FCA takes over the SRA’s anti-money laundering role

The UK government confirmed in October 2025 a significant overhaul of the anti-money laundering (AML) and counter-terrorist financing (CTF) supervisory landscape, designating the Financial Conduct Authority (FCA) as the Single Professional Services Supervisor (SPSS). This move transfers AML oversight from the Solicitors Regulation Authority (SRA) and over 20 other professional body supervisors to the FCA, aiming to consolidate a fragmented system and bolster the UK's resilience against financial crime. While the underlying Money Laundering Regulations 2017 remain unchanged, legal professionals should anticipate a more assertive, data-driven, and outcomes-focused supervisory approach from the FCA, with a greater emphasis on demonstrable compliance and potentially higher penalties for breaches. The transition is expected to span several years, requiring enabling legislation and detailed implementation plans.

The landscape of anti-money laundering (AML) and counter-terrorist financing (CTF) supervision for the UK legal sector is undergoing its most profound transformation in over a decade. In October 2025, the UK government announced a pivotal reform, confirming that the Financial Conduct Authority (FCA) will assume the role of the Single Professional Services Supervisor (SPSS) for AML/CTF, thereby taking over these responsibilities from the Solicitors Regulation Authority (SRA) and numerous other professional body supervisors. This strategic shift is designed to streamline a historically fragmented regulatory framework, enhance consistency, and fortify the UK's defences against economic crime.

This article delves into the implications of this significant regulatory change for practising attorneys and legal professionals. While the core obligations under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs 2017) remain constant, the supervisory approach, enforcement mechanisms, and expectations for demonstrating compliance are set to evolve dramatically under the FCA's remit. Firms must prepare for a transition to a more rigorous, data-intensive, and interventionist regulatory environment, moving beyond a mere 'tick-box' approach to AML compliance.

The impetus for this supervisory overhaul stems from long-standing criticisms, notably from the Financial Action Task Force (FATF), regarding the UK's fragmented AML/CTF supervisory framework. The previous system, involving 22 different professional body supervisors for various sectors, including legal and accountancy, was identified as suffering from inconsistent standards, uneven enforcement, and insufficient data sharing. HM Treasury's 2023 consultation on reform models for AML/CTF supervision ultimately led to the decision to consolidate oversight under a single public body.

Prior to this reform, the SRA was responsible for supervising solicitors' compliance with the MLRs 2017, which came into force on 26 June 2017, replacing earlier regulations. These regulations impose obligations on firms to conduct firm-wide and client-level risk assessments, implement robust AML policies, controls, and procedures, carry out customer due diligence (CDD) and enhanced due diligence (EDD), and appoint Money Laundering Reporting Officers (MLROs). The SRA, while having strengthened its AML approach in recent years, operated with a different regulatory culture, often characterised as more guidance-led and with a lower cap on internal fines compared to the FCA. The broader legislative context also includes the Economic Crime and Corporate Transparency Act 2023 (ECCTA), which came into effect on 25 March 2025, further strengthening measures against financial crime, fraud, and illicit business activities, and introducing new identity verification requirements and a 'failure to prevent fraud' offence.

The transition of AML/CTF supervision to the FCA, while confirmed in October 2025, is a multi-year process requiring enabling legislation, with full implementation potentially extending towards 2029. HM Treasury published its response to the consultation on supervisory powers in June 2026, outlining the broad framework for reform. The Financial Services and Markets Bill, introduced to Parliament in May 2026, includes clauses to facilitate this transfer. During this transitional period, existing supervisory arrangements under the SRA remain in effect.

Crucially, the underlying MLRs 2017 themselves are not being rewritten; rather, it is the supervisory body and its approach that are changing. The FCA's supervisory model is distinctly more assertive, data-driven, and outcomes-focused than the SRA's, with a strong emphasis on firms demonstrating the *effectiveness* of their AML controls, not merely their existence. This will necessitate robust internal audits, continuous monitoring, and meticulous record-keeping to evidence compliance. The FCA's enforcement powers are also considerably more extensive, with a history of imposing multi-million-pound fines in the financial sector, a stark contrast to the SRA's previous £25,000 internal fine cap.

New powers for the FCA will include maintaining a public register of supervised firms, requiring registration as a condition for AML-regulated activity, and applying strengthened 'fit and proper' assessments for beneficial owners, officers, and managers. While the legal profession will continue to draft AML guidance, the FCA will be responsible for its approval, with HM Treasury retaining a veto power. A new framework for cooperation and information sharing between the FCA, professional body supervisors, and HMRC will also be legislated. Concerns have been raised by professional bodies, including the Law Society, regarding the preservation of sector-specific expertise, potential regulatory overlap, additional costs, and the need for safeguards for legal professional privilege and confidentiality. The government has affirmed that existing protections for privileged material will remain. The SRA will continue to regulate other aspects of solicitor conduct and professional standards, meaning firms will still navigate a dual regulatory landscape for different aspects of their operations.

The shift of AML/CTF supervision from the SRA to the FCA represents a monumental change for the UK legal sector, signalling a move towards a more harmonised, robust, and stringent anti-financial crime regime. While the full implementation will unfold over several years, legal professionals must proactively prepare for the FCA's distinct supervisory culture, which prioritises demonstrable effectiveness of controls, data-driven oversight, and a willingness to impose significant penalties for non-compliance. Firms should use this transitional period to review and enhance their existing AML policies, procedures, and training, ensuring they can provide granular evidence of their controls working in practice.

Practitioners should closely monitor legislative developments and forthcoming guidance from the FCA and HM Treasury regarding the detailed implementation plan, fee structures, and specific expectations. Engaging with professional bodies, which will continue to play a role in drafting guidance, will be crucial. The emphasis will be on embedding a culture of continuous compliance and robust governance, moving beyond mere procedural adherence to a demonstrable commitment to preventing money laundering and terrorist financing. Firms that embrace this proactive approach will be best positioned to navigate the evolving regulatory landscape successfully.