Accountants and Lawyers Face FCA-Led AML Oversight from 2027

The Financial Conduct Authority will assume responsibility for supervising all anti-money laundering activities of accountants and lawyers, ending nearly two decades of professional body oversight and marking the most significant restructuring of Britain’s AML supervisory regime since the Money Laundering Regulations took effect in 2007.

The decision went against the preference of the legal profession, whose representative bodies had lobbied for either strengthened professional body supervision or a single legal sector supervisor. Instead, the Treasury opted to expand the FCA’s remit across approximately 60,000 firms, consolidating a system previously managed by 22 professional body supervisors plus HMRC. For accountants and lawyers, this means the end of an era defined by professional body self-regulation.

The move strips established professional bodies of a lucrative and influential supervisory role. For firms accustomed to oversight from organisations that understand their operations intimately, the transition represents a fundamental shift in regulatory culture. David Winch, an AML and onboarding adviser to accountancy firms, said he is “not thrilled with the decision”, adding that he would have preferred the OPBAS+ approach, which would have given increased powers to the existing oversight body rather than transferring supervision entirely.

Winch expressed concern that the FCA would produce voluminous guidance, creating extra work in practice. His assessment was blunt: “I see it as being, if anything, more onerous, less sympathetic and less understanding of what accountants in practice actually do in their normal everyday lives.” This sentiment reflects broader anxiety among accountants and lawyers about regulatory overreach.

Professional Bodies Pushed Aside

The announcement has triggered considerable frustration across the sector. Parjinder Basra, chair of the Institute of Chartered Accountants in England and Wales regulatory board, believes the decision will “only increase the regulatory burden and costs to firms, making business growth more challenging”. The ICAEW supervises around 10,000 firms and now faces losing that role entirely.

The Law Society of Scotland urged the government to reconsider, arguing that a finance-sector focused AML regulator would struggle to replicate knowledge of Scotland’s legal sector. David Gordon, convener of its regulatory committee, questioned how a body overseeing banks with thousands of staff can provide effective enforcement and support for single-solicitor law firms, especially with FCA resources heavily concentrated in London.

Paul Philip, chief executive of the Solicitors Regulation Authority, said he was “disappointed” by the decision. The SRA had lobbied hard to become the sole AML supervisor for the legal sector, positioning itself as best placed to understand law firm operations whilst maintaining rigorous standards. Philip noted the SRA was not told about the announcement in advance, highlighting the government’s determination to proceed regardless of professional body opposition.

What the FCA Brings: Enforcement with Teeth

The contrast between professional body oversight and FCA supervision could not be starker. The FCA has issued more than £1.07 billion in fines across 27 cases over the past decade for anti-money laundering failings. This enforcement record reflects a regulator that views substantial penalties as essential deterrents rather than last resorts.

In 2024, the FCA issued its first-ever fine to an audit firm, penalising PwC £15 million for failing to report suspected fraudulent activity at London Capital & Finance. The case demonstrated the FCA’s willingness to expand its enforcement reach across professional services when it identifies systemic failures. The message to accountants and lawyers is unmistakable: the era of sympathetic treatment from professional bodies that understand the practical constraints of running a practice is over.

Philip acknowledged that the FCA’s model of regulation is rules-based as opposed to principles-based, warning that “being on the receiving end will feel very different”. Professional bodies typically adopt a collegial approach, working with firms to address deficiencies. The FCA operates with explicit consumer protection and market integrity mandates, and its enforcement decisions reflect those priorities.

The Timing and Dual Regulation Challenge

Implementation timelines remain uncertain. A consultation on the powers the FCA should have as Single Professional Services Supervisor was due in early November, after which the government would need to pass enabling legislation. The 2027 target date is no coincidence. The UK is preparing for its upcoming visit from the Financial Action Task Force, the international body that assesses countries’ anti-money laundering frameworks.

Economic Secretary to the Treasury Lucy Rigby KC said in her foreword that the current regime remained “complex and disjointed”, with 23 different supervisors inevitably leading to inconsistencies in supervision and enforcement. The fragmented system created opportunities for regulatory arbitrage, with firms gravitating toward less demanding supervisors.

All regulated lawyers covered by the Money Laundering Regulations 2017 will have two regulators: the FCA for AML activities and their existing regulator for everything else. For law firms, this means answering to both the FCA for money laundering compliance and the SRA, Bar Standards Board, Council for Licensed Conveyancers, or CILEx Regulation for professional conduct matters.

This could potentially lead to overlapping supervision and increased regulatory burden if misconduct were scrutinised by both regulators. Money Laundering Reporting Officers currently approved by professional bodies may need to obtain FCA authorisation under Senior Management Functions, subjecting them to separate FCA rules on conduct, fitness, and propriety. For sole practitioners and small firms already stretched thin, navigating two regulatory regimes simultaneously adds complexity and cost.

The Technology Imperative

As enforcement expectations rise, anti-money laundering technology offers solutions that manual processes cannot match. Modern AML software combines artificial intelligence and machine learning to analyse vast transaction volumes, identifying patterns indicative of money laundering that human review would miss.

