FCA takes over compliance.
The UK government is transferring anti-money laundering (AML) supervision from the Solicitors Regulation Authority (SRA) and the Law Society of Scotland to the Financial Conduct Authority (FCA), marking a major shift in the regulatory landscape for law firms. Understanding these changes and preparing now will help firms stay compliant and avoid unnecessary disruptions.
What This Change Means for Law Firms
1. Centralised AML Oversight
The FCA will become the Single Professional Services Supervisor, taking responsibility for AML compliance across law firms, accountants, and other professional services. This centralisation aims to simplify supervision, reduce fragmented oversight, and create a consistent standard across the sector.
2. The Transition Timeline
The transfer of responsibilities will take place over the coming months, with a public consultation planned for November 2025. During this period, law firms should start reviewing compliance processes and policies to align with the FCA’s supervisory approach.
3. SRA’s Ongoing Role
While the SRA will no longer supervise AML, it will continue regulating professional conduct and the Solicitors Accounts Rules (SAR). Firms must note that AML breaches may still lead to SRA disciplinary action, creating potential overlaps with FCA enforcement.
4. Industry Reactions and Concerns
The announcement has received a mixed response. Organisations such as The Law Society and ICAEW have highlighted potential challenges, including higher compliance costs, administrative burdens, and questions over the FCA’s capacity to manage these expanded responsibilities.
5. Practical Steps for Law Firms
Law firms can take immediate action to navigate this transition smoothly:
- Update internal AML policies to reflect FCA expectations
- Train staff on new compliance requirements
- Engage with the November consultation to influence the transition process
- Monitor FCA and professional body guidance for ongoing updates
Conclusion:
The shift of AML supervision from the SRA to the FCA is a significant regulatory change that will impact every UK law firm. Proactive preparation, policy reviews, and engagement with the consultation are essential to ensure compliance and avoid penalties under the new system.
FCA AML Supervision: What It Means for Scottish Law Firms
Yes, the recent UK government decision to transfer anti-money laundering supervision from the Solicitors Regulation Authority to the Financial Conduct Authority will also apply to law firms in Scotland. This marks an important regulatory shift with direct implications for Scottish legal practices.
Key Points for Scottish Law Firms
1. UK-Wide Application
The reform establishes the FCA as the Single Professional Services Supervisor for AML and counter-terrorist financing (CTF) compliance across the entire UK, including Scotland. This means Scottish law firms will now come under direct FCA supervision for AML compliance.
2. Retention of Local Regulatory Powers
While AML supervision moves to the FCA, the Law Society of Scotland will continue to regulate professional conduct and the Solicitors Accounts Rules (SAR). This creates a dual regulatory framework, where the FCA oversees AML compliance, and the Law Society of Scotland retains authority over other regulatory areas.
3. Concerns from Scottish Legal Bodies
The Law Society of Scotland has raised concerns that the FCA’s finance sector focused approach may not align with the nuances of legal practice in Scotland. The Society warns that the change could introduce higher compliance costs and administrative burdens for smaller firms.
4. Implementation Timeline
The transition to FCA-led AML supervision will unfold over the coming months in exactly the same way as in England and Wales. Scottish firms should prepare for changes to compliance requirements and supervisory processes.
Next Steps for Scottish Law Firms
To ensure a smooth transition under the FCA’s new AML framework, Scottish practices should:
- Stay Informed – Follow regular updates from the FCA and Law Society of Scotland on the transition timeline and regulatory expectations.
- Engage in Consultation – Contribute to the November 2025 public consultation to ensure the unique challenges faced by Scottish law firms are properly represented.
- Review Compliance Procedures – Conduct a full review of AML and CTF policies to align with FCA supervision standards.
As soon as further information becomes available, we shall keep you posted.
