FCA to take control of anti-money laundering supervision of professional service firms in major reform
The government’s reform of anti-money laundering and counter-terrorism financing supervision will significantly change and diminish the roles of the legal regulator and HMRC.
Today, the Treasury revealed the outcome of its consultation on reforming anti-money laundering and counter-terrorism financing supervision, primarily for professional services, by creating a Single Professional Services Supervisor (SPSS), with the Financial Conduct Authority (FCA) taking on this new role.
Along with the FCA and HMRC, the Solicitors Regulation Authority (SRA) served as a Professional Body Supervisor (PBS) for anti-money laundering and counter-terrorism financing for most law firms in England and Wales.
These bodies were responsible for supervising firms that carry out activities within the scope of the money laundering regulations.
However, under the reform, the FCA will supervise legal services, accountancy services and trust and company service providers, including all firms currently supervised by the PBS and HMRC.
The government believes that having the City watchdog oversee professional services firms is the most effective approach. The FCA was chosen for its existing expertise, as it already supervises financial institutions on anti-money laundering and counter-terrorism financing.
In the foreword, City minister Lucy Rigby MP explained, “This change will align the supervision of professional services firms with other similar parts of the economy which already have a public sector supervisor.”
The implementation is subject to the passage of enabling legislation, with the Treasury to publish a separate consultation on the new supervisor’s powers.
Reactions to the move
Commenting on the decision, Steve Smart, joint executive director of enforcement and market oversight at the FCA, explained: “These changes will simplify the supervision of professional services, ensure more consistent oversight and help us identify and disrupt crime.”
“The FCA will work closely with the government, the Office for Professional Body Anti-Money Laundering Supervision (OPBAS), PBS, HMRC, the firms we will be supervising and others, as we work together to equip the UK to better fight financial crime,” he added.
The All-Party Parliamentary Group (APPG) on Anti-Corruption and Responsible Tax welcomed the Treasury’s announcement. Chair Phil Brickell MP said: “For far too long crooks and kleptocrats looking to launder their ill-gotten gains have exploited weaknesses on our regulated sectors.”
Ali Ishaq, partner at law firm Reed Smith, stated, “Designating the FCA as SPSS could strengthen AML enforcement by providing centralised, data‑driven oversight, stronger investigative tools, better intelligence‑sharing and more credible deterrence.”
However, Colette Best, director of anti-money laundering at law firm Kingsley Napley, stated: “The FCA is not a natural supervisor for legal services and there are a lot of questions to be answered.”
While the Law Society says solicitors will face significant change following this move, as the role of the SRA “will be significantly reduced”.
Law Society of England and Wales president Mark Evans said: “The government must carefully manage the cost implications of implementing an SPSS model and avoid increasing regulatory burdens that could undermine the competitiveness of our world-beating legal services sector, especially given the extensive changes required.”