On 17 July 2025, the UK Home Office and HM Treasury published the latest National Risk Assessment (NRA) on Money Laundering and Terrorist Financing [1] [2]. This comprehensive report outlines the evolving threats to the UK’s financial system and highlights the sectors most vulnerable to abuse—including the legal profession.
For small law firms and sole practitioners , the NRA is more than a policy document. It’s a vital tool for shaping your firm-wide risk assessment (FWRA) and client and matter risk assessments (CMRAs). The Solicitors Regulation Authority (SRA) expects regulated firms to align their AML frameworks with the risks identified in the NRA, ensuring that policies, controls, and procedures (PCPs) are proportionate and effective.
This blog post breaks down the key findings of the 2025 NRA, explains their relevance to legal services, and outlines practical steps for small firms to stay compliant.
Why the NRA Matters to the Legal Sector
The NRA is the UK’s official assessment of how criminals and terrorists exploit financial and professional services to move illicit funds. It informs the government’s AML strategy, shapes regulatory priorities, and guides supervisors like the SRA in their enforcement approach.
The 2025 NRA identifies the legal sector as a medium-risk area for money laundering, with particular vulnerabilities in:
- Conveyancing and property transactions
- Trust and company formation
- Client account misuse
- High-value transactions involving opaque ownership structures
These risks are not limited to large firms. Small practices and sole practitioners are often targeted precisely because they may lack the resources or systems to detect sophisticated laundering schemes.
Updated Legal Sector Risks in the 2025 NRA
1. Conveyancing and Property Transactions
Property remains a key vehicle for laundering illicit funds. The NRA highlights risks such as:
- Use of offshore entities to conceal beneficial ownership
- Third-party contributions to purchase funds
- Rapid resale of properties to obscure transaction trails
Action point: Review your CDD procedures for property matters. Ensure you verify the source of funds and beneficial ownership, especially in high-value or unusual transactions.
2. Trust and Company Formation
The formation of trusts and companies—especially off-the-shelf entities—is flagged as a high-risk activity. Criminals may use these structures to hide assets or facilitate cross-border laundering.
Action point: If your firm offers company formation services, ensure you’re registered as a Trust or Company Service Provider (TCSP) and apply enhanced due diligence where appropriate.
3. Client Account Misuse
The NRA warns that client accounts can be misused to layer funds and obscure their origin. This is particularly relevant for firms that hold large sums temporarily or facilitate payments on behalf of clients.
Action point: Audit your client account practices. Ensure all transactions are justified, documented, and traceable. Avoid acting as a “banking facility” for clients.
4. High-Value Transactions and Professional Enablers
The NRA identifies legal professionals as potential professional enablers—individuals who, knowingly or unknowingly, facilitate money laundering. High-value transactions involving art, luxury goods, or complex financial arrangements are especially risky.
Action point: Train fee-earners to spot red flags in high-value matters. Include examples in your AML training and ensure decisions are documented.
FWRAs and CMRAs: Aligning with the NRA
The SRA requires firms to maintain a firm-wide risk assessment (FWRA) and client and matter risk assessments (CMRAs) that reflect current national risks [2]. These assessments must be:
- Tailored to your firm’s services and client base
- Updated regularly, especially after major publications like the NRA
- Documented and available for inspection
Tip: Use the 2025 NRA to identify new risk factors and typologies. Update your FWRA to include threats such as cryptoasset laundering, sanctions evasion, and misuse of legal services.
Expect Greater Regulatory Attention
While the NRA notes the largest increase in supervisory activity is in the payments and e-money sector, the SRA has signalled its intention to intensify AML supervision across the legal profession [2]. This includes:
- Thematic reviews of high-risk practice areas
- Inspections of AML policies and procedures
- Enforcement action for non-compliance
Implication for small firms: You must be able to evidence compliance. This means having up-to-date risk assessments, documented procedures, and trained staff.
Emerging Typologies to Watch
The 2025 NRA refreshes its list of money laundering typologies, many of which involve legal services. These include:
- Use of cryptoassets to obscure transaction trails
- Trade-based money laundering involving legal contracts
- Use of informal value transfer systems (IVTS)
- Sanctions evasion through legal structuring
Action point: Revisit your AML training materials. Include updated typologies and ensure staff understand how these risks may present in legal work.
Governance and Accountability
The SRA expects firms to demonstrate clear governance structures around AML compliance. This includes:
- Defined roles for the Money Laundering Reporting Officer (MLRO), Compliance Officer for Finance and Administration (COFA), and Compliance Officer for Legal Practice (COLP)
- Regular reporting and oversight
- Documented decision-making processes
Tip: Ensure your governance framework is proportionate to your firm’s size but robust enough to withstand regulatory scrutiny.
Practical Next Steps for Small Firms
1. Review and Update Risk Assessments
Use the 2025 NRA to refresh your FWRA and CMRAs. Include new threats, typologies, and sector-specific risks.
2. Revisit AML Training
Update training materials to reflect the latest NRA findings. Include practical examples and red flags relevant to your practice areas.
3. Test Your AML Controls
Conduct an internal audit or mock inspection. Ask: Would your AML framework stand up to an SRA review?
4. Strengthen Governance Structures
Ensure your MLRO, COFA, and COLP are clear on their responsibilities. Document oversight and escalation procedures.
5. Monitor Regulatory Updates
Subscribe to SRA alerts and review guidance regularly. The SRA may issue further updates or thematic reviews based on the NRA.
Final Thoughts
The 2025 National Risk Assessment is a critical resource for understanding how money laundering and terrorist financing risks are evolving in the UK. For small law firms and sole practitioners , it provides a roadmap for strengthening AML compliance, protecting your practice, and meeting regulatory expectations.
By aligning your risk assessments, training, and governance with the NRA, you not only stay compliant—you also contribute to the integrity of the UK’s legal and financial systems.
References
[1] National risk assessment of money laundering and terrorist financing …
[2] National Risk Assessment of Money Laundering and Terrorist Financing 2025