The latest AML Core Group meeting proved once again why bringing compliance professionals together in the legal sector is so valuable. This time, the meeting was in person in the heart of London and the session quickly developed into a lively, interactive discussion, with participants openly sharing experiences, challenging assumptions and exchanging solutions to some of their biggest AML challenges.
With the AML Core Group meeting taking place in person for the first time, members took advantage of the opportunity to engage directly with one another. The conversation flowed well beyond the planned topics, creating a vibrant, collaborative session that reflected the real issues firms are grappling with and delivered practical insights that attendees could take back to their firms.
The SRA to FCA transition: the topic on everyone’s minds
The proposed transfer of AML supervision from the SRA to the FCA dominated a lot of discussion throughout the meeting.
Participants explored what this change could mean, with concerns raised around the scale of transferring supervision for about 60,000 firms and whether the FCA will realistically be able to implement such a significant regulatory change without adopting a phased approach.
A recurring theme was the likelihood of a lengthy transition period, with current expectations suggesting implementation could take several years before the new regime is fully operational.
Attendees acknowledged that although the FCA may eventually become the AML supervisor, firms remain fully accountable to the SRA today.
Dual regulation and enforcement concerns
One of the most engaging discussions centred on the possibility of overlapping regulatory activity during the transition.
Participants debated whether firms could find themselves dealing with both the SRA and FCA at the same time, especially where existing investigations remain open when responsibility transfers, or where AML concerns overlap with wider professional conduct, sanctions, data protection or economic crime issues.
There was also discussion around how the FCA’s supervisory style may differ from the SRA’s current approach. Attendees raised questions about the FCA’s likely use of information-gathering powers, ongoing monitoring, data-led supervision and a more interventionist regulatory model.
While government proposals suggest regulators will coordinate where appropriate, participants questioned how this will actually work and whether firms could face parallel scrutiny during the transition.
The group also discussed the need for proportionate enforcement. Minor breaches, poor process or documentation gaps may need to be treated differently from serious or systemic failures, but firms should not assume that technical failings will be ignored.
Guidance, fees and future FCA powers
Several important practical questions came up around what FCA supervision will look like.
Attendees discussed the likely continued importance of sector-specific guidance, including the role of LSAG guidance. There was concern that any future FCA-led model should retain legal-sector expertise, rather than importing a financial services approach into law firms without recognising how legal practice works.
Cost was another concern. The move to FCA supervision is not only a regulatory change but potentially a financial one, with firms likely to face further consultation on fee structures and the cost of funding the new supervisory model.
The group also touched on possible FCA-style gatekeeping, including whether more formal fit and proper checks could change how firms manage beneficial owners, officers and managers under the AML regime.
Legal professional privilege was another important legal-sector concern. Members discussed how any future information-gathering powers would need to operate without undermining privilege or creating uncertainty during inspections and investigations.
Risk and compliance need a stronger voice
One of the most significant themes that emerged was the need for risk and compliance teams to be more visible and influential within their firms.
Several attendees shared how they have successfully embedded compliance into senior decision-making by creating dedicated risk committees that report directly to the Board. This was seen as a practical way to ensure senior leadership is actively engaged on regulatory and economic crime risks, rather than treating AML as a purely operational issue.
Participants noted that risk and compliance teams are often viewed as non-billable, but they carry significant responsibility for protecting the firm. Fee earners also need the right skills, confidence and support, rather than only encountering AML when something has gone wrong.
Participants noted that economic crime risk should be treated as a strategic business risk that requires active oversight from senior leadership. AML should no longer be seen purely as a compliance issue. Effective governance is becoming just as important.
Practical experiences from SRA inspections
Many of the attendees shared their recent inspection experiences.
One participant described an SRA inspection lasting over two hours that examined not only regulated work but also questioned how unregulated matters were being assessed for AML risk. This was not something the firm had expected to be questioned on in that level of detail.
Inspectors reportedly focused heavily on internal referral processes, governance arrangements and whether compliance teams had enough authority to intervene where concerns arose.
A key takeaway was the need for firms to understand their own matter data. Several attendees noted the importance of clearly separating regulated and unregulated work within firm systems, so that AML risk analysis, reporting and inspection preparation are easier to manage.
