The UK government’s latest proposals to reform the anti-money laundering (AML) and counter-terrorism financing (CTF) supervision regime have raised concerns across the legal sector. At the heart of the debate is a proposal to create a Single Professional Services Supervisor (SPSS) under the oversight of the Financial Conduct Authority (FCA). The Law Society of England and Wales has now formally opposed the move.
While the government frames the reform as a way to cut “pointless admin” and streamline supervision, the Law Society argues that the proposals risk doing the opposite: increasing complexity, cost, and regulatory uncertainty for law firms and the businesses they serve.
What exactly are the proposed reforms?
Currently, AML supervision in the UK is fragmented. There are around 23 professional body supervisors, including the Solicitors Regulation Authority (SRA), which supervises law firms. In October, Chancellor Rachel Reeves announced plans to create an SPSS as part of a wider drive to simplify regulation and improve consistency.
Under the proposals:
- AML supervision for legal services would move away from the SRA.
- A new SPSS would be created, sitting under the FCA.
- The FCA would gain expanded oversight and information-sharing powers in relation to professional services firms.
The government’s stated aim is to reduce inconsistency in enforcement, improve collaboration with law enforcement, and streamline the supervisory landscape.
Why is the Law Society opposing the SPSS?
The Law Society has repeatedly stated its commitment to effective, proportionate, and sustainable AML supervision. Its stated objection to the SPSS is to how this reform is being designed and implemented.
1. No proven benefits, significant risks
The Society argues that the SPSS model offers no clear evidence of improvement over the current system. Instead, it poses “major operational and strategic risks” for the legal profession, while failing to resolve long-standing issues such as dual regulation.
Rather than simplifying oversight, the reforms may lead to greater fragmentation, with law firms effectively subject to overlapping regimes and unclear lines of accountability.
2. Dual regulation and regulatory burden
A central concern is that transferring AML supervision to the FCA would not eliminate existing oversight by the SRA. Instead, firms could find themselves regulated by both bodies, increasing compliance costs, administrative burden, and legal uncertainty. The Law Society stresses that the proposals do not demonstrate how a proportionate, risk-based approach, one that reflects the realities of legal practice, would be achieved under the new model.
3. Client confidentiality and legal professional privilege
The expansion of FCA information-sharing powers raises serious red flags for the legal sector. The Law Society warns that, without robust safeguards, the reforms could:
- Compromise client confidentiality and legal professional privilege
- Undermine the integrity of Suspicious Activity Reports (SARs)
- Weaken whistleblowing protections
For law firms, these risks strike at the core of the solicitor-client relationship and could have knock-on effects for trust in legal services more broadly.
4. Rushed consultation and unclear transition
The Society has also criticised the speed of the consultation, warning that rushed reform could destabilise AML supervision across multiple sectors.
In particular, it notes that:
- Transition arrangements are insufficiently detailed
- There is no clear commitment to grandfathering, phased implementation, or close coordination between the FCA, SRA, and HM Treasury
- Persistent issues around overlapping disciplinary powers are not addressed
What exactly does this all mean for law firms and businesses?
If implemented as proposed, the reforms could have wide-reaching implications beyond the legal sector.
For law firms, the risks include:
- Higher compliance costs and duplicated reporting obligations
- Increased uncertainty about supervisory expectations
- Greater exposure to enforcement action under a regime less attuned to legal practice
For businesses and clients, the impact could be indirect but significant:
- Increased legal fees as firms pass on higher compliance costs
- Slower transactions due to more cautious AML processes
- Potential weakening of confidentiality protections in sensitive matters
Rather than supporting growth, the Law Society argues that poorly designed reform could act as a drag on professional services, undermining the government’s own economic objectives.
What’s next?
At this stage, the SPSS is still a proposal, not settled law.
The process involves:
- Government consultation on the reform of the AML/CTF supervision regime
- Responses from regulators, professional bodies, and stakeholders (including the Law Society)
- HM Treasury reviewing submissions and deciding whether to amend, pause, or proceed with the proposals
- If taken forward, legislative and regulatory changes would be required, alongside detailed implementation planning
Full implementation is not anticipated before 2029. The Law Society has urged the Treasury to pause before moving ahead with the proposals. Specifically, it has called for a further period of consultation to allow the full implications of the reforms to be properly examined. It has also emphasised the need for deeper and more meaningful engagement with supervisors and practitioners, arguing that those responsible for day-to-day compliance are best placed to identify practical risks and unintended consequences. Above all, the Society has stressed that any final decision must be preceded by the careful design of appropriate safeguards and robust transition arrangements, to ensure that reform actually strengthens the UK’s AML supervisory framework, instead of destabilising it.
A request for reform that is measured and proportionate
The Law Society emphasises that the debate over the SPSS is not about resisting change. It is about ensuring that reform genuinely improves AML supervision without undermining legal practice, client confidentiality, or economic growth.
Law Society president Mark Evans noted that meaningful reform “cannot be achieved through undue haste.” He believes that without clearer benefits, stronger safeguards and a workable transition plan, the proposed SPSS risks adding complexity where simplification was promised.
For now, the future of the SPSS remains uncertain, but its potential impact on law firms and businesses makes this a reform worth watching closely.
Our guide, From the SRA to the FCA: What the single professional services supervisor means for your firm, covers everything you need to know about this reform. Download it here.
