At this quarter’s VinciWorks AML Core Group meeting, our bringing together of UK legal professionals and compliance experts to discuss the latest developments in financial crime regulation, one topic led the conversation.

AML Core Group meetings are by invitation only. Reach out here if you are interested in participating.

The government has just announced one of the most significant shake-ups in legal-sector AML supervision in over a decade: the Solicitors Regulation Authority (SRA) will be stripped of its AML supervisory powers, which will instead transfer to the Financial Conduct Authority (FCA).

Don’t miss our just-released guide: From the SRA to the FCA: what the Single Professional Services Supervisor means for your firm. Download it here.

The change, unveiled by Chancellor Rachel Reeves as part of her “blitz on business bureaucracy,” will see the FCA become the UK’s Single Professional Services Supervisor (SPSS) for AML. In short, the city watchdog will take over from the SRA in overseeing AML compliance across law firms, a role the SRA has held since 2007.

The Law Society has so far responded with cautious support. Its president, Mark Evans, said the Society was “ready to work with the FCA,” though he stressed the importance of a “smooth handover to avoid extra costs or complexity for firms.” The comment captures the mood across much of the legal profession: curious optimism mixed with understandable apprehension.

Out of the frying pan and into the fire?

As Compliance Office founder and consultant Andrew Donovan noted, this isn’t what legal regulators expected. “Some parts of the market will be pleased to see the SRA not getting yet more powers,” he pointed out, “especially given recent questions around its performance in certain areas, but those of us familiar with the FCA also know that this could be going out of the frying pan and into the fire.”

The FCA is known for its rigorous, data-driven, and often unforgiving approach to compliance. In the financial services world, the regulator frequently invokes Section 166 reviews, in-depth, independent investigations into firms’ systems and controls. These reviews can cost ten to a hundred times the price of a standard AML audit law firms are currently used to, sometimes running into six figures.

That level of scrutiny may well be headed for the legal sector if the FCA applies its existing model under the Financial Services and Markets Act (FSMA).

A shift in tone: From risk-based to prescriptive

Donovan added that the FCA’s style of regulation has historically been viewed as more prescriptive than the risk-based approach typically emphasised by the SRA. “That brings both opportunities and downsides,” he observed.
Clearer rules can create certainty, but they can also remove flexibility, which is vital in a diverse legal sector. 

Another concern was the risk of regulatory overlap. Even if the FCA assumes AML oversight, the SRA will still handle professional conduct breaches for the individuals they will continue to regulate. Donovan did not think the SRA would step back entirely. If a firm has a serious AML issue, both regulators will likely have a view and that could easily lead to double regulation.

Questions also surfaced from participants in the meeting about the transition process itself:

“Will the FCA recognise SRA audit data already gathered on firms, or will they start from scratch?” Donovan assumed they’d start from scratch, but the answer could mean the difference between a smooth transition and an administrative nightmare.

Change won’t happen overnight

While the announcement is headline-grabbing, no one expects the change to be immediate. Implementing this shift will require new legislation, especially if the government intends to extend FSMA powers to law firms. In the meantime, the SRA remains in post, and law firms face an uncertain interim period where policy is shifting, but supervision continues as usual.

As Donovan summed up: “It’s a massive change, but it’ll take time, if it ever fully happens. Hopefully, that gives us space to work out the details.”

What law firms should do now

For now, the key takeaway is don’t panic, but do prepare. If the FCA is to take over, its focus on systems, evidence, and accountability means firms should start strengthening their AML frameworks now. Practical steps include:

• Reassess AML governance structures, ensuring clear accountability at senior management level. 
• Review data and record-keeping. The FCA will expect clear, evidence-based compliance, not just well-written policies. 
• Plan for possible Section 166-style reviews. Even if these remain rare initially, firms should understand the potential cost and scope. 
• Monitor FCA and Treasury consultations. The implementation details will be crucial in determining impact and timelines. 

The FCA’s appointment as the AML supervisor for law firms would mark the most significant regulatory realignment in over a decade. For some, it represents a chance to professionalise and standardise AML oversight; for others, it’s a worrying sign that the financialisation of legal compliance is accelerating.

Either way, as our VinciWorks AML Core Group discussion made clear, change could be coming, and firms that take this moment to tighten their AML controls, governance, and data readiness will be in the strongest position to adapt when it does.

In this volatile regulatory environment, the need for firms to adopt agile systems that can keep pace. This is why we developed Omnitrack, our workflow optimisation platform. It includes our AML Client Onboarding and Legal Compliance Suite solutions, all customisable to client process. Learn more here.