These real-life examples prompted a wider discussion about preparing firms for future inspections and ensuring compliance processes are properly documented, easy to evidence and understood across the business.
Ongoing monitoring continues to be a challenge
If one topic generated near-universal agreement, it was ongoing monitoring.
Participants shared how difficult it can be to balance effective monitoring with operational efficiency, particularly where fee earners are already under a lot of pressure and may not always recognise when a matter has changed in a way that affects AML risk..
The group discussed the importance of defining what actually constitutes an AML trigger. Rather than expecting fee earners to rely solely on judgement, firms need clear criteria for when risk should be reassessed, when sanctions screening should be refreshed and when matters should be escalated.
Technology was a major part of this discussion. Many participants shared how they are using systems to trigger sanctions checks, monitor risk indicators and reduce the administrative burden overall. But technology was not seen as a complete answer. Firms still need clear processes, practical guidance and a culture where people understand why ongoing monitoring matters.
The group also discussed the value of file review outcomes. Where reviews identify recurring issues, firms should use those findings to improve training, matter-opening processes, escalation routes and risk assessments.
Source of funds and source of wealth: all about documentation
The group also explored best practice around source of funds and source of wealth checks.
The discussion centred less on whether checks had been completed and more on whether the fee earner’s reasoning was properly evidenced. Participants agreed that firms need to be able to show not only that documents were collected, but what was considered, why the explanation was accepted and where the evidence is stored.
Attendees shared a variety of approaches, including maintaining dedicated AML folders within document management systems, recording the rationale behind source of funds decisions, involving finance teams earlier in the transaction process and using technology to improve document storage and retrieval.
One theme was the need to make IT and finance key allies. Some firms are working closely with IT teams to improve how AML information is captured in attendance notes, matter records and document systems. Others are involving finance earlier, including before client money enters the client account, so due diligence and AML checks can be completed before money is received.
Beneficial ownership and cross-border challenges
Complex ownership structures, especially private equity arrangements, generated another lively discussion.
Participants discussed the importance of moving beyond the traditional 25% ownership threshold and considering effective control, layered structures, jurisdictional risk and whether the ownership picture makes commercial sense.
The group also discussed cross-border matters and the challenges of applying AML standards consistently across offices and jurisdictions. Some firms described using London or UK-based processes as a central standard, while others discussed how to document AML responsibility where work is being carried out across multiple jurisdictions.
The EU AML package was also mentioned for firms operating internationally. The practical challenge here is not only complying with one regime, but developing a global AML standard that can be applied consistently and still recognising local requirements.
Questions were also raised around approval processes for higher-risk or multi-jurisdiction matters, including whether partner approval is needed and how lawyers should be involved in AML assessments.
Sharing best practice ideas
One of the greatest strengths of the Core Group is the sharing of practical solutions by participants.
Among the ideas discussed were:
- creating board-level risk committees to strengthen governance
- separating regulated and unregulated work within firm data to improve risk analysis
- building stronger relationships with IT teams to improve AML record keeping
- working closely with finance departments before client money enters client accounts.
- using structured file reviews to encourage better AML decision-making
- introducing clearer escalation processes for fee earners
These peer-led discussions were as valuable as the formal presentations.
Looking ahead
The meeting concluded with a reminder that significant regulatory change is coming, but firms should not wait for the FCA transition before strengthening their AML frameworks
Participants were encouraged to monitor consultations on implementation and enforcement powers and fees. There was also discussion about avoiding speculation and focusing on what firms can control now such as remaining SRA compliant, improving internal data, strengthening governance and making AML processes easier to evidence.
The coming years may bring a very different supervisory model, but many of the immediate priorities remain practical. Firms need clear records, active senior oversight, effective monitoring, strong source of funds and source of wealth processes, and a culture where risk and compliance have a meaningful voice.
A session driven by collaboration
One of the most striking features of this AML Core Group meeting was the level of engagement from attendees.
While the original agenda provided an excellent framework, the discussions quickly evolved into an open forum where participants challenged ideas, shared experiences and worked collaboratively to solve common problems.
The result was an energetic, practical and highly valuable session that reflected exactly what the AML Core Group aims to achieve. That is bringing professionals together to navigate an increasingly complex regulatory landscape through shared expertise and open discussion.
