26/10/2025
The FCA’s New Supervisory Role for Legal Practice
This week’s key terms/concepts:
• Anti-Money Laundering (AML): The set of policies and practices to ensure that institutions and regulated entities are preventing and detecting financial crime and money laundering, as well as reporting suspicious activity.
• Counter-Terrorist Financing (CTF): The set of policies and practices to ensure that institutions and regulated entities are not making funds available to a potential person or organisation which may be used for acts of terrorism.
• Financial Conduct Authority (FCA): A financial regulatory body that operates in the UK, independently to the Government, regulating financial firms that provide services to consumers.
Earlier this week, the UK’s anti-money-laundering (AML) landscape moved closer to a major transformation following a UK Government decision to give the Financial Conduct Authority (FCA) new powers as the single anti-money laundering and counter-terrorist financing (AML/CTF) supervisor for law and accounting firms. This weekly update outlines the key elements of the reform, why it matters for law firms, and how they can prepare, as the move could reshape how professional-services firms manage compliance, risk, and client relationships.
Why is this significant?
For UK and cross-border commercial law firms, the FCA’s new role as AML/CTF supervisor marks a significant shift in regulatory risk and compliance expectations. Moving from multiple legal-sector regulators to the FCA, a body that has traditionally focused on financial services, could mean stricter oversight, higher compliance costs and greater exposure to enforcement and reputational risk. Law and accounting firms will be expected to strengthen due-diligence and beneficial-ownership checks to meet evolving standards. This change reflects a broader trend: regulators now view professional-services firms as key players in preventing financial crime, making anti-money-laundering and counter-terrorist-financing a strategic priority rather than a procedural formality.
What could this mean for law firms?
Law firms should begin preparing by reviewing and enhancing their AML/CTF controls, as the shift to FCA supervision is likely to increase compliance expectations, costs, and scrutiny. Firms may need to reallocate resources toward risk and compliance, expand staff training, and refine client-acceptance procedures, particularly for higher-risk or cross-border work. The move may also create competitive advantages for firms that demonstrate robust compliance cultures, while active participation in regulatory consultations will help ensure a proportionate and practical transition.
The decision by HM Treasury still awaits final legislation and implementation, meaning firms should continue monitoring developments closely.
Lex Weekly 