A New Era for AML Supervision

The Financial Conduct Authority (FCA) has been crowned the Single Professional Services Supervisor (SPSS), a surprising outcome for many, not least the professions that will now fall under the FCA’s oversight.

The Current Regime: Fragmentation and Frustration

The UK system currently comprises three statutory regulators – the FCA, HM Revenue & Customs (HMRC) and the Gambling Commission, alongside 22 Professional Body Supervisors (PBSs) overseeing the legal and accountancy sectors. Each PBS is responsible for ensuring that its supervised population complies with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs).

This structure has long attracted criticism. The 2015 National Risk Assessment first identified inconsistent supervision, while the 2018 FATF Mutual Evaluation Report confirmed that the fragmented PBS system was struggling to deliver risk-based oversight. In response, the Government created the Office for Professional Body Anti-Money Laundering Supervision (OPBAS) in 2018 to improve coordination and raise standards across PBSs.

Six years on, OPBAS’s annual report found no material improvement in PBS effectiveness, while the Solicitors Regulation Authority (SRA) reported that only 22% of law firms were fully compliant with the MLRs. These persistent deficiencies have reinforced perceptions of a system ill-equipped to keep pace with evolving financial crime risks.

Reform of the AML/CTF Supervisory Regime

Recognising that incremental reform had reached its limits, HM Treasury’s 2023 consultation proposed four alternative models – from enhancing OPBAS’s powers to creating a single regulator responsible for AML/CTF supervision across every sector.

Under the chosen SPSS model, all firms currently supervised for AML/CTF matters by a PBS, as well as Accountancy Service Providers and Trust & Company Service Providers supervised by HMRC, will now be supervised by the FCA. Professional bodies such as the SRA will continue to regulate professional conduct matters.

This reform is designed to simplify the system and introduce a more consistent, risk-based approach. Yet implementation will be complex, and its success will depend on how effectively the FCA can balance regulatory rigour with an understanding of the professions it is about to supervise.

The FCA: Strengths and Opportunities

The FCA has considerable experience delivering risk-based supervision across the UK financial sector, underpinned by its data-driven approach. Recent collaborations – for example, its banking pilot with the NCA – convincingly build on the FCA’s proven capability to identify anomalies, track emerging risks and direct resource to target firms most exposed to ML/TF.

Similarly, the FCA’s leading roles in initiatives such as the Joint Money Laundering Intelligence Taskforce (JMLIT) and the new System Prioritisation Governance Group (SPGG), reflect its ability to coordinate between regulators, law enforcement and the private sector to disrupt complex or emerging threats. Embedding professional services within this ecosystem should, in principle, enhance the overall intelligence picture, help detect cross-sector risks, and reduce opportunities for criminals to exploit regulatory blind spots between professions and sub-sectors: a long-recognised weakness in the fragmented PBS system.

Finally, while the Government has yet to clarify whether the SPSS will assume broader enforcement powers, the FCA’s track record offers reassurance. It has consistently secured meaningful sanctions, exemplified by its 2021 prosecution of NatWest for widespread AML failings – in stark contrast to the SRA’s mixed enforcement record, marked by high-profile losses before the Solicitors Disciplinary Tribunal and High Court. OPBAS has likewise reported that most PBSs make limited and inconsistent use of their enforcement tools, underscoring the need for a more robust, co-ordinated approach.

Valid Concerns: Scale, Scope and Sector Expertise

Nevertheless, the Government’s chosen model presents valid concerns, particularly regarding scale and capacity, as the FCA will soon oversee an estimated 60,000 firms. With limited resources, questions remain as to whether it can deliver proportionate, risk-based oversight across such a diverse population.

Moreover, the MLRs were drafted for financial institutions, not law firms. The FCA will need to adapt its prescriptive, rule-based approach to accommodate a sector accustomed to principles-based regulation and a degree of professional autonomy. Indeed, both the Law Society and SRA advocated for a consolidation of PBSs, emphasising that AML supervision requires sector-specific expertise such as contextual knowledge and an understanding of operational realities, including legal privilege and jurisdictional nuance. The SRA employs dedicated AML staff supported by a budget exceeding £3 million. Building comparable capability within the FCA will take time and investment.

Finally, the pitfalls of dual regulation are plentiful. For example, will the existing Money-Laundering Report and Compliance Officer roles – currently authorised by the SRA – be treated as the equivalent FCA Senior Management Functions? And how will the Government avoid regulatory overlap when, as will often be the case, a breach of the MLRs amounts to a breach of professional conduct rules? A lack of clarity risks unnecessary cost.

Conclusion: A Long Road Ahead

This reform is a decisive response to persistent weaknesses in the UK’s supervisory architecture. But while centralisation offers the prospect of greater consistency and accountability, a one-size-fits-all approach could be costly.
The transition will test the FCA’s capacity and adaptability. Success will depend on its ability to strike the right balance – maintaining robust, risk-based oversight without imposing disproportionate or duplicative burdens. Engagement with professional bodies will be critical.

Forthcoming AML reports from OPBAS and the SRA are expected to show progress in data-driven supervision and enforcement. If those improvements are borne out, the Government may struggle to justify the scale and cost of change. For now, however, the FCA stands at the threshold of a major expansion of its mandate. The ambition is clear, but the true test is in delivery.

This Article was written by Rebecca Hughes and first published in New Law Journal on 31 October 2025.