FCA AML supervision: what changes for law firms

What is the Single Professional Services Supervisor?

A new role being added to the FCA’s responsibilities, under which it becomes the sole AML and counter-terrorist financing supervisor for the legal and accountancy sectors and for trust and company service providers.

At present AML supervision is fragmented. The Office for Professional Body Anti-Money Laundering Supervision, itself a unit within the FCA, oversees a group of professional body supervisors including the SRA, the law societies of Scotland and Northern Ireland, the bar councils and the accountancy institutes. HMRC acts as default supervisor for some firms outside that structure.

The SPSS model replaces that structure with one supervisor. Professional body supervisors lose the AML function, and OPBAS ceases once the reform is complete, though it continues through the transition.

Has the FCA taken over yet?

No. This is the point most commentary gets wrong, and it matters because firms are being told their supervisor has changed when it has not.

The sequence so far. HM Treasury consulted in 2023 on four reform models, ranging from giving OPBAS enhanced powers through to creating a new cross-sector supervisor. In October 2025 the government confirmed it had chosen the SPSS model, adding the role to the FCA. In June 2026 HM Treasury published its consultation response on duties, powers and accountability, providing a clearer roadmap for the transfer.

What has not happened is the transfer itself. Legislation is required, and the Law Society’s assessment is that the date the FCA starts supervising the professional services sector is heavily dependent on the availability of parliamentary time. Detailed implementation arrangements are still being developed.

Will firms have two regulators?

Yes. Once the transfer completes, every regulated firm within scope of the Money Laundering Regulations 2017 will answer to the FCA for AML and to its existing regulator for everything else.

For solicitors that means the SRA continues to handle conduct, professional obligations and all other regulatory functions, while AML supervision sits with the FCA. Barristers keep the Bar Standards Board, licensed conveyancers the CLC, and chartered legal executives CILEx Regulation, on the same split.

HM Treasury has said it and the FCA will work with the professional body supervisors to minimise duplication in registration, fee payments and administrative matters. Whether that materialises is one of the open questions, and the sector has been sceptical.

The practical exposure is dual scrutiny. A serious client money or source of funds failure could engage the FCA on the AML side and the SRA on the conduct side at the same time. That is a materially different position from today, where one regulator handles both.

What will change for firms in practice?

The obligations themselves are not being rewritten. HM Treasury proposes extending the FCA’s existing powers under the Money Laundering Regulations 2017 rather than introducing new statutory obligations for regulated firms.

What changes is the supervisor, and supervisors differ. The FCA operates a data-driven model with a track record of substantial financial penalties in financial services, and it will have supervisory tools including inspections, skilled person reviews and enforcement action. Firms that have grown used to the SRA’s approach should expect a different rhythm of engagement and a different evidential standard.

Two things follow for firms preparing now, and neither depends on the commencement date:

• Your firm-wide risk assessment carries more weight, not less. The obligations under regulation 18 are unchanged, and a supervisor with a data-driven approach will read it against what your firm actually does. Our guide to what regulation 18 requires sets out the five risk factors and the SRA’s findings when it reviewed 400 assessments.
• Evidence, not policy, is the currency. The consistent theme across both regimes is that documents alone do not discharge the obligation. Records of client and matter risk assessments, source of funds enquiries and ongoing monitoring are what a supervisor tests.

Funding is a further practical consideration. The FCA’s costs would be recovered through fees charged to supervised firms, with HM Treasury providing Economic Crime Levy funding for implementation, so firms should expect the cost of AML supervision to be visible in a new place rather than to disappear.

Why is the legal sector concerned?

Because the decision went against the profession’s preference, and because a financial services regulator supervising legal practice raises questions the reform has not fully answered.

Many legal sector respondents to the 2023 consultation favoured the OPBAS+ model, giving the existing oversight body enhanced powers including the ability to levy fines. The SRA’s own bid to become the sole supervisor for all lawyers was rejected. SRA chief executive Paul Philip questioned whether FCA staff have the expertise to understand the nuances of legal practice. The Law Society has warned that the changes may raise costs, increase administrative burden and introduce regulatory complexity, and the CLC has raised concerns about the dual model and the potential gap between frontline professional regulation and AML oversight.

The Law Society’s substantive position is that FCA oversight must be tailored to the realities of legal practice, reflecting solicitors’ ethical duties, professional training and legal professional privilege, and that AML guidance should remain practitioner-led rather than FCA-authored.

Not all commentary has been negative. Campaign group Spotlight on Corruption has described the FCA’s stronger investigative capacity and independence as a positive shift capable of closing loopholes in legal sector AML supervision.

Legal professional privilege is the issue to watch. It is the point at which a supervisory model designed for financial services meets an obligation that has no equivalent in that sector, and it is where the transitional arrangements will be tested first.

What should firms do now?

Prepare on the substance and wait on the mechanics. Nothing about the current obligations changes before commencement, and there is no new registration to make yet.

The useful preparatory work is the work that would improve AML compliance anyway: a firm-wide risk assessment that reflects the firm’s actual practice and is reviewed on a recorded basis, client and matter risk assessments that exist on every relevant file, source of funds and source of wealth enquiries recorded with the reasoning rather than just the documents, and a named person who owns AML compliance and can produce the evidence trail on request.

What is worth adding is horizon-watching. Track the legislation, because commencement will bring registration and fee arrangements with it, and the transitional detail is where the practical burden will land.