FCA to take over anti-money laundering supervision of law firms from SRA under 2025 reforms
The Solicitors Regulation Authority (SRA) is to be stripped of its anti-money laundering (AML) responsibilities, with supervision of law firms transferred to the Financial Conduct Authority (FCA) in one of the most significant regulatory shifts in recent years.
The change was announced on 21 October 2025 by Chancellor Rachel Reeves, who unveiled the reform as part of a wider initiative described as a “blitz on business bureaucracy” aimed at boosting the government’s economic growth agenda.
Following a consultation launched in 2023, the government confirmed that the FCA will be formally designated as the Single Professional Services Supervisor (SPSS) for AML. The City watchdog will now oversee money-laundering compliance across the legal and accountancy sectors, working alongside professional bodies, law enforcement agencies and other regulators to strengthen the UK’s defences against financial crime.
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The move marks the end of nearly two decades of AML oversight by the SRA. Since its creation in 2007, the authority has served as the primary AML supervisor for the legal profession, its powers expanded under the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 (known as the MLRs). Those regulations required all law firms conducting in-scope work to maintain up-to-date firm-wide risk assessments and implement compliant AML policies, controls and procedures — obligations that applied even to sole practitioners.
By October 2023, the SRA oversaw 23,275 beneficial owners, officers and managers across more than 6,000 regulated firms, supported by a 34-person AML team and an annual AML-specific budget exceeding £3 million.
The regulator had come under sustained pressure from both the government and the Treasury to demonstrate that it was effectively enforcing AML standards. In recent years, the SRA had stepped up its supervision, issuing warnings and conducting proactive reviews of firms’ compliance practices.
In its 2021/22 annual report, the SRA stated that while overall compliance had improved, “a very significant proportion of firms” still failed to maintain fully compliant risk assessments. It found that many firms did not properly assess AML risks either at the firm or client-matter level, and that some had made false declarations in response to an SRA survey on firm-wide AML compliance conducted in January 2021.
The findings coincided with the expansion of the SRA’s fining powers to £25,000, leading to a marked rise in the number and severity of financial penalties. In the last two years, the regulator intensified enforcement efforts — including 864 proactive AML engagements with law firms in 2024/25, up from 253 in 2020/21.
Despite these measures, concerns persisted about the fragmented structure of the UK’s AML supervision regime, which currently includes 22 professional body supervisors. Critics argued that inconsistent enforcement across sectors weakened the country’s financial integrity. The creation of a single AML supervisor for professional services represents the government’s attempt to centralise oversight and reduce duplication.
The Treasury said the new model would “improve the UK’s resilience against illicit finance, ensure consistency across regulated sectors and support legitimate business activity.”
The FCA, which already regulates the financial services sector, will now assume responsibility for assessing risk, conducting inspections, and enforcing AML breaches within law firms and other professional practices. It is expected to introduce new guidance and reporting frameworks once the transfer of responsibilities is complete.
The SRA has not yet issued a formal response to the announcement but is expected to work with the FCA to ensure a smooth transition of supervisory duties. The move raises questions about how the regulator’s future remit will evolve once AML functions are removed.
The handover represents a fundamental reshaping of regulatory oversight in the legal sector, aligning it more closely with financial industry standards. The government believes the reform will streamline compliance, eliminate duplication and strengthen public trust in the UK’s efforts to combat money laundering and financial crime.