Law firms across the United Kingdom are preparing for a significant toughening of anti-money laundering rules, as the government moves to overhaul supervision ahead of a critical international review.
A New Watchdog with Sharper Teeth
The Financial Conduct Authority (FCA) is set to become the new anti-money laundering regulator for the legal sector. This consolidation aims to replace the current fragmented system, where oversight is spread across nine separate supervisors, including the Solicitors Regulation Authority (SRA).
Experts warn this shift will bring "sharper" penalties and could fundamentally reshape the industry. The change is part of a government drive to clean up the UK's reputation as a hub for illicit finance, with the National Crime Agency estimating that £100bn is laundered through or within the UK annually.
Pressure Mounts Ahead of FATF Review
The urgency for reform is linked to an upcoming evaluation by the Financial Action Task Force (FATF), the global money laundering watchdog, scheduled for August 2027. A 2018 FATF report had previously criticised "significant weaknesses" in the UK's defences, specifically highlighting the legal and accounting sectors.
"The timing of this shift is no coincidence," said Priya Giuliani, a financial crime investigator and partner at consultancy HKA. She noted the "urgency is there for the UK to present a credible, consistent, and effective supervisory system" before the review.
From Guidance to Enforcement: A Starker Regime
The regulatory approach is expected to harden considerably. The SRA has historically employed a more collaborative, guidance-led style, with its fines for money laundering breaches capped at £25,000 unless cases go to tribunal. In the year to April, it issued 86 fines totalling £1.5m.
In stark contrast, the FCA's enforcement is markedly more severe. Last year, it issued just six anti-money laundering fines, but they ranged from £289,000 to £39.3m, summing to £82m. Its smallest penalty was larger than the SRA's biggest.
"The FCA brings sharper scrutiny, broader powers, and a data-driven lens," Giuliani stated. "Legal firms must be ready." The higher bar is also evident in authorisations: the FCA rejected 44% of applications in 2023-24, while the SRA accepted all firms that applied.
Steve Smart, the FCA's executive director of enforcement and market oversight, said: "Fighting financial crime is a priority for the FCA and we have experience in anti-money laundering supervision which we will bring to bear. We intend to take a data-led and proportionate approach."
