SRA losing anti-money laundering powers concerns legal sector

The recent announcement that the Solicitors Regulation Authority (SRA) will relinquish its anti-money laundering (AML) responsibilities, transferring the oversight of law firms to the Financial Conduct Authority (FCA), has sparked alarm within the legal sector. Phil Cotter, CEO of SmartSearch, an anti-money laundering and digital compliance specialist, described this shift as a “wake up call” for the industry, highlighting that the need for rigorous compliance has reached unprecedented levels.

Phil Cotter warned that with the FCA's oversight, “compliance can no longer be treated as a tick-box exercise - it must be embedded, proactive, and risk-based.” He further emphasised the enormity of the transition, noting that “with over 6,000 firms and 23,000 individuals now moving under FCA oversight, the scale and complexity of this transition cannot be underestimated.”

The UK Government’s intensified focus on combating financial crime, through initiatives such as the Economic Crime and Corporate Transparency Act (ECCTA) and the introduction of digital ID cards, amplifies the scrutiny that legal and financial firms will face. Cotter asserted that firms should anticipate “greater scrutiny, higher expectations, and zero tolerance for gaps in compliance,” making adherence to regulatory standards imperative.

The FCA's emphasis on risk-based regulation necessitates that companies implement systems that ensure substantial compliance rather than superficial processes. SmartSearch aims to facilitate this by providing clients with robust automated AML checks that simplify onboarding and guarantee thorough due diligence. Cotter stated, “Our mission is to help firms know exactly who they’re doing business with, and to make that process clear, secure, and efficient, so that they can grow their own organisations with confidence.”

With over 3,000 FCA-regulated firms relying on SmartSearch’s solutions, including more than 800 legal practices, the company draws upon extensive experience and strong technological capabilities. Cotter pointed out the importance of partnerships with leading data providers such as World-Check and Dow Jones, leveraging triple-bureau data to offer comprehensive identity verification and screening services.

As the landscape shifts, Cotter firmly believes that “partnering with SmartSearch is not just the smart choice—it’s the only choice for businesses serious about compliance and tackling the fight against financial crime." Legal firms must now reassess their compliance strategies to align with the heightened expectations and regulatory demands ahead.