The UK government is once again tightening the screws on anti-money laundering (AML) compliance. In its latest draft Money Laundering and Terrorist Financing Regulations 2025, HM Treasury has zeroed in on pooled client accounts (PCAs), a cornerstone of how many law firms operate.

At the Law Society’s recent economic crime conference, delegates heard stark warnings that law firms could soon be “battered” with requests from banks if the changes go ahead. But what’s really on the table and why does it matter? 

And, significantly, what can law firms do to prepare?

What’s changing?

Under current rules, PCAs often benefit from simplified due diligence (SDD). Banks have typically been able to treat them as “low risk” because they are managed by regulated professionals such as solicitors.

The Treasury wants to “decouple” PCAs from the SDD framework. In practice, this means:

• Banks can no longer automatically treat PCAs as low risk. 
• They must take reasonable measures to understand the purpose of the PCA, the nature of the law firm’s business and the risks involved. 
• Firms holding PCAs must, on request, disclose details of the individuals whose funds are held. This is referring to the underlying clients. 

The aim is greater transparency, without forcing banks to run customer due diligence (CDD) on every underlying client but it still represents a change in expectations.

Should law firms worry?

For solicitors, PCAs are not an optional tool. They are the backbone of client money handling, from conveyancing to litigation settlements.

The concern is that these proposals will create a flood of bank information requests, especially for firms working with multiple institutions. As Amasis Saba of Simmons & Simmons and a member of the Law Society’s economic crime taskforce, noted: “Your teams are going to get battered by requests. If you have multiple banks, [that means] multiple requests.”

If the Financial Conduct Authority (FCA) designates legal services a “high-risk sector”, banks may take an especially cautious approach, piling pressure on compliance teams.

What’s driving the change?

The Treasury’s consultation makes clear the rationale:

• Close regulatory loopholes. PCAs have been flagged as a weakness in the UK’s AML framework. 
• Risk-based regulation. Instead of assuming PCAs are safe, banks must assess risk case by case. 
• Alignment with evolving threats. The reforms form part of a broader package, including changes to trust registration, cryptoasset regulation, and enhanced due diligence rules. 

The impact on law firms

If implemented as drafted, law firms may face:

• Administrative overload by responding to repetitive and overlapping bank requests. 
• Client delays because  transactions involving client money may slow down as banks demand more detail. 
• Confidentiality tensions because, while disclosure is limited to what banks reasonably request, firms must balance AML transparency with client confidentiality obligations. 
• Increased compliance costs because firms will need stronger systems to track and retrieve information about underlying clients quickly. 

What law firms can do now

With the consultation closing on September 30, 2025 and final regulations expected in early 2026, law firms have a window to prepare. Steps worth considering include:

1. Engage with the consultation
   The Law Society will push back, but individual firms and practice groups should also provide feedback on the practical impact. 
2. Audit your PCA processes
   Review how you capture, store, and retrieve information about clients whose money is pooled. Could you respond quickly if a bank requested details? 
3. Strengthen bank relationships
   Proactive engagement with banking partners can help establish clear protocols for information-sharing and avoid unnecessary duplication. 
4. Train your teams
   Staff handling client money should understand the likely changes, how to respond to bank requests, and how to protect client confidentiality while meeting AML obligations. 
5. Factor in client communication
   Clients may be unsettled if banks suddenly request more detail about them. Preparing template explanations and FAQs could help preserve trust. 

The government’s move to tighten oversight of pooled client accounts is not just a technical fix. It’s a seismic shift in how law firms will interact with their banks. While the stated goal is to “increase accessibility of PCAs while maintaining robust controls,” the practical reality may be a heavier compliance burden for firms and slower client transactions.

For now, law firms should respond to the consultation, strengthen their data processes, and get ahead of the banks’ questions. Waiting until the regulations take effect in 2026 will be far too late.

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