There are a lot of acronyms here, so we’ve included a glossary at the end of this article.
Why change?
A review in 2022 by HM Treasury of the UK’s AML and counter-terrorist financing (CTF) regulatory and supervisory regime concluded that while there had been iterative improvement to the regime, structural reform may be needed. The 2023 consultation set out four models for reform:
1) OPBAS+ - increased powers to the Office for Professional Body AML Supervision (OPBAS). Created in 2018, OPBAS aims to improve consistency and effectiveness of professional body supervision, including the sharing of information between the PBSs and law enforcement agencies;
2) PBS consolidation – the current 22 PBSs to be reduced to a small number;
3) Single Professional Services Supervisor (SPSS) – single public body granted responsibility for all AML/CTF supervision for the legal and accountancy sectors, trust or company service providers (TCSPs), and potentially other sectors, such as estate agency and letting agency businesses, who are regulated under the Money Laundering Regulations (MLRs);
4) Single AML Supervisor (SAS) – one public body holds responsibility for all AML/CTF supervision. The FCA, Gambling Commission, and the PBSs would continue to supervise relevant firms only for non-AML/CTF purposes.
Respondents from the legal and accountancy sectors were, overall, more supportive of OPBAS+ - due to the continuity this option could bring, the ability to build upon the improvements that OPBAS and the PBSs had made over the previous five years, and because of concerns about the feasibility of implementing other options.
In the end, the UK government favoured model 3, a Single Professional Services Supervisor (SPSS) i.e. the FCA. This was because:
1) The move will bring professional services in line with all other sectors in scope of the MLRs, already overseen by public bodies;
2) It simplifies the highly complex regulatory regime;
3) It provides greater consistency for firms;
4) It allows increased information and intelligence-sharing between supervisors and law enforcement to identify and respond to non-compliance; and
5) There can be a more robust approach to enforcement action where required.
Who and what will move?
Those firms carrying out activities within scope of the MLRs as legal services providers, accountancy service providers (ASPs) and TCSPs will now be supervised by the FCA. In other words, all firms currently supervised for AML/CTF matters by a PBS (such as the SRA and ICAEW), and all ASPs and TCSPs supervised by HMRC will be supervised by the FCA.
OPBAS’ existing function will no longer be needed once PBSs cease in their AML/CTF supervisory function.
The scale of the task is significant – in its AML report for 2025, the SRA confirmed it supervises 5,569 firms for AML compliance. The SRA reportedly currently has 30 full-time staff dedicated solely to AML regulation. The ICAEW is the largest accountancy PBS, supervising around 10,000 firms.
The move means approximately an additional 60,000 entities will fall under the FCA’s supervisory remit, in addition to the c.17,000 it already supervises. As of around March 2025, the FCA’s total supervisory remit, including firms outside the scope of the MLRs, extended to around 42,000 firms.
The professions’ response
The news brought with it many unknowns.
A concern mirrored across the professions is the loss of sector specific expertise with the new model.
The SRA responded to the government consultation by saying it wanted to be the consolidated legal sector supervisor. In responding to the news of the FCA as SPSS, former Chief Executive of the SRA, Paul Philip, highlighted that the SRA has 280 employed solicitors and is better placed to deal with law firms. Part of the SRA’s argument to become the consolidated legal sector supervisor was its better understanding of the practice of law. And there is much still to do in the sector: in its 2025 AML report, the SRA reported carrying out 935 proactive AML engagements with firms during the reporting period (an increase from 545 proactive engagements in the last reporting year). Almost a third (270) of firms the SRA engaged with were not compliant.
In 2023, the ICAEW warned that the model now selected by the Government would give rise to a high risk of losing the expertise and knowledge needed to effectively perform supervision.
HM Treasury’s intention is that the FCA will build specific expertise in the particularities of each sector it supervises. This will of course be no quick task, not least because of the significant increase in supervisory population, and gives rise to concerns as to what this means for the intervening period. Such concerns will not have been quelled by the Government’s recent consultation (see below), within which it concedes that implementation will, “inevitably take several years and during this time, the UK’s ML/TF defences may come under threat if the appropriate safeguards are not in place.”
