many by surprise, particularly the legal sector.
Do we need a tougher regime?
The SRA recently released their 2024-25 Anti-Money Laundering Report which revealed that 73% of all Suspicious Activity Reports (SARs) submitted by law firms relate to property conveyancing transactions, highlighting the sectors ever increasing exposure and risk to financial crime.
These findings reveal that weak due diligence processes can result in SAR reporting failures, leaving firms vulnerable to regulatory action and potential penalties and/or fines.
As reports received about potential breaches of AML and money laundering activity almost doubled between 2023/24 and 2024/25, the question is asked do we need tougher regimes to crack down on non-compliant firms? Plus, is the FCA the one to do it?
While the FCA will be fully aware of the risk this industry faces, it is not yet clear how they will continue the supervision, or what changes they will make. The SRA have stated in their report that conveyancing, in particular residential conveyancing, remains the area of greatest risk. It states conveyancing is vulnerable to vendor fraud and money laundering and advised that strong client due diligence is essential as it continues to be an emerging risk.
The potential benefits for change
A unified approach to guidance and enhanced data sharing
When the FCA were selected, the government reviewed 4 options on how to better the process. They ultimately chose module 3, which was the creation of a Single Professional Services Supervisor (SPSS). A model that would transfer all AML supervision responsibilities to a single government led body, aiming for a unified approach to guidance. Currently, each supervisor interprets any AML legislation independently, creating inconsistencies in how rules are communicated and enforced. The same ID and AML checks are repeated, for different regulators who have different approaches and guidance. Greater standardisation should mitigate this and make the process smoother for law firms. When the supervisory landscape is unified it is easier to identify any suspicious activity, or any cross-sector patterns or trends.
The potential drawbacks
Overlapping Regulation and increased compliance burden
The introduction of the FCA as an additional regulator raises significant concerns about dual oversight and unclear boundaries between the FCA, SRA, and CLC. While the SRA and CLC would continue to oversee professional conduct, the FCA would take charge of AML compliance, which could potentially result in conflicting expectations, duplicated reporting, and a heavier administrative load.
Given the FCA’s data-driven model, firms may also face stricter reporting and disclosure requirements, with smaller companies likely to struggle most. Unless coordination between regulators improves, law firms could find themselves performing the same compliance work twice.
Rising costs and risk of over-standardisation
Extending the FCA’s remit will come with additional supervision fees, which the Government has confirmed will be recovered from regulated firms. This means law firms could end up paying both FCA and SRA/CLC fees, without any assurance that existing charges will decrease. Furthermore, applying a uniform regulatory model designed for banks or accountants could dilute the sector-specific approach currently used in legal supervision. To avoid this, the FCA will need to ensure its AML framework is flexible enough to reflect the distinct nature of legal services.
What’s next and what can be done in the interim?
The Government has now launched a follow-up consultation to gather views on the proposed powers, duties, and accountability mechanisms for the FCA as the UK’s single AML supervisor.
This consultation will run from 6 November to 24 December 2025 and will shape these sweeping reforms before they are implemented.
While firms wait for the switch over and to see the outcome of a new supervisor, there are things that can be done in the interim to ensure compliance.
Our CEO Tim Barnett shares his advice: “As regulatory oversight evolves, property professionals across the transaction chain – from estate agents to conveyancers – should view this as an opportunity to strengthen their compliance frameworks,”
“Digital verification technology can help firms conduct more thorough due diligence, improve transaction oversight, and reduce the risk of errors that could lead to regulatory consequences. The tools exist to make compliance more efficient and more effective.”
The new supervision may bring new rules and guidelines, however having a strong due diligence process will always be a requirement. Credas can help streamline your onboarding and ensure you are fully compliant.
Get in touch with our team today to learn more about how we can help you. To keep up with the new guidelines, you can read the full consultation document here:
Anti-Money Laundering and Counter-Terrorist Financing Supervision Reform: Duties, Powers and Accountability Consultation
