UK Money Laundering Crackdown: What Solicitors Must Do Now

The two regimes, and why the difference matters

Firms routinely treat anti-money laundering as one subject. It is two, and conflating them is how solicitors end up exposed.

The Money Laundering Regulations 2017 impose obligations on the firm: a written firm-wide risk assessment, client and matter risk assessments, customer due diligence, ongoing monitoring, policies and controls. Breach is a regulatory matter, and the SRA enforces it with fines and published outcomes. Our guide to what regulation 18 requires covers the central document.

The Proceeds of Crime Act 2002 creates criminal offences committed by individuals. It does not care whether your firm’s risk assessment was compliant. It asks what you knew, what you suspected, and what you did about it.

How low is the suspicion threshold?

Lower than most practitioners assume, and deliberately so.

In R v Da Silva [2006] EWCA Crim 1654, the Court of Appeal rejected the argument that suspicion must rest on reasonable grounds. The court held it could not read a word such as “reasonable” into the statutory provision, noting that Parliament had used the phrase “having reasonable grounds to suspect” elsewhere and had chosen not to use it here. Judgment.

What the court did require is that the suspicion be more than fanciful. A vague feeling of unease does not suffice, but the defendant need only think there is a possibility, more than fanciful, that the relevant facts exist.

Two practical consequences follow. A fee earner cannot defend a failure to report by saying the suspicion was not well founded. And once a suspicion has formed, documenting the basis for it is worth doing, because a recorded reasoning process defeats any later suggestion of bad faith reporting.

Do prosecutors have to prove the underlying crime?

No. This is the point that makes money laundering prosecutions viable where the predicate offending is untraceable.

In R v Anwoir [2008] EWCA Crim 1354, the Court of Appeal confirmed that the prosecution need not prove the property was the benefit of a particular or specific act of criminal conduct. Requiring that would unduly restrict the legislation. Instead the Crown may rely on evidence that the circumstances in which the property was handled give rise to an irresistible inference that it could only have been derived from crime.

For solicitors the significance is evidential rather than doctrinal. You do not need to identify the crime to have a suspicion worth reporting, and the absence of an identifiable offence is not a reason to conclude there is nothing to report.

The offence that catches solicitors

Section 330 of POCA, failure to disclose in the regulated sector, and it is the one most likely to catch a competent, honest practitioner.

The offence is committed where a person receives information in the course of a business in the regulated sector and thereby knows or suspects, or has reasonable grounds for knowing or suspecting, that another person is engaged in money laundering, and fails to make the required report.

That final limb is objective. Unlike the principal offences under sections 327 to 329, which require actual knowledge or suspicion, section 330 can be committed by someone who genuinely did not suspect anything, if the court concludes that a reasonable person in their position would have had grounds to.

The Crown Prosecution Service’s position is that the offence is committed by failing to report regardless of whether it later transpires that money laundering cannot be proven, or did not occur at all.

There is a statutory defence of reasonable excuse, and a further protection where the person has not been given the training their employer was required to provide, which places a real burden on firms to evidence that training actually happened.

Reporting, consent and tipping off

Three obligations that operate together, and getting the sequence wrong creates its own exposure.

The report. A suspicious activity report goes to the firm’s nominated officer, usually the MLRO, who considers whether to report onward to the National Crime Agency. A nominated officer has their own offence under section 331 for failing to disclose.

Consent. Where proceeding with a transaction would risk committing a principal offence, the firm may seek a defence against money laundering, commonly called consent, under section 335. The practical difficulty is timing: a client expecting completion may not accommodate the statutory notice periods, and the retainer should anticipate that possibility rather than discover it.

Tipping off. Section 333A makes it an offence to disclose that a report has been made, or that an investigation is contemplated, where the disclosure is likely to prejudice any investigation. This is what makes the position awkward in practice: you may be unable to explain the delay to your own client.

Where legal professional privilege fits

Privilege provides an exemption from the section 330 reporting duty, but it is narrower than the profession sometimes hopes.

Information received in privileged circumstances is excluded from the duty to disclose. The exemption does not extend to information communicated with the intention of furthering a criminal purpose, which is the crime-fraud exception, and it does not convert every communication in a transactional retainer into privileged material.

That distinction is where the difficulty lies. Advice given in contemplation of litigation is on firm ground. Information received in the course of a conveyancing or corporate transaction frequently is not, and a fee earner who assumes privilege covers everything the client tells them has misunderstood the exemption.

The Law Society’s guidance on suspicious activity reports is the practical reference point, and any borderline case warrants advice rather than an assumption either way.

What the regulator is doing separately

The SRA has moved to a data-led approach, calling in documents and taking action on what it finds rather than waiting for complaints.

It reviewed 400 firm-wide risk assessments and took follow-up action on around 20% that did not meet the required standards. Its published fines increasingly turn on documentary failures rather than on any suggestion that laundering occurred, and the settlement agreements remain searchable against the firm’s name long after the penalty is paid.

One case is worth stating accurately, because it is often summarised loosely. In Dentons UK and Middle East LLP v SRA [2026] EWCA Civ 508, which concerned breaches of the Money Laundering Regulations 2007, the Court of Appeal held that a breach must be sufficiently serious to amount to professional misconduct under the relevant SRA standards. The court upheld the quashing of the tribunal’s original decision and remitted the matter to a freshly constituted tribunal to apply the correct test. The distinction concerns the disciplinary consequences of a breach, not the underlying obligation to comply.

Supervision itself is also changing. The government has confirmed the FCA will take over AML supervision of law firms as Single Professional Services Supervisor, though the transfer awaits legislation and the SRA remains the supervisor for now. Our guide to FCA AML supervision sets out the timing.