What UK legal and accounting bodies have said about FCA supervision of AML

The Financial Services and Markets Bill [HL] 2026-27 had its second reading in the House of Commons on 10 November and now goes to a Public Bill Committee, which has opened a call for written evidence.

For law firms and accounting practices the relevant provision is clause 13, which supports the government's plan to make the FCA the AML/CTF supervisor for the legal and accountancy sectors in place of the professional bodies.

1. Clause 13 deals with cooperation between supervisors, and most of the detail will come through regulations

Clause 13 amends the Sanctions and Anti-Money Laundering Act 2018 so the Treasury can make regulations on how the FCA and the professional bodies cooperate and share information once those bodies are no longer supervising.

According to the explanatory notes, those regulations could include criminal offences for failing to comply. The supervisory model itself, covering everything from registration to transition arrangements, will be set through regulations under existing powers and the Treasury described its approach in a consultation response published on 18 June 2026.

2. The government considers the current system too fragmented to work well

Around 100,000 businesses are supervised under the Money Laundering Regulations by 25 supervisors, 22 of which are professional bodies supervising their own members. The government says Parliament, government, civil society and the Financial Action Task Force have generally regarded professional body supervisors as less effective than public-sector supervisors on risk assessment and enforcement. It also takes the view that OPBAS, the office set up within the FCA in 2018 to oversee the professional bodies, has not significantly improved the situation.

3. The Law Society of England and Wales wants FCA supervision to be specific to legal practice

The Law Society argues that a single supervisor for professional services brings significant challenges and that FCA oversight would need to reflect legal professional privilege and the way legal practice actually works. It wants practitioner-led guidance retained and the suspicious activity reports system protected, and has raised concerns about regulatory overlap, expanded FCA powers, higher costs and added complexity. It has also pointed to the limited evidence of money laundering in the profession and to gaps in the detail on how the transition will work.

4. The Law Society of Scotland opposes the move

In its response to the Treasury consultation, the Law Society of Scotland said there was insufficient evidence that FCA oversight would make AML supervision more effective, and described the proposal as "neither justified nor proportionate". Its concern is that a UK-wide model would replace a risk-based system it considers effective, increasing bureaucracy for solicitors and costs for consumers.

5. The accountancy bodies have taken different positions

ICAEW opposes handing AML supervision to the FCA, arguing that it would lose the specialist knowledge the professional bodies have of how their members work and would increase costs for business. The Chartered Institute of Taxation has made similar points and also expects more cost and bureaucracy. The Association of Accounting Technicians broadly welcomed the Treasury's response, on the condition that the regime is proportionate and workable for smaller firms.

6. FCA expertise is a concern for supporters of the change as well as its critics

The change has support from Baroness Hodge (the Prime Minister's anti-corruption champion), Spotlight on Corruption, Transparency International UK and RUSI. Spotlight on Corruption argues that lawyers should be regulated on a level playing field, but has said the reform will only succeed if the FCA has the resources and specialist legal expertise to supervise law firms. Baroness Bi, a solicitor and regional chair at Norton Rose Fulbright, has questioned whether the FCA has that expertise.

7. The government has said the FCA will not be able to compel disclosure of privileged material

During the Lords committee stage, peers raised legal professional privilege and client confidentiality, along with proportionality, devolution and intelligence sharing between the FCA and law enforcement. The minister said the Money Laundering Regulations already protect privilege and that the FCA "will not be able to compel disclosure of legally privileged material" under the new powers. The amendments were not put to a vote.

8. The new regime will not start when the bill becomes law

A Lords amendment, now clause 52, requires the Treasury to report to Parliament on how it plans to use the bill's AML/CTF powers before those provisions come into force, and clause 53 authorises funding for the FCA's preparation. The bill still has to complete its Commons stages and the regulations setting out the new regime will follow after that.

What it means for firms

The government's stated reason for the change is that professional body supervisors have been weaker on risk assessment and enforcement. That is the clearest signal of where a public-sector supervisor will look first. Firms with a current firm-wide risk assessment, consistent CDD and records they can produce on request will notice the change least.