The regulatory landscape for Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) is undergoing a significant transformation. The UK government has announced plans to unify the regulation of AML and CTF under the Financial Conduct Authority (FCA), with the Solicitors Regulation Authority (SRA) managing the transition while continuing its current oversight.
FCA Regulation Unification Plan
The government’s plan to consolidate AML and CTF regulation under the FCA will involve a managed handover from the SRA. Until this transition is complete, law firms must continue following SRA guidance.
The SRA will soon launch a consultation on regulatory interpretation burdens, aiming to gather evidence to inform proportional risk assessments—especially in high-risk areas like immigration law, where client consequences can be severe.
Key Compliance Areas Discussed
- Inspections and Compliance Requirements
- AML inspections increased in 2024–25 and will continue to rise through 2026.
- Sanctions compliance desktop reviews are scheduled for January 2026.
- Firms should expect SRA thematic reviews on Policies, Controls, and Procedures (PCPs) in 2026.
- Risk Assessments
- Many firms fail due to untailored risk templates and missing mandatory risks.
- 50% of referrals stemmed from missing client and matter risk assessments.
- 19 firms were found to have no firm-wide risk assessments at all.
- Independent AML Audits
- The SRA favours regular, repeating AML audits, not just annual ones.
- These audits help identify gaps between written policies and actual practices.
- PCPs and File Reviews
- PCPs must be tailored to firm-specific needs and regularly updated, with documentation of who made changes and when.
- Firms conducting regular file reviews show higher compliance rates.
Next Steps for Law Firms
To stay ahead of the curve, law firms should:
- Continue current AML practices as directed by the SRA
- Watch for targeted data requests from the SRA in early 2026
- Monitor SRA guidance on the Mazur decision
- Prepare for sanctions compliance reviews in January 2026
- Ensure firm-wide risk assessments include the 5 mandatory risks
- Include client and matter risk assessments on all files
- Conduct independent AML audits on a repeating basis
- Tailor PCPs to your firm’s specific needs and document updates
- Prepare for SRA thematic reviews on PCPs in 2026
- Conduct regular file reviews for AML compliance
Looking Ahead
- New SARs guidance from the NCA is expected in November 2025. Stay updated via nca.gov.uk
- The SRA Compliance Conference will return in April 2027, skipping 2026.