When the King’s Speech was delivered last Wednesday, many AML experts and legal compliance officers scanned the text and sighed. On the face of it there was no explicit mention of the long-promised, highly controversial overhaul of AML supervision. Many assumed the government had kicked the can down the road.
But as it turns out, they were just hiding it in plain sight. FCA AML audits are on the horizon.
It has now emerged that the government intends to use the newly announced Enhancing Financial Services Bill as the formal legislative vehicle to strip professional bodies the SRA and CLC of their AML supervisory duties and hand them over to the FCA.
Moving Beyond “Institutional Boundaries”
The legal industry has heavily resisted this consolidation, but outside observers and financial crime watchdogs are praising the decision. The move is fuelled by a growing realisation that the current, fragmented system of multiple distinct regulators including the SRA and CLC is no longer fit for purpose.
Speaking at an FCA financial crime conference just a day after the King’s Speech, FCA Chief Executive Nikhil Rathi didn’t mince words about the sophisticated nature of modern financial threats:
“Historically, we’ve organised our responses around institutional boundaries… But criminals today don’t see our org charts. They see seams. Gaps to exploit in the hand-off between one system and another.”
What the Enhancing Financial Services Bill Will Actually Do
The primary legislation tucked inside this bill will lay the operational and financial groundwork for a centralised AML powerhouse:
- Legitimise the Switch: Provide the necessary legal powers to transfer supervisory oversight from sector-specific bodies to the FCA.
- Bridge the Information Gap: Mandate and smooth out cooperation and information-sharing frameworks between the FCA and professional bodies (like the Solicitors Regulation Authority).
- Follow the Money: Explicitly authorise HM Treasury to provide the FCA with the critical start-up funding required to build out its new team and infrastructure.
The Clock is Ticking
For law firms caught in the middle, this means the “awkward holding pattern” is officially coming to an end. Regulators are being forced to adapt to a landscape where data-sharing, heavy tech investments, and deeper joint operations with the National Crime Agency (NCA) are the norm.
With a high-stakes Financial Action Task Force review looming for the UK, the government has clearly decided that closing regulatory “seams” is no longer optional.