New UK bill could weaken economic crime fight

Plans by the UK Government to reform anti-money laundering regulation in Scotland are “misplaced, misguided and counterproductive” and risk weakening the fight against economic crime, the Law Society of Scotland warned today. This concern follows the recent King’s Speech, which included proposals for legislation such as the Regulating for Growth Bill and the Enhancing Financial Services Bill. One bill is expected to transfer anti-money laundering (AML) regulation from professional bodies, including the Law Society of Scotland, to the Financial Conduct Authority (FCA), based in London.

This move reflects HM Treasury's previous decision to consolidate AML regulation under the FCA. However, various professional bodies within the legal and accounting sectors have expressed strong opposition to these changes, highlighting that they could reduce effective specialist oversight and lead to greater costs and bureaucracy for businesses. Ben Kemp, Chief Executive of the Law Society of Scotland, expressed serious concerns by stating that “the UK Government’s proposals risk weakening the fight against economic crime while imposing unnecessary cost and bureaucracy on hundreds of Scottish law firms.”

Kemp noted that the Law Society has a proven track record in regulating Scottish solicitor firms with respect to money laundering. He commented, “Our specialist regulatory teams operate clear rules alongside a proactive programme of inspections.” The Society’s commitment to tackling economic crime is well recognised, yet Kemp warned that “removing anti-money laundering regulation from specialist professional regulators and centralising it within the Financial Conduct Authority creates a real risk that this robust and effective approach will be undermined.” This centralisation would lack the necessary knowledge of the Scottish legal environment, potentially introducing additional costs and complexities without any real benefit.

According to Kemp, “no evidence has been provided and no impact assessment published” to support these proposals, which risk amplifying the costs, bureaucracy, and administrative burdens faced by law firms. The proposed changes could result in multiple regulators supervising a single firm, intensifying the regulatory complexity already burdensome during economically challenging times for many. He stressed that smaller firms serving local communities will likely be the most negatively impacted, as they have less capacity to manage extra compliance costs.

As Parliament considers this legislation, Kemp affirmed that the Law Society would “continue making the case that these reforms are misplaced, misguided and counterproductive.” He added that there is still an opportunity for the UK Government to reconsider these plans in order to protect the public and sustain the effective anti-money laundering framework currently in place in Scotland.