HM Treasury announced the switch from the Solicitors Regulation Authority (SRA) and 22 other professional services supervisors this week. The FCA will replace all 23 as the single professional services supervisor (SPSS), the Treasury said in its response to a 2023 government consultation, Reforming anti-money laundering and counter-terrorism financing supervision.
However, Colette Best, director of AML at Kingsley Napley, and a former director at the SRA, said: ‘The FCA is not a natural supervisor for legal services and there are a lot of questions to be answered.
‘In particular, firms will need to know the timescale for this change, whether they will need FCA authorisation and what happens to AML supervision in the meantime. There is also a question over whether the SRA will retain their wider responsibilities to promote the prevention and detection of economic crime.
‘Given the FCA’s already broad and expanding remit, it will need a significant increase in resources to fulfil this additional function.’
Sheila Kumar, chief executive of the Council for Licensed Conveyancers (CLC), said the change ‘will create duplication of effort in AML supervision and risks increasing the burden on the regulated community and the financial burden that will be passed on to users of legal services.
‘We are concerned that creating a separate regime for AML supervision will require significantly more coordination between frontline regulators like the CLC and the FCA as the supervisor of AML compliance, but risks opening up gaps in the insight that we currently have across all areas of the practices that we regulate'.
Law Society president Mark Evans urged the government to ‘avoid increasing regulatory burdens that could undermine the competitiveness’ of the legal sector. He called on the FCA to focus on ‘proportionate risk-based regulation, rather than blind compliance’.
The SRA expressed disappointment at the change, pointing out it has made significant progress in recent years.
However, Rebecca Hughes, senior associate at Corker Binning, said: ‘Although this news appears to have taken many by surprise, the truth is that the writing has been on the wall for the SRA for some time now as it has been under mounting pressure from its watchdog, OPBAS [Office for Professional Body Anti-Money Laundering Supervision].
‘Faced with widespread, persistent non-compliance linked to recurring issues, including inadequate AML controls and risk assessments at firm, client and matter levels, the SRA’s promised focus on more data-led, proactive supervision in 2026 is arguably too little, too late.’
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