HM Treasury AML/CTF Supervision Reform consultation response overview

HM Treasury has published its formal response to the consultation on AML/CTF Supervision Reform: Duties, Powers and Accountability.

The proposals are no longer proposals. This document confirms the legislative framework that will underpin the FCA's expanded role as AML/CTF supervisor for legal, accountancy, and trust and company service providers (TCSPs) in the UK.

For legal and accountancy compliance teams, the response is worth reading carefully. Not because it changes anything today, but because the framework that will govern your next supervisory relationship is now settled in its broad shape. What follows is a breakdown of what is confirmed, what is still open, and what the realistic timeline looks like.

A single public register replaces 22 separate professional body supervisors

The FCA will maintain a single public register of all supervised professional services firms. Firms must appear on it to lawfully carry out AML-regulated work. The FCA also gains the power to cancel a registration where a firm is no longer conducting in-scope activity, subject to advance notice and verification requirements.

This is a material shift from the current model. Under the existing regime, a firm's supervisory relationship sits with its professional body. Under the new one, it sits with a publicly searchable register maintained by a financial regulator with a track record of enforcement. That changes the nature of accountability, not just the administrative arrangements.

Regulation 58 fit and proper testing extended to legal and accountancy service providers 

The FCA's fit and proper bar is higher than anything the SRA has applied. The response confirms that Regulation 58 fit and proper testing will extend to legal and accountancy firms. This goes materially further than the current Regulation 26 framework, which covers criminal conviction checks. Regulation 58 requires assessment of the integrity, competence and compliance history of Beneficial Owners, Officers or Managers (BOOMs).

During the transition period, the FCA will draw on existing professional body checks where they meet the standard, to avoid firms going through the process twice. That is a practical concession. It does not change the underlying standard that firms will ultimately be assessed against.

FCA supervisory powers: skilled person and directions powers confirmed

The FCA is confirmed to receive the power to appoint a skilled person and to issue directions to firms, both subject to a reasonableness test. Risk-based supervision under Regulations 17 and 46 of the MLRs is extended to the FCA's expanded remit.

For context: skilled person reviews (formerly known as Section 166 reviews) are a standard FCA tool across financial services. They are used to commission independent assessments of a firm's systems and controls, typically in response to identified weaknesses. Law firms have not previously been subject to this mechanism. Under FCA supervision, they will be.

Guidance will still be practitioner-drafted, but the FCA approves it

The Legal Sector Affinity Group survives, but the FCA holds the sign-off

One of the most debated aspects of the reform has been whether the FCA would displace practitioner-led guidance with generic financial services frameworks. The response addresses this directly. Guidance for the legal and accountancy sectors will continue to be drafted by practitioners through reformed versions of LSAG (Legal Sector Affinity Group) and CCAB (Consultative Committee of Accountancy Bodies). However, the FCA takes over responsibility for approving it.

HM Treasury retains a veto. The timing signal is worth noting: HM Treasury intends to consult on the details of the veto mechanism in late 2026, with a Statutory Instrument to amend the MLRs following in 2027. The guidance framework is unlikely to be fully settled before then.

Information-sharing obligations between the FCA and existing professional body supervisors

The most substantive concern raised during the consultation was the risk of firms being simultaneously regulated by both the FCA and their professional body. The government has acknowledged it. Treasury minister Rachel Blake confirmed that the intention is to minimise burden, and that the FCA and existing professional body supervisors will be required to establish information-sharing and cooperation arrangements.

The SRA's position is also clarified in the response. Legal services regulators retain the economic crime objective under the Economic Crime and Corporate Transparency Act 2023. The SRA will continue to have a role in financial sanctions compliance and wider economic crime matters (fraud, bribery) that sit outside the MLRs. The FCA takes AML/CTF supervision. 

FCA go-live timeline: The realistic go-live date is likely to be 2028, not 2027

The response contains two timeline signals that, taken together, push the realistic go-live date further than earlier commentary suggested.

First, the consultation on the guidance veto mechanism is planned for late 2026, with the associated Statutory Instrument in 2027. Second, the response explicitly states that implementation will "inevitably take several years" and acknowledges the need to protect the UK's AML defences during the transition.

Against the requirement for primary legislation and the scale of approximately 60,000 firms needing to transition, the picture looks like this:

Earlier assessments pointed to 2027 as a likely target. The response signals late 2027 at the earliest. 2028 is the more realistic expectation.

What law firms should do now before FCA supervision begins

Firms' obligations to the SRA and existing professional body supervisors remain entirely in place. Nothing changes for clients today.

What the response does is close the door on uncertainty about the shape of the new regime. The FCA's supervisory approach is not unknown. It has already signalled, through its 2025 CDD review of financial services firms, what the standard looks like in practice: policies that are operationally specific enough for staff to act on, customer files that evidence the measures actually taken, governance structures with defined escalation paths, and compliance monitoring that is structurally independent of the onboarding function.

These are existing MLR obligations. The difference under FCA supervision will be the rigour of the scrutiny applied and the scale of the enforcement consequences if firms fall short. The SRA capped financial penalties at £25,000. The FCA does not operate under that constraint.

The firms that will find the transition hardest are those treating FCA supervision as a future problem. The work required to meet FCA standards is the same work required to meet current MLR obligations, done well. Starting now means the transition is a confirmation of existing practice, not a rebuild.

For background on the original announcement, see The FCA takes control: what the transfer of AML supervision means for the UK legal sector. For the FCA's own signalling on supervisory standards, see What the FCA's 2025 CDD review really tells us about compliance maturity.