header-logo header-logo

01 October 2025
Issue: 8133 / Categories: Legal News , Legal services , Regulatory , Risk management , Fraud
printer mail-detail

Due diligence headache for smaller firms?

Proposed legislation to tighten the rules on pooled client accounts would place ‘substantial’ burdens on solicitors, the Law Society has warned

Pooled accounts are bank accounts used to hold funds for multiple clients and are commonly used by solicitors in conveyancing, probate and corporate matters.

The draft Money Laundering, Terrorist Financing (Amendment and Miscellaneous Provision) Regulations 2025, published for consultation last month, ‘decouples’ pooled client accounts from the simplified due diligence framework under which they are treated by banks as ‘low risk’. Instead, financial and credit institutions would need to take reasonable measures to understand the purpose, gather information and assess the risks associated with the account, with additional controls imposed where appropriate to manage risk.

Firms holding the pooled client account would, on request, need to provide the bank with information about the identity of the clients.

Responding this week to the Treasury’s consultation, the Law Society emphasised that full due diligence would be required on all clients—regardless of the assessed risk level and despite safeguards already inherent in pooled account structures.

Consequently, the draft regulations may cause delays, increase costs and reduce access to justice for the public as well as weaken defences against criminals, the Law Society warned.

Richard Atkinson, Law Society president, said ‘imposing blanket obligations’ would be ‘disproportionate, operationally burdensome and inconsistent with previous policy.

‘By eroding the risk-based approach—where solicitors have the option of applying simplified due diligence in low-risk circumstances—the UK’s defences against economic crime would be undermined and compliances resources diverted away from higher-risk cases, while creating unnecessary work in low-risk contexts.

‘We urge HM Treasury to retain the option of applying simplified due diligence in pooled accounts, where the risk assessment supports it.’

Atkinson said full due diligence on pooled accounts would impose a ‘significant administrative and financial burden on legal practices—particularly on small and medium-sized firms’.

He argued there was no compelling evidence to date that the current approach to pooled accounts ‘presents a systemic risk to the UK’s [anti-money laundering] regime. Without clear evidence of abuse or regulatory failure, the proposed amendment appears disproportionate and misaligned with the principles of better regulation’.

MOVERS & SHAKERS

Womble Bond Dickinson—Paula Myers

Womble Bond Dickinson—Paula Myers

Womble Bond Dickinson appoints Paula Myers to private capital team in Leeds

mfg Solicitors—five promotions

mfg Solicitors—five promotions

Law firm mfg Solicitors announces five promotions at Birmingham office

Brabners—six promotions

Brabners—six promotions

Brabners adds six to partnership in record year for partner promotions

NEWS
Calls to raise the age of criminal responsibility from 10 to 14 have been renewed, with the Bar Council arguing the current threshold criminalises children too early and risks pushing them towards lifelong offending
The legal profession's AI challenge extends far beyond fabricated case citations, according to a warning about the next phase of technological risk
Law firms should use the transition period before the Financial Conduct Authority (FCA) assumes anti-money laundering (AML) supervision to strengthen governance and compliance, experts have warned
Cross-border disputes increasingly demand creative approaches to gathering evidence, with litigators needing to look beyond traditional letters of request
A Court of Appeal ruling has clarified the distinction between contracts of 'indefinite' and 'perpetual' duration, with potentially significant implications for commercial drafting
back-to-top-scroll