FCA to become single professional services supervisor for AML/ CTF – what should firms be thinking about now?

What is changing?

The AML/ CTF supervisory system currently comprises three public sector supervisors, namely the FCA, the Gambling Commission and His Majesty’s Revenue and Customs (HMRC), plus 22 private sector professional body supervisors (PBSs) who supervise the legal and accountancy sectors such as the Solicitors Regulation Authority.

The Consultation Response explains that the FCA will supervise firms that carry out activities within scope of the Money Laundering Regulations (MLRs) as Legal Service Providers (LSPs), Accountancy Service Providers (ASPs), and Trust and Company Service Providers (TCSPs). In practice, this means that all firms currently supervised for AML/ CTF purposes by a PBS, and all ASPs and TCSPs supervised by HMRC will be supervised instead by the FCA.

The precise scope of the FCA’s new remit remains to be seen but by way of simplified overview and taking into account the 2023 proposal on which HMT consulted, the new regime could involve AML/ CTF supervision for certain categories of firms switching to the FCA as follows (for more detail see the diagram at page 77 of the 2023 Consultation):

The change in supervisor does not alter firms’ obligations under the MLRs and the response expressly states that firms that are already compliant should not need to make changes to their AML/ CTF controls. However, firms may experience a difference in the way they are supervised by the FCA.

In terms of the FCA’s new expanded role, the response comments that the FCA will: 

• take a risk-based approach across a population of approximately 60,000 regulated firms, which means it can target resources towards the UK’s highest risk accountancy, legal, trust and company service providers;
• build specific expertise in the particularities of each sector it supervises;
• be provided with funding in respect of the new role which will enable it to hire and train expert staff, make investments in new technology, and prepare to undertake its new functions; and
• be equipped to take strong enforcement action where it is necessary, ensuring there is a clear incentive to comply and that robust action is taken against the minority of wilfully negligent or complicit firms.

What might the impact be?

1. Dual regulation: Some firms, such as legal and accountancy service providers, will be regulated by the FCA for AML/ CTF purposes and by their existing PBS for professional conduct and other matters. As well as the practicalities of having more than one regulator to deal with, including the payment of more than one set of regulatory fees, there is also the potential for overlapping regulatory jurisdiction where misconduct does arise – for example, where both AML/ CTF and conduct issues such as integrity are in question. It will be interesting to see whether the November consultation deals with this potential for dual enforcement and, if so, how it proposes to manage this.
2. Risk-based supervision: Some firms may experience more intense supervision, particularly those that are perceived to pose a higher risk, with an increase in frequency and/or depth of AML/ CTF audit from the FCA. The FCA’s Strategy for 2025 to 2030 confirms that fighting financial crime is one of the FCA’s four strategic priorities and, in July 2025, the NCA and FCA jointly published nine economic crime priorities for the UK’s regulated sector which included a number of AML/ CTF related activities and reference to the role that professional service providers play in enabling criminality. The FCA is likely to want to demonstrate its effectiveness in carrying out its new role and that professional services firms and others are supervised to the same high standard.
3. Enforcement: This year the FCA has issued sizeable fines in relation to AML failings (for example, see here). Although recent enforcement action against regulated firms has been based on FCA Principle breaches rather than the MLRs, its enforcement policy for MLR breaches is to have regard to its standard penalty framework and previous civil fines for MLR breaches have been based on a percentage of the firm’s revenue. The FCA has also shown itself willing to bring a criminal prosecution under the MLRs. The FCA’s enforcement powers in taking on its extended responsibilities will be set out in legislation. However, the Consultation Response confirms that “[t]he FCA will be equipped to take strong enforcement action where it is necessary, ensuring there is a clear incentive to comply and that robust action is taken against the minority of wilfully negligent or complicit firms”. The FCA has a strong record on financial crime enforcement against firms and may also seek to hold individuals personally to account.

When is this changing?

The implementation of these changes is subject to: (i) the passage of enabling legislation; (ii) confirmation of funding arrangements; and (iii) development of a detailed transition and delivery plan. As a result, the date at which the FCA will commence supervision of the professional services sector is dependent on the availability of parliamentary time.

The government intends to identify an approach to phasing in firms and sectors into the FCA when enabling legislation has been passed. In the meantime, HMT has said that, in early November this year, it will publish a consultation on the powers that the FCA should have which should provide further information in relation to the proposals

What should firms do now?

In terms of next steps for impacted firms, key considerations now include:

1. Governance: Allocate responsibility internally for monitoring developments in this area, including reviewing and reacting to, the November consultation paper. A working group may be useful here, including a range of internal stakeholders such as legal, compliance and the business, with regular meetings and formal updates to senior management.
2. Review AML/ CTF policies and procedures: Having particular regard to lessons learned from recent FCA AML enforcement, such as: (a) financial crime systems and controls keeping pace with business growth; (b) the need to gather sufficient due diligence about customers, including about the purpose and intended nature of their business; (c) the importance of responding effectively to red flags concerning AML/ CTF, including about weaknesses in relevant systems and controls; and (d) ensuring adequate record-keeping of all related activities including senior management oversight and challenge.
3. Training: Consider training for the MLRO and wider financial crime team, both at consultation stage and once the final changes have been decided to refresh understanding of: the regulatory requirements and the firm’s internal financial crime framework; reporting obligations and procedures; dealing with supervisory interventions including dawn raids; and the potential consequences of breaches. This will inform responses to the November consultation and the firm’s response to legislative changes and will help to set the firm up for success under a new supervisor.
4. External assurance: Consider obtaining external support and assurance regarding your financial crime framework in advance of the changes to provide additional comfort to senior management and the Board regarding the potential impact of FCA supervision.