FCA Takes Over AML Supervision: What Law and Accountancy Firms Need to Know (2026)

The FCA's Takeover of AML Supervision: A Comprehensive Analysis for Law and Accountancy Firms

This article delves into the Treasury's consultation on the Financial Conduct Authority (FCA) taking over Anti-Money Laundering (AML) supervision across professional services sectors. It explores the key proposals, their implications, and the potential impact on law firms and accountancy practices.

The Regulatory Shift:

Single Professional Services Supervisor (SPSS): The FCA will replace multiple professional body supervisors, streamlining supervision and eliminating inconsistencies.
Enhanced Supervision: The FCA gains expanded powers for inspections, skilled person reviews, and enforcement actions, ensuring compliance with Money Laundering Regulations (MLRs). This may increase the burden on professional businesses, especially those already subject to rigorous supervision.
Registration and Gatekeeping: The FCA will maintain a public register and conduct fit-and-proper tests for beneficial owners and senior managers.
Risk-Based Approach: The consultation promotes a risk-based AML regulation, utilizing data analytics to prioritize high-risk firms and sectors.
Guidance Transfer: Responsibility for AML/CTF guidance for professional service providers shifts to the FCA.
Information and Intelligence: The FCA will provide up-to-date AML/CTF information to supervised firms and share intelligence with law enforcement and other authorities.
Enforcement Powers: The FCA will have the same enforcement powers as before, plus minor fines for routine non-compliance.
Appeals: Decisions made by the FCA regarding AML/CTF supervision are appealable to the Upper Tribunal.
Funding and Fees: The FCA's costs will be met by regulated firms, with details to be consulted.

Key Questions and Concerns:

Sufficiency of Powers: Stakeholders question if proposed powers are sufficient for effective oversight.
Sector-Specific Teams: The need for specialized supervisory teams to address unique risks in law and accountancy is debated.
Transition Process: Smooth transition strategies and information-sharing mechanisms between the FCA and regulators are crucial.
Overlapping Supervision: Potential overlaps between FCA and existing professional regulators need clarification.
Proportionality: Clear guidance on transitional arrangements, funding, and proportional enforcement is essential.
Smaller Firms: How the FCA will engage with smaller firms to ensure compliance without disproportionate burdens remains unclear.

Impact on Legal and Accountancy Sectors:

The FCA's AML/CTF supervision will significantly impact law and accountancy firms, requiring cultural and operational adjustments.
Firms must demonstrate compliance through written policies, risk assessments, and client due diligence.
Practical steps include reviewing governance structures, fostering compliance culture, enhancing training, and investing in AML technology.

Concerns and Gaps:

The FCA's limited understanding of sector-specific risks, potential intrusiveness of 'fit and proper' assessments, and the cost of skilled person reports are concerns.
Legal professional privilege in a different regulatory environment needs clarification.
The consultation lacks timelines, operational details, and strategies for retaining sector-specific expertise.
Overlapping supervision and enforcement actions between the FCA and existing regulators require further clarification.

Timelines and Next Steps:

The consultation ends on December 24, 2025, leaving limited time for responses.
The Treasury's transition plan is expected in 2026, with a phased implementation likely starting in 2028.
Early preparation by professional firms is crucial for a smooth transition and risk mitigation.