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The FCA is taking over AML supervision of law firms: what a small firm should do now

Writer: Ashley Barwick
Ashley Barwick
Oct 21
4 min read

The Financial Conduct Authority has told the legal profession it is "not looking to catch you out". That is a reassuring line. It is also the sort of line worth reading twice.


Steve Smart, the FCA's executive director of enforcement and market oversight, said it in a speech at the Law Society Economic Crime Conference 2026, reported by Today's Conveyancer on 21 October.


The FCA is set to take over anti-money laundering supervision of law firms from the SRA and other supervisors in late 2028, in a phased transition aiming to finish by 2030.


Nothing changes for your firm tomorrow.


Quite a lot changes by the end of the decade.


Frying pan to the fire?
Frying pan to the fire?

What the FCA has said so far


Smart described a "risk-based, intelligence-led approach", with the information requested from a firm depending on "the risk you face". The FCA says it wants to reduce duplication and burden where it can. He also drew a line. Most firms uphold strong standards, he said, but "the small minority who enable crime should expect us to find them".


On the mechanics, the FCA has announced that it will keep a public register of supervised firms and make registration a condition of carrying out AML-regulated activity. It will gain powers to cancel registrations where a firm is no longer doing regulated work. It will also apply strengthened "fit and proper" assessments under Regulation 58 to the legal and accountancy sectors.


What the Treasury has settled


HM Treasury published its consultation response in June 2026. Lewis Silkin's summary makes three points that matter to a small firm.


First, the policy is settled. The FCA will become the single AML supervisor for legal and accountancy providers, and the Office for Professional Body AML Supervision will cease to exist once the reform is complete.


Second, Regulation 58 lets a supervisor assess more than criminal convictions. It covers the "integrity, competence and compliance history" of firms and their beneficial owners, officers and managers. Your compliance record becomes part of the test of whether you are fit to operate.


Third, the FCA's AML supervision will be funded on a full cost-recovery basis, and it will consult separately on its fees. Respondents to the consultation warned that smaller firms and sole practitioners may struggle to absorb new charges on top of existing ones. There is no fixed go-live date, and the SRA keeps its supervisory role in the meantime.


Why the SRA matters more today


It is tempting to file all of this under "later".


I would not.


The Law Society's AML inspection guide, written by AMLCC, records that the SRA carried out 864 proactive AML engagements with firms in 2024 to 2025, up from 545 the year before. Of the 833 firms that received an onsite inspection or a desk-based review, close to a third were assessed as non-compliant. The SRA is your AML supervisor today, and its programme is not slowing down while the FCA gets ready.


My view is that the compliance history you build now is the compliance history you will be glad to point to later. Nobody has yet said how the FCA will weigh past SRA findings under Regulation 58, so I will not guess. But a clean, well-documented record has never been a disadvantage.


Four things to do now


First, read your business-wide risk assessment as if you had never seen it. Is it written for your firm, your clients and the work you actually do? The Law Society guide notes that template assessments which read like every other firm's remain a persistent finding.


Second, check that every in-scope file carries a client and matter risk assessment that assesses money laundering risk, not just operational risk. The same guide reports that missing or inadequate assessments accounted for half of all referrals for investigation in 2024 to 2025.


Third, write down who your money laundering compliance officer and your money laundering reporting officer are. In a small firm they are often the same person, and the SRA tests whether both sets of duties are genuinely being carried out.


Fourth, put the FCA's fees on your planning list as a known unknown. No figure exists yet, so do not invent one. Just make sure the question is in your 2027 and 2028 budget conversations before it becomes a surprise.


A second pair of eyes


If you would like an independent view of where your firm stands on compliance, I offer a free health check, with no obligation. Get in touch and we can arrange a time to talk it through.

The contact page is an enquiry form, so please put "free health check" in the message subject and I will pick it up straight away.


Ashley Barwick, Fraxinus Business Associates. This post is general information and does not constitute legal advice. Fraxinus Business Associates is not authorised to provide legal advice.


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