FCA takes control of AML supervision

HM Treasury has today announced that the Financial Conduct Authority (FCA) will assume sole responsibility for Anti-Money Laundering (AML) supervision across various professional sectors. This significant shift follows HM Treasury's 2023 consultation on reforming the AML and counter-terrorist financing supervision regime.

Many within the legal community have voiced their apprehensions regarding this reform. Sheila Kumar, Chief Executive of the Council for Licensed Conveyancers (CLC), expressed concern over the unexpected outcome of the decision, stating “it will create duplication of effort in AML supervision and risks increasing the burden on the regulated community and the financial burden that will be passed on to users of legal services.” She further indicated awaiting further details on the operation of these new arrangements.

In Scotland, the Law Society has similarly highlighted potential drawbacks of the FCA's new role. The Society argues that the government's decision to remove its AML function, despite its strong track record in enforcement and education, will add unnecessary complexity. David Gordon, the Convener of the Law Society of Scotland’s Regulatory Committee, stated: “We are frustrated and disappointed with this decision, which imposes a finance sector focused AML regulator on law firms and all other professional services.” He pointed out that this shift undermines previous changes granting the Law Society enhanced regulatory powers.

Furthermore, Gordon raised concerns about the FCA's capacity to understand Scotland's unique legal landscape. He said: “It is difficult to see how a body overseeing banks and other finance sector businesses with thousands of staff can also provide effective enforcement and support for single-solicitor law firms.” This transition is anticipated to result in an increased bureaucratic burden on law firms in Scotland, especially as they contend with multiple regulators.

With the announcement already having elicited frustration from various stakeholders, both Kumar and Gordon have called for a reconsideration of this decision. They believe that consumers are likely to bear the brunt of the costs associated with inefficient regulation, leading to calls for the government to ensure that the new system is as effective as possible in tackling money laundering without detriment to legal service users.