By Alex Ridley, Compliance Consultant, UK
In November 2025, the Treasury published the AML/CTF Supervision Reform Consultation Paper, proposing the appointment of the Financial Conduct Authority (FCA) as the sole anti-money laundering/countering the financing of terrorism (AML/CTF) financing supervisor for law firms, accountancy firms, and certain trust and company service providers. Based on current projections and considering the likelihood of a preparatory/transition period, it’s estimated that full implementation will occur by 2028/29.
There are profound implications for this move away from the current patchwork of 22 professional body supervisors (PBSs) that are currently performing the supervisory role. In this article, we look to provide firms with the following:
- A clear breakdown of the proposed reforms and what they’ll mean in practice for in-scope firms
- Why these reforms are being implemented
- Action you can take now to adapt your firm’s existing AML controls to meet regulatory expectations
- How we can support your firm’s readiness for the FCA’s tougher AML regime
Current failings
The regulator has levelled criticism against the current AML system for lawyers and accountants, calling it a fragmented patchwork system overseen by multiple PBSs. This has caused significant AML challenges for these firms, including:
- Inadequate client due diligence
- Weak internal controls
- A misplaced reliance on client privilege (especially with law firms)
- For trust and company service providers (TCSPs) specifically, offshore structures with obscure beneficial ownerships have created systemic vulnerabilities that can be exploited by bad actors
Light-touch, guidance-based supervision and principles-based oversight has resulted in some firms not treating AML as a core business risk or a legal obligation. The FCA wants to reform this approach to implement more governance and evidence-based assurances.
When it comes to law and accounting firms, the findings indicate a significant gap in AML/CTF compliance in 2025:
- Only 13% of law firms supervised by the Solicitors Regulation Authority (SRA), were fully compliant with expected AML/CTF controls
- Only 19% of accounting firms supervised by the Institute of Chartered Accountants in England and Wales (ICAEW), were fully compliant with expected AML/CTF controls
The story so far
As part of its broader AML reform agenda, the FCA is renewing its focus on professional services firms. Here’s what’s occurred to date:
- December 2018: Financial Action Task Force (FATF) flagged inconsistent applications of the risk-based approach to AML supervision by different PBSs as a major vulnerability in the UK
- June 2022: HM Treasury AML/CTF review found continuing deficiencies in the effectiveness of PBS supervision; it announced the government was considering “the establishment of a single statutory supervisor for professional services”
- October 2025: After consultation, HM Treasury announced that they were pursuing the establishment of a single statutory supervisor (SPSS) for professional services, and that the FCA would now be supervising all firms currently supervised for AML/CTF matters by a PBS (such as the SRA, HMRC and ICAEW)
What this means for your firm
We know that firms will have concerns about how these reforms are going to impact their business, and that the transition process into a new supervision regime can feel complex and unfamiliar.
For those firms ready to adapt, compliance obligations can be turned into a competitive advantage, signalling to clients and stakeholders that they take financial crime seriously. Firms that fail to act risk both regulatory penalties and reputational damage.
The shift from principle, interpretive-based oversight to a more proactive monitoring and data-led intervention will be significant. Whilst the precise FCA-led supervisory actions for law and accounting firms aren’t yet confirmed, it’s reasonable to assume the following will be implemented across all firms:
- Client due diligence (CDD): Firms must adopt a much more rigorous approach to CDD
- Enhanced risk assessments: Comprehensive, data-driven and regularly reviewed firm and client/ subject matter risk assessments will need to be conducted
- Internal processes: AML policies, controls and procedures documentation will need to be updated. Detailed compliance records should be readily available for auditing purposes
- FCA risk-based supervision: A consistent regulatory risk-based approach across sectors (on-site inspections, desk reviews)
- Enforcement toolkit and increased scrutiny: FCA powers to impose substantial civil penalties, suspensions, prohibitions, public censures and initiation of criminal proceedings for MLR 2017 breaches
- Enhanced ownership checks: Beneficial owners, officers and managers (BOOMs) will be subject to competence and risk profile evaluations of their compliance history under MLR 2017 rules
- Ongoing monitoring: Verifiable evidence resulting from robust transaction and relationship checks will replace reliance on client assurances or reputation
- Governance structures: Defined senior management oversight, and evidence of active AML risk management and oversight from senior managers
How we can help
At IQ-EQ, our compliance consulting team (including those previously employed at the FCA and other regulatory bodies) have significant experience helping firms align to major regulatory change. We provide a range of AML-related services, from basic to in-depth in scope:
- Embedding evidence-based controls
- Providing detailed AML training to your staff
- Performing a health check to your current AML systems/controls
- Implementing practical, tailored solutions that align with FCA requirements
- Embedding robust AML practices into your operational framework
We’re committed to helping law and accounting firms navigate the new AML landscape.
To discuss how these supervisory changes may impact your operations and what proactive steps you can take now to stay ahead of regulatory expectations, get in touch today.
