Bold takeaway: The FCA is poised to take over AML supervision for law and accountancy firms, a move that could reshape how professionals manage risk and compliance. And this is the part most people miss: the change isn’t just about who enforces the rules; it reshapes daily operations, budgets, and strategic culture across firms.
Overview
This piece reviews HM Treasury’s consultation on transferring anti-money laundering (AML) supervision from current professional bodies to a single supervisor: the Financial Conduct Authority (FCA). The goal is to address FATF’s concerns about fragmented supervision and to improve consistency, accountability, and effectiveness across professional services. The analysis below highlights the core proposals, questions posed to stakeholders, sector-specific implications, gaps in the consultation, and anticipated timelines. A central thread is the need for proportionality and sector-specific expertise in implementing these reforms.
Key Proposals
- Single Professional Services Supervisor (SPSS): The core idea is to replace multiple professional body supervisors with one overarching regulator (the FCA) to oversee AML/CTF compliance across the sector. This aims to reduce inconsistencies and improve enforcement outcomes.
- Enhanced FCA powers: The FCA would gain robust supervisory tools—including inspections, skilled person reviews, and enforcement actions—to ensure adherence to the Money Laundering Regulations (MLRs). Law and accountancy firms will need to align with an intensified, centralized regulator that may use data-driven approaches to identify gaps.
- Registration and gatekeeping: The proposal includes maintaining a public register and applying fit-and-proper checks for beneficial owners and senior managers as part of risk-based AML regulation.
- Guidance and information sharing: Responsibility for AML/CTF guidance would shift to the FCA, and the regulator would be obligated to provide up-to-date AML/CTF information to supervised firms. There would also be enhanced information sharing with law enforcement and other authorities, subject to guardrails on onward transmission of sensitive data such as SARs.
- Enforcement and penalties: The FCA would retain its existing enforcement toolkit and could introduce minor fines for routine non-compliance, such as failure to register, in addition to more traditional penalties for serious failures.
- Appeals and funding: Decisions would be appealable to the Upper Tribunal, and funding for expanded AML supervision would come from the fees charged to the regulated firms.
- Transition and coordination: The FCA would work closely with existing regulators and professional bodies during the transition to preserve sector knowledge. Some firms may face dual regulation temporarily, interacting with both the FCA (AML/CTF) and their professional bodies (other matters). The goal is to minimize burden through coordinated planning.
Impact on Sectors
- Core obligations remain under the MLRs, but supervision will shift in style and emphasis toward risk-based, data-driven oversight. This may require firms to adopt stronger internal governance, culture of compliance, and investment in AML technology.
- Firms should expect more detailed evidence of compliance, including documented risk assessments, client due diligence, and ongoing monitoring. The FCA’s inspection style may probe whether policies are not just written but effectively implemented.
- Practical steps for firms: review governance structures, strengthen compliance culture, expand training, and invest in AML tech to support monitoring and reporting.
Concerns and Controversies
- Sector understanding: Critics worry the FCA may initially lack deep, sector-specific AML expertise, such as conveyancing risks in law practices.
- Fit-and-proper assessments: There is concern these assessments could be intrusive or overlap with existing professional regulation.
- Resource and cost impact: The introduction of skilled person reports and broader supervision could raise costs and strain resources.
- Legal privilege: How privilege will be treated under a centralized regulator remains uncertain and may spark debate.
- Transitional issues: Questions remain about the transfer of ongoing investigations and how dual-regulation duties will be managed.
Gaps in the Consultation
- Timelines: The proposal lacks concrete implementation timelines for transferring powers to the FCA.
- Operational transfer details: There is insufficient detail on how investigations would transition and how sector-specific expertise would be retained.
- Overlap risks: The plan does not clearly address potential overlapping supervision and enforcement between the FCA and existing regulators (e.g., SRA, CCAB).
- Smaller firms: Guidance on engaging and assisting smaller practices to achieve compliance without excessive burden is underdeveloped.
Timelines and Next Steps
- Consultation window: Opened 9 November and closes 24 December 2025.
- Expected transition plan: The Treasury anticipates a plan in 2026, with potential phased implementation through 2027–2028. Full legislative change may not pass until late 2026, suggesting a gradual move toward FCA-led AML supervision over 2–3 years.
- Practical readiness: Firms should begin preparing now for a future where FCA-style supervision applies, focusing on governance, culture, training, and technology to mitigate transition risks.
Conclusion
The proposed shift to FCA-led AML supervision marks a major regulatory shift for law and accountancy firms. Proactive participation in the consultation and early alignment with FCA expectations will be essential to sustain compliance and minimize disruption. Do you think the benefits of unified supervision outweigh the potential costs and complexities for smaller practices? What sector-specific safeguards would you insist on to protect your firm’s unique risks and privileges?
