Reeves moves AML scrutiny to City watchdog
The Solicitors Regulation Authority (SRA) is to lose its anti-money-laundering (AML) responsibilities in England and Wales.
British chancellor Rachel Reeves announced yesterday (21 October) that the supervision of law firms would pass to City watchdog the Financial Conduct Authority (FCA).
The England and Wales Law Society Gazette said that the move was part of what Reeves described as a “blitz on business bureaucracy”.
After a consultation that began in 2023, the British government is to designate the FCA as Single Professional Services Supervisor (SPSS) for AML.
Obligation
The SRA has held responsibility for regulating AML compliance since it was formed in 2007, but its powers were significantly strengthened by the Money Laundering, Terrorist Financing and Transfer of Funds regulations (MLRs) in 2017.
These changes introduced the obligation on all law firms doing in-scope work to maintain and keep up to date a firm-wide risk assessment and have compliant AML policies, controls and procedures in place.
This applied to all firms, even sole practitioners.
The SRA was established as the largest legal-sector AML supervisor and, as of October 2023, supervised 23,275 beneficial owners, officers, and managers spread across more than 6,000 firms in scope.
At that point, the SRA had 34 dedicated members of staff and an AML-specific annual budget of more than £3 million.
Coinciding with the SRA extending its fining powers to £25,000, the last two years has featured a substantial increase in the rate and severity of AML-linked fines being handed out to firms.
‘Regulatory burdens’
Commenting on the transfer of responsibilities, the Law Society of England and Wales warned that the British government must carefully manage the cost implications of implementing an SPSS model and “avoid increasing regulatory burdens that could undermine the competitiveness of our world-beating legal services sector”.
President Mark Evans added: “In its new role, the FCA should have a greater focus on proportionate risk-based regulation, rather than blind compliance.
“There must also be a careful transition between the SRA and the FCA, so that cost and complexity risks are mitigated for our members and their clients. It is vital that representative bodies, such as the Law Society, continue to play a central role in shaping and contributing to legal sector-wide guidance,” he stated.