Government’s AML reform aims to cut red tape, but solicitors still flagged as exploitation targets
The Solicitors Regulation Authority (SRA) has pledged to issue an update “as soon as possible” after the government unveiled sweeping reform plans to the Money Laundering Regulations 2017 (MLRs). The move follows a Treasury consultation that signals a tightening of the regulatory net around legal professionals, amid concerns solicitors remain vulnerable to criminal exploitation.
A 47-page response from HM Treasury outlines proposals to overhaul the MLRs, promising to “streamline compliance,” “reduce regulatory friction,” and enhance the UK’s resilience to economic crime. Legal experts say the reforms mark the most significant shake-up of anti-money laundering (AML) rules since 2020.
Ben Cooper, head of risk and financial crime at law firm TLT, said the government’s approach suggests “a clear intent to build a smarter, more proportionate AML regime” without compromising on the fight against illicit finance.
The upcoming changes will introduce stricter due diligence requirements, especially for complex transactions and dealings with high-risk third countries. Reforms will also clarify the rules around pooled client accounts and trigger checks for certain non-financial firms.
Despite the Treasury’s aim to reduce red tape, solicitors received a sharp warning: they remain classified as a “high-risk” group for potential criminal exploitation.
Embed from Getty ImagesIn its recent industrial strategy, the Treasury promised more “clear and proportionate” AML rules to help unshackle the professional services sector, which often cites AML compliance as its heaviest regulatory burden. But the government’s broader review revealed lingering concern over how easily criminals can use legal services as vehicles for money laundering.
Lawyers were only briefly mentioned in the Treasury document. However, one significant point of contention during the consultation was the lack of clarity around “source of funds” checks—a vital safeguard in legal transactions. Many within the legal sector argued the existing guidance was ambiguous and made compliance unnecessarily difficult.
In response, the government said it would retain the current wording to “preserve flexibility” but will work closely with supervisors, including the SRA, to refine sector-specific guidance.
Alexandra Jones, the SRA’s Director of AML, welcomed the government’s push for more effective and efficient regulations.
“We support the focus on clearer guidance for source of funds checks and a more risk-based approach, especially regarding high-risk countries,” she said. “Using legal services for financial crime is a very real risk to our society, security and economy. AML regulations must be constantly reviewed to stay ahead of the criminals.”
The SRA confirmed that it will work in tandem with HM Treasury and other regulators to implement the reforms and will issue an update for law firms in due course.
The Treasury said it plans to introduce the changes via a draft statutory instrument before the end of 2025, “if parliamentary time allows.”
In the meantime, AML professionals are urging firms not to delay preparations.
TLT’s Cooper said the changes are a “welcome step” but warned that, as ever, “the devil will be in the detail.”
He advised law firms to begin reviewing their compliance frameworks now: “Firms should expect more guidance and secondary legislation in the months ahead. A more intelligent AML regime is coming, and the legal sector must be ready.”
