FCA to take over AML supervision from SRA

The Financial Conduct Authority (FCA) will take over direct regulation of Anti-money laundering (AML) compliance from the Solicitors Regulation Authority (SRA) and 21 other professional regulators following an announcement by the Chancellor on 21 October 2025. Solicitors will rightly be considering how best to prepare for what many are predicting will be a significant culture shock.

The case for reform

It is tempting to see the decision to transfer AML oversight to the FCA as an indictment of the SRA. Coming, as it does, so close on the heels of the SSB scandal, it is natural to make assumptions. 

However, the reality is that the change has been a possibility for years. HM Treasury’s 2022 review of the AML supervisory regime identified a need for structural change to address systemic weaknesses in supervision, some of which were attributable to inconsistency between the 25 bodies with responsibilities in the AML arena. This includes 22 regulators known as “professional body supervisors” (PBS) – such as the SRA – who regulate the legal and accountancy professions and had AML added to their jurisdiction with specific mandates to enforce AML compliance through the use of “effective, proportionate and dissuasive disciplinary measures”. 

The other AML supervisors are the FCA, HMRC and the Gambling Commission which each have their own jurisdictions and are not associated with professional bodies.

OPBAS

The 22 PBS have been subject to oversight from the Office of Professional Body AML Supervision (OPBAS) – a division of the FCA - since January 2018. OPBAS has routinely reported issues with the effectiveness of the work done by PBS and pressure from OPBAS has been a significant factor in the rise of AML inspections and resultant AML-related sanctions. 

There is vast disparity in the size of the regulated population for each PBS, with the ICAEW as the largest responsible for over 9,000 firms, and the smallest responsible for just a handful of in-scope providers. 

This, along with the statutory obligation for PBS to provide adequate resources to carry out effective AML supervision, has presented real challenges in ensuring consistency across all professions and OPBAS has reported that some regulators are not only not meeting expectations but also regressing in some aspects. OPBAS does not specifically name the regulators it assesses in its annual reviews. 

Options for reform

HM Treasury’s 2023 consultation highlighted the structural problems identified in the 2022 review and proposed four options for reform. Broadly these were:

1.”OPBAS+” – enhancing central oversight of existing PBS

2. Consolidation by profession (eg a single legal services AML supervisor across the UK)

3. Single Professional Services Supervisor (‘SPSS’) – one supervisor for all professions with HMRC and the Gambling Commission largely retaining their existing jurisdictions; and 

4. Single AML Supervisor (‘SAS’) consolidating all supervisors including HMRC and the Gambling Commission into one body. 

The government has decided on option 3.

Not just a history lesson

For solicitors, this context is important – and potentially slightly reassuring – because:

• OPBAS is part of the FCA. It has produced annual reports about the performance of PBS which contain valuable insights into what solicitors could potentially see from the new regime
• The SRA favoured option 2. It hoped to see all legal AML supervision placed into its hands. To that end, its AML activities over the last couple of years have been – at least in part – intended to demonstrate that it could be entrusted with an expanded AML jurisdiction. 

This has involved pushing hard to try to deliver on the expectations of OPBAS and ramping up its AML oversight very significantly which may help to lessen the culture shock when the FCA takes direct responsibility for AML supervision. 

What can we expect from the change?

Although it is still too early to say what direct FCA regulation will look like, the fact that OPBAS will be redundant after the transfer suggests that its staff may form the basis of the FCA’s SPSS team – at least initially. While recruitment will inevitably be needed, the likelihood is that the work of OPBAS over the last 7 years will inform the SPSS’ initial budget, business plan and identification of priority focus areas. 

Based on OPBAS annual reports, this likely means that there will continue to be a significant programme of desk-based reviews looking at policies, controls and procedures (‘PCPs’) and firm wide risk assessments. There may be some form of annual certification/questionnaire enabling the FCA to assess the risk profile of its regulated population – an initiative OPBAS had singled out for praise. 

We can also expect to see a continued focus on conveyancing – a high risk area specifically singled out by OPBAS as requiring a “whole of system mindset” to understand the end to end risks within the conveyancing process as well as the commercial balance in high volume/low margin and high value/high margin work. OPBAS recommended continuing engagement to help understand regulatory overlaps and, more importantly, “underlaps or gaps” including those “at or beyond the regulatory perimeter”. Conveyancers, it seems, can expect no let-up of regulatory attention.

ID and Risk verification is likely to continue to be the cornerstone of the overall process and we can expect continued focus on due diligence (including enhanced due diligence where appropriate) ongoing monitoring and client and matter risk assessments (‘CMRAs’) 

Whether the FCA will continue the SRA’s approach of sanctioning firms even where there is no evidence of actual harm is an open question. The FCA is likely to start by doing so because of the need to deter non-compliance. 

However, the FCA’s current investigation opening criteria expressly confirms that “certain cases will be subject to enforcement action and others not, even where they may be similar in nature or impact” because the FCA’s focus is on the effective and efficient use of its resources to drive “impactful deterrence”. That may mean that some firms are made an example of and others are not prosecuted if they have self-corrected to the satisfaction of the FCA prior to any inspection.

We do expect that the FCA will look to impose more significant fines than the SRA has to date. Although the OPBAS response to the SRA consultation on fining powers in 2022 is now quite old, it appears to be OPBAS’ unequivocal view that the SRA’s maximum fine level of 5% of firm turnover was too low given that some regulators could impose fines of up to 20% of turnover. One hopes that the FCA will review the hundreds of AML fines the SRA has imposed since that time and reconsider OPBAS’ implied position that fines should be set at such a high level. Fines at these levels would risk firms failing, although we may find that the FCA takes the view that non-compliant firms ought not to exist anyway. 

Double Jeopardy

The FCA is keen to facilitate information sharing and inter-regulator co-operation. This may mean taking a view on one set of regulatory proceedings if, for example, strike off is a likely outcome. However there is a significant risk of “double jeopardy” – ie different regulators bringing allegations based on their own jurisdiction against the same firm arising out of the same conduct. 

The SRA pursues solicitors who are convicted of criminal offences because of the need to maintain the reputation of the profession. We can expect that firms which are found by the FCA to have breached the AML regulations could also face secondary prosecution by the SRA on the basis that they have also breached professional standards and brought the profession into disrepute. This is potentially devastating for solicitors as it could see them under regulatory scrutiny for unconscionable periods of time by multiple regulators. This could stall careers and lead to serious health and financial consequences if the regime is not handled sensitively. 

Timeline

It took almost two years for the Government to announce its preference for the SPSS model under the auspices of the FCA. There is no timeline for implementation yet. We expect a consultation in early November and that may begin to answer some of the swirling questions. 

It seems unlikely this will happen before April 2027 even if there has already been work behind the scenes preparing the necessary legislative changes. The UK has a Financial Action Task Force review in August 2027 and it is possible (although by no means certain) that the Government will want to see the new system in place before that happens. 

Key Preparatory Steps

There are going to be some major changes. The FCA has its own processes, handbooks, terminology and acronyms. The FCA Handbook is not the most intuitive of documents to navigate although there is some helpful guidance to assist in this task. 

Pending further details of the change, here are some top tips to get ahead of the curve:-

1. Review the OPBAS reports and letters to PBS concerning key areas of concern;
2. Familiarise your team with FCA terminology and the structure of the FCA regulations, including the enforcement processes;
3. Read and respond to the FCA consultation when issued;
4. Review the SRA’s recently published AML review, particularly focussing on the key issues identified as “partial compliance”;
5. Continue your regular reviews of PCPs, FWRAs and training diligently;
6. Keep reading the updates! 

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