UK Law Firms Brace for Enhanced FCA Money Laundering Oversight
The Financial Conduct Authority (FCA) has been designated as the new anti-money laundering regulator for the UK legal sector, consolidating oversight that was previously divided among nine supervisors including the Solicitors Regulation Authority (SRA). This move aims to strengthen the UK's supervisory system ahead of an important FATF review scheduled for August 2027.
The UK government is striving to improve the City’s reputation following FATF assessments since 2018 that highlighted the need for stronger regulation of the legal and accounting sectors. The National Crime Agency estimates that approximately £100bn is laundered through or within the UK annually, with entities such as law firms playing a role in facilitating these illicit transactions.
Currently, the SRA manages AML enforcement with a cap on fines at £25,000 unless cases are escalated to a tribunal. Between May 2023 and April 2024, the SRA issued 86 AML fines totaling £1.5m, with individual fines ranging from £1,520 to £300,000. In contrast, the FCA issued six AML fines totaling £82m in the same period, with penalties ranging from £289,000 to £39.3m.
The FCA takeover, however, could pose challenges for law firms. In 2023-24, the FCA rejected 44% of 275 licensing applications, compared to the SRA’s acceptance of all 218 applications. Despite this, the FCA has pledged to adopt a data-led and proportionate enforcement approach, supported by broader regulatory powers.
Reforms are being advanced urgently to present a credible and consistent supervisory framework to FATF by August 2027, as emphasized by experts like Priya Giuliani of HKA.
