The UK’s AML/CTF Supervisory Reform: FCA to become sole regulator for professional services

In late 2025, HM Treasury set out its proposal to implement the government’s decision for the Financial Conduct Authority (the "FCA") to become the sole anti-money laundering and counter-terrorist financing ("AML/CTF") supervisor for legal, accountancy and trust and company service providers—replacing 22 private‑sector professional body supervisors ("PBSs") and aspects of His Majesty's Revenue and Customs ("HMRC") role. Shortly thereafter the Government ran a consultation, which closed on 24 December 2025, seeking industry views on exactly what duties and powers the FCA would need to perform this role effectively.

While the outcome of the consultation has not yet been published, the FCA is expected to be given new powers to ensure that it is able to regulate professional services sector consistently and proportionately. With this in mind, regulated businesses should monitor the outcome of the consultation, to ensure that they remain abreast of their regulatory and legal obligations, including ensuring that their AML/CTF compliance systems and processes continue to be compliant and effective, particularly in relation to the proposed registration and gatekeeping requirements.

Anti-Corruption in the spotlight

The UK’s financial crime regulatory landscape is undergoing a period of significant reform. As discussed in our previous article (see here), the UK recently published its Anti-Corruption Strategy 2025, which contains over 100 commitments across the whole of Government aimed at reducing the harm caused by corruption (the "Anti-Corruption Strategy"). Tellingly this comes at a time the UK is sliding down rankings on perceptions of corruption (albeit remaining relatively highly ranked) – having fallen from 7th place to 20th place in Transparency International's recently published 2025 Corruption Perceptions Index - and when concerns as to corruption in political and financial dealings are particularly high following the release of the Epstein files. One commitment of the Anti-Corruption Strategy is to combat corrupt actors and the movement of illicit funds domestically and overseas; a particularly relevant issue for the UK given the prominent role its professional services play within the global financial system.

As set out in more detail in the Anti-Corruption Strategy, corrupt individuals often seek the specialist expertise of professional services (e.g. lawyers, accountants, and trust and company providers) to service a spectrum of needs, including laundering money, legitimising wealth, and protecting reputations – and so there is a risk that they look for this from the sizeable UK services sector. Despite recent efforts to strengthen oversight and support for regulated businesses, including the creation of the Office for Professional Body AML Supervision ("OPBAS") in 2017, it is widely acknowledged that the system was overly complex and fragmented with poor guidance for businesses, ultimately underscoring the need for more fundamental reform.

The Treasury’s 2022 Review of the UK’s AML/CTF regulatory and