The How
This is of course the big question: how will the FCA undertake this mammoth new role?
The government has now published its consultation on Anti-Money Laundering/Counter Terrorist-Financing (AML/CTF) Supervision Reform: Duties, Powers, and Accountability and with it some further clarity as to how this will all work in practice.
The government has made clear that its primary goal is, “to ensure effective AML/CTF supervision for professional services firms.”
Some of the key proposals/considerations set out include:
1) The FCA registering all relevant professional services firms that are carrying out activity within scope of the MLRs (as it already does for financial services firms);
2) The FCA carrying out “gatekeeping” checks as assurance that these firms are well-placed to comply effectively with AML/CTF obligations;
3) The FCA identifying and acting against firms that are improperly operating without registration (“policing the perimeter”) – currently PSBs don’t have a power through the MLRs to bring relevant persons within AML/CTF supervision;
4) The FCA receiving and processing applications for registration and publishing a register of notified professional services firms in scope of the MLRs;
5) Amending regulation 58 under the MLRs (the “fit and proper” test) to ensure the FCA’s gatekeeping powers are harmonised across the professions;
6) Consideration of information-sharing arrangements between the FCA and professional bodies, to help all parties identify firms operating without due supervision and to minimise burdens on firms from registering with multiple supervisors;
7) All firms which carry out legal services in scope of the MLRs should be required to register with the FCA, even if they are not currently registered with an AML/CTF supervisor;
8) The FCA be provided with the powers necessary to carry out effective interventions across its population and to gather up-to-date information on risk from relevant authorities to inform this;
9) The FCA to be provided with a broadened toolkit to enable it to intervene in the most appropriate way – this may include tools such as the power of directions (said to support early remediation, promote compliance and help maintain confidence in the supervisory regime) and the ability to appoint or require firms to appoint a skilled person (similar to the powers the FCA has under regulations 74A, 74B and 74C in relation to crypto asset firms);
10) Extension of the information gathering and inspection powers in the MLRs to the new sectors within FCA supervision;
11) Responsibility for AML/CTF guidance for legal, accountancy, and TCSPs to be transferred to the FCA; the FCA should seek to minimise disruption and excess burden on firms, including considering how existing Legal Sector Affinity Group (LSAG) and Consultative Committee of Accountancy Bodies (CCAB) guidance could be incorporated into the new arrangements;
12) The MLRs to be amended to require the National Crime Agency to share Suspicious Activity Reports with the FCA and other public sector supervisors, where these have been submitted by or relate to firms within their supervisory population;
13) All decisions of the FCA in relation to their AML/CTF supervision of professional services firms to be appealable to the tribunal regime, as other FCA decisions currently are;
14) Day-to-day costs of AML/CTF supervision of professional services firms by the FCA will be recovered through fees charged to the firms it supervises (the FCA intends to consult on how it proposes to do this in due course);
15) The FCA, HMRC and PBSs may require additional powers to ensure a smooth transition while reducing scope for duplication;
16) The FCA will work closely with OPBAS and the existing PBSs to ensure the knowledge of professional services sectors is retained and embedded into its supervisory model;
17) The intention is for firms already supervised by PBSs or HMRC to not need to complete a re-registration process but that firms or individuals may be required to confirm certain details – potentially on an annual basis – as they already are, and it is proposed that the FCA undertakes fit and proper checks in respect of the professional services firms, recognising that these may not have been conducted previously to the same depth as those typically applied by the FCA;
18) The details of how information on supervised firms will be provided to the FCA by existing supervisors will be determined by the FCA, HMRC and existing PBSs;
19) A proposal for a legislative requirement to be placed on the FCA and existing bodies to work together to agree an information-sharing regime that minimises requests of firms whilst ensuring that all bodies have the necessary information to meet their objectives effectively;
20) While recognising that some firms may experience a degree of dual regulation with requirements to register and interact with both their professional body or regulator for non-AML/CTF related matters and the FCA for AML/CTF related matters, the FCA will determine in conjunction with existing professional bodies and regulators how best to limit duplication for those firms to which this may apply. This could involve the creation of a single registration gateway, managed by an appropriate body, through which relevant data is shared with both the FCA and professional bodies – helping to reduce duplication for firms that continue to interact with both. Or it could include structured information-sharing arrangements between the FCA and professional bodies to minimise the burden on firms of providing the same information to multiple organisations;
21) The FCA could have the power (in relation to professional services firms) to impose civil penalties, suspensions, prohibitions and public censures, and to initiate criminal proceedings for breaches of the MLRs, in line with existing FCA and HMRC powers. It is said this should support more dissuasive action against non-compliance with the MLRs; and
22) The FCA will continue to be operationally independent of HM Treasury and political control. It will remain accountable to HM Treasury and Parliament.
