UK law firms are preparing for more stringent oversight of their anti-money laundering (AML) programs after the Financial Conduct Authority (FCA) was designated as the compliance supervisor for the legal sector, The Guardian reported.

The move is part of a government effort to counter the UK’s reputation as a destination for “dirty money,” the newspaper said, noting National Crime Agency estimates that £100 billion is laundered through or within the UK each year with the help of “enabling entities” such as law firms.

Under the change, responsibility for supervising the legal sector’s compliance with anti-money laundering rules will be consolidated under the FCA, replacing a system currently spread across nine separate supervisors. The transition follows a two-year government review that found inconsistent oversight, duplicated efforts across more than 20 regulators, and gaps in information-sharing with police, according to the report.

“The timing of this shift is no coincidence,” Priya Giuliani, a financial crime investigator and partner at consultancy HKA, told The Guardian, arguing there is urgency for the UK to present a “credible, consistent, and effective” supervisory system to the Financial Action Task Force (FATF) by August 2027.

The Paris-based global watchdog, which is expected to begin evaluating the nation’s AML and counterterrorism financing regime next year, has previously pointed to weaknesses in UK supervision and urged stronger oversight of the accounting and legal sectors, the news outlet said. 

The UK’s national risk assessment has also classified the legal sector as “high risk” in every assessment since 2017, according to the report.

While there is no deadline yet for the handover, Giuliani told The Guardian that the FCA’s arrival could mean “sharper” enforcement compared with the Solicitors Regulation Authority, which she described as historically more “collaborative” and guidance-led. 

The SRA’s powers include a £25,000 cap on fines, although larger penalties can be imposed through a tribunal route. In the year to April, the SRA issued 86 AML fines totaling £1.5 million, with penalties ranging from £1,520 to £300,000, according to figures cited by The Guardian. 

By contrast, the FCA issued six AML fines last year ranging from £289,000 to £39.3 million, totaling £82 million. 

“The FCA brings sharper scrutiny, broader powers, and a data-driven lens,” Giuliani told the newspaper. “Legal firms must be ready.”

Read more at The Guardian

Related: A Third of Inspected Law Firms Break UK’s AML Rules