The FCA’s shift toward “Impactful Deterrence” is already making waves, there is a specific regulatory transition looming that should have every High Street partner checking their risk register: the transfer of AML supervision.
Currently, for most High Street firms, the Solicitors Regulation Authority holds the reins. But the landscape is shifting. The Financial Conduct Authority (FCA) is positioned to become the single professional services supervisor for AML.
This means “bank-grade” scrutiny is officially moving from Canary Wharf to the local High Street.
The Gap: From the SRA to the FCA
It is important to be clear: the SRA still currently oversees your AML compliance. However, the FCA is already the “supervisor-in-waiting,” and this transition period is arguably the most dangerous time for a firm to be complacent.
The FCA’s “Impactful Deterrence” model is fundamentally more aggressive than the SRA’s historical approach. Where the SRA AML Audit often focuses on “assisted compliance”, helping firms fix mistakes, the FCA AML Audit is known for “effectiveness testing.” They don’t just want to see your written AML policy and FWRA; they want to see it stress tested to see how your staff reacts.
The Solution: The Independent AML Audit
Under Regulation 21 of the Money Laundering Regulations 2017, most High Street firms, certainly ones offering conveyancing, are already legally required to establish an independent audit function based on their size and nature. Even for firms where it isn’t a strict requirement, an independent AML audit has become the ultimate regulatory shield.
An independent AML audit, conducted by an external expert, serves as your firm’s “stress test” before the regulator arrives.
Why the High Street Needs an Independent View:
- The “Marking Your Own Homework” Problem: The FCA is notoriously skeptical of internal reviews. A third-party audit provides the “objective distance” that a proactive regulator demands.
- Identifying the “Policy-Reality Gap”: Many High Street firms have excellent manuals that sit on a shelf. An audit catches whether your fee-earners are actually performing the ID checks and PEP screening the manual claims they are.
- Mitigation in Enforcement: If the FCA (or SRA currently) finds a breach, the first thing they ask is: “What steps did you take to prevent this?” Having a recent, independent AML audit report, and proof that you acted on its findings, is the strongest mitigating factor your firm can possess.
The Future is Almost Upon Us
With the Money Laundering and Terrorist Financing (Amendment) Regulations 2026 now in play, expectations around governance and “doing the right thing” have never been higher. The FCA will be using data analytics to spot patterns in the legal sector, even before the formal takeover is complete.
The “regulatory honeymoon” for smaller firms is over. The FCA won’t care that you only have three partners; they will care that your firm could be a gateway for illicit funds.
The Bottom Line: Don’t wait for a formal notice from the FCA to find out your AML controls are purely cosmetic. For a High Street firm, a Reg 21 independent audit today is a fraction of the cost of an “impactful” fine tomorrow.