What next?
The consultation seeks views on whether the proposed powers, duties, and accountability mechanisms for the FCA are sufficient and appropriate to achieve the primary aim of AML/CTF supervision reform, i.e. supervisory effectiveness. The deadline for responses is on 24 December. And so, the New Year will bring further clarity on the new regime.
Some of the big-ticket issues have been left to the FCA to determine, such as information sharing and how best to minimise duplication for regulated firms. Much uncertainty therefore remains.
The dual regulation aspect generally is one part of the move which will self-evidently require careful thought and management. The SRA Code of Conduct for Firms, for example, specifically provides at paragraph 3.11 for Firms to keep up to date and follow the law and regulation governing the way they work, which of course includes the MLRs. We have seen in the context of drink driving convictions the tensions that can arise with dual outcomes, with fairness and proportionality considerations in mind, resulting in the SRA’s policy statement that it will no longer impose a financial penalty for misconduct relating to convictions for drink driving because, in most cases where a sanction is required, a letter of warning or rebuke will be appropriate. This followed concerns amongst the public and the profession that SRA-imposed fines could be excessive in light of previous penalties imposed as part of the criminal process (and one particular matter where a solicitor was fined over £13k by the SRA for driving while under the influence of alcohol (a figure 31 times higher than the penalty imposed by the court)). Depending on the changes introduced, should separate action by the SRA and FCA be permitted in respect of the same MLR breach(es), there is scope for similar tensions in the future under this new AML supervisory regime. The SRA makes clear in its Enforcement Strategy that its actions are not designed to ‘punish’ for past misdemeanors and that while sanctions it imposes may be punitive, such sanctions do not have that primary purpose. As the SRA and FCA navigate the new regime and any cross-over in their regulatory remits, how best to stay on the right side of this line will need to be carefully considered.
The consultation notes that “It is important to emphasise that the FCA’s responsibilities in relation to the register will be limited strictly to AML/CTF compliance. The FCA will not have any remit over broader professional standards or qualifications, which will remain the responsibility of any relevant professional bodies.” It will be important that the design and operation of the new regime gives effect to this express aim, and that the respective roles and remits of the professional bodies and the FCA are well understood and respected.
1This requirement also appears at paragraph 7.1 of the Code of Conduct for Solicitors, RELs, RFLs, and RSLs.
Glossary
AML – Anti-Money Laundering
ASP – Accountancy Service Provider
CCAB – Consultative Committee of Accountancy Bodies
CTF – Counter-Terrorist Financing
FCA – Financial Conduct Authority
ICAEW – Institute of Chartered Accountants in England and Wales
LSAG – Legal Sector Affinity Group
MLRs – Money Laundering Regulations
ML/TF – Money Laundering/Terrorist Financing
NCA – National Crime Agency
OPBAS – Office for Professional Body AML Supervision
PBS – Professional Body Supervisor
SAS – Single AML Supervisor
SPSS – Single Professional Services Supervisor
SRA – Solicitors Regulation Authority
TCSP – Trust or Company Service Provider