Advanced platforms reduce false positives, which have plagued compliance programmes for years. Rather than investigating hundreds of routine transactions flagged by crude rules-based systems, AI-powered monitoring allows compliance teams to focus on genuinely high-risk activities. Machine learning models trained on institutions’ own data provide comprehensive risk scoring by examining transactions, account behaviours, customer relationships, and corporate structures holistically.

Real-time monitoring ensures firms remain in compliance whilst reporting suspicious activities immediately. Integration with existing client relationship management and core business systems reduces manual labour, addressing concerns about increased administrative burdens under FCA supervision. For professional services firms facing significantly heightened scrutiny, investing in robust AML technology may prove essential to demonstrating compliance and avoiding penalties.

The efficiency gains are substantial. Automated screening and transaction monitoring systems process data in seconds rather than hours, freeing compliance staff to investigate actionable alerts. As the FCA applies data analytics and sophisticated monitoring capabilities developed through supervising financial institutions, firms relying on spreadsheets and manual processes will struggle to meet expectations.

Costs and a Risk-Based Approach

Winch expressed worry about additional costs, suggesting that the government might require supervised firms to fund the FCA through levies rather than providing Treasury funding. For small practices and sole practitioners, the financial implications could prove significant. The Treasury acknowledged “some familiarisation costs to businesses where, for instance, the FCA has a new IT system with which firms interact”.

Professional bodies currently fund AML supervision through membership fees, creating a business model that depends on retaining supervisory roles. Losing that function threatens their financial viability and influence. The ICAEW, for instance, derives significant income and regulatory authority from its role supervising 10,000 firms.

The FCA will take a risk-based approach across the 60,000 regulated firms, targeting resources towards the UK’s highest-risk accountancy, legal, trust and company service providers whilst ensuring lower-risk firms receive supervisory attention appropriate to their risk profile. This methodology, refined through supervising 17,000 financial services firms, leverages data analytics to identify outliers and concentrate resources where risks are greatest.

For firms operating compliantly, this approach should reduce unnecessary interference. However, what constitutes “low risk” and “compliant” in the FCA’s assessment may prove more demanding than under previous supervisory regimes. The regulator’s data-driven capabilities mean weaknesses in AML systems will become increasingly difficult to conceal.

Colette Best, director of AML at Kingsley Napley and a former head of AML at the SRA, commented: “The FCA is not a natural supervisor for legal services and there are a lot of questions to be answered”. Her insight as someone who has worked inside both regulatory environments underscores legitimate concerns about whether a finance-focused regulator can adapt its approach to professional services.

Preparing for the Inevitable

Waiting for the FCA takeover to begin preparations would be unwise. Firms should review their AML policies and procedures against FCA standards now, rather than merely meeting minimum Money Laundering Regulations requirements. The FCA expects watertight processes, clearly documented decision-making, and demonstrable senior management oversight.

Documentation standards will need to exceed current practices. The FCA’s examination approach demands auditable records showing how firms assessed risks, conducted due diligence, and reached conclusions about customer relationships. For practices relying on informal processes or inadequate record-keeping, the transition will require significant operational adjustments.

Training requirements will intensify. The FCA has repeatedly identified inadequate staff training as a contributing factor in AML failures. Firms must ensure all relevant personnel understand their obligations, can recognise red flags, and know how to escalate concerns appropriately. Generic annual training sessions will not suffice; the FCA expects targeted, role-specific training that demonstrably improves competence.

The changes aim to improve Britain’s defences against money laundering ahead of the FATF visit. Professional services have long been recognised as vulnerable to exploitation by criminals seeking to legitimise proceeds. Accountants and lawyers provide access to the financial system, create corporate structures that obscure beneficial ownership, and lend legitimacy to transactions that might otherwise attract scrutiny.

The 2025 National Risk Assessment confirmed that accountancy services remain at high risk for money laundering. Criminals specifically target professional services for the trust, legitimacy, and financial system access they provide. Raising standards across the sector has become a matter of national economic security, not merely regulatory housekeeping.

An Uncomfortable New Reality

For accountants and lawyers, the comfortable era of oversight by sympathetic professional bodies is ending. The FCA brings enforcement-minded supervision, substantial penalties, and sophisticated detection capabilities that leave little room for complacency. Those who view AML compliance as a tick-box exercise will find the new environment unforgiving.

Success requires cultural adjustment as much as operational change. Firms must recognise that preventing money launderers from exploiting professional services is not merely a regulatory obligation but fundamental to maintaining the integrity that makes their services valuable. The FCA’s arrival forces a reckoning: professional services can no longer rely on regulatory forbearance whilst claiming to uphold standards voluntarily.

The transition will be painful for some. Small practices and sole practitioners face disproportionate burdens adapting to more demanding supervision. Professional bodies lose influence and income, threatening their viability. Yet the alternative is continued weakness in Britain’s AML defences and further damage to the country’s international reputation.

The question is not whether accountants and lawyers can adapt to FCA oversight, but how effectively they choose to prepare for it. Those who act now will navigate the transition successfully. Those who delay may find themselves struggling to survive once the FCA assumes full powers and begins demonstrating the enforcement approach that has extracted over a billion pounds in fines from financial services firms over the past decade.