HM Treasury’s consultation on reforming AML and counter-terrorist financing supervision for professional services represents one of the most significant regulatory shifts the legal sector has faced in decades. The proposals would fundamentally change how law firms are supervised for AML and CTF purposes, transferring responsibility from professional body supervisors to the FCA and introducing new powers, processes and accountability mechanisms.
VinciWorks’ response to the consultation was grounded in extensive engagement with law firms across England, Wales and Scotland. It reflected direct conversations with managing partners, MLROs, COLPs and senior compliance leaders, alongside structured feedback gathered through a dedicated client webinar on the proposals. Our role was not to advance an abstract policy position, nor to substitute for representative bodies, but to reflect how firms expect these reforms to operate in practice and where they foresee real risks if changes are not carefully calibrated.
We have also created a FAQ guide to the main issues raised by firms with the announced transition. You can also watch our webinar on the subject with legal sector professionals.
What concerns did law firms raise?
There was broad recognition across the sector that reform is needed. Firms consistently acknowledged concerns about fragmentation in the current supervisory model and supported efforts to improve consistency, transparency and effectiveness. At the same time, there was equally strong consensus that reform must be proportionate and must avoid creating overlapping or duplicative regulatory regimes for legal services.
A recurring theme in firm feedback was concern about duplication with existing legal regulation. Proposals to extend “fit and proper” testing to beneficial owners, officers and managers were viewed as particularly sensitive. Firms questioned what additional protection would be achieved where equivalent probity and approval checks are already carried out by legal regulators, and warned that parallel approval regimes risk delay, uncertainty and increased cost without clear AML benefit.
The proposed expansion of supervisory and enforcement powers also prompted careful scrutiny. Firms broadly accepted that the FCA would require appropriate information-gathering and inspection powers to carry out its role. What concerned them was how these powers would interact with existing regulatory oversight and whether supervision could drift too quickly into enforcement, especially for smaller firms with limited resources and lower inherent risk profiles.
How will legal professional privilege be protected?
Legal professional privilege emerged as one of the most significant areas of concern. Proposals around skilled person reports, information sharing and access to SARs raised questions about how privilege would be protected in practice. Firms stressed that privilege is not a technical obstacle to supervision, but a foundational principle of legal services that must be explicitly safeguarded if reforms are to command confidence across the sector.
Firms also raised concerns about consumer confusion and reputational risk arising from proposals such as FCA-maintained registers. While there was support in principle for a single authoritative AML register, firms emphasised the need for clear labelling and explanation to ensure such registers are not misconstrued as authorisation to provide regulated financial services.
What about transition periods?
Transition was repeatedly identified as the greatest operational risk. Firms were clear that without clear timelines, structured handover arrangements and retention of sector expertise, there is a risk of regulatory atrophy during the move to a new supervisory model. Many stressed that poor transition design would undermine the very AML outcomes the reforms seek to improve.
These concerns are not limited to individual firms. Both the Law Society of England and Wales and the Law Society of Scotland have publicly expressed opposition to aspects of the proposed reforms, highlighting risks to proportionality, professional independence and the effective functioning of legal services. Their interventions underline that the issues raised through VinciWorks’ response reflect wider, deeply held concerns across the profession.
VinciWorks’ consultation response aimed to reflect the shared position emerging from firms of different sizes and practice areas, rather than isolated objections. Our focus throughout was on how the proposals would work day-to-day within law firms, how they would interact with existing regulatory obligations, and where unintended consequences are most likely to arise.
We will continue to engage with firms as this reform process develops, providing a forum for discussion and sharing practical insight on how proposals may evolve. We will also continue to feed back sector concerns to policymakers, supporting a regulatory framework that strengthens AML and CTF outcomes while respecting the unique role and obligations of legal services.
If you would like a copy of the consultation response, or would like to continue to share your firms’ perspectives on the shift to the FCA as the single regulator, please contact [email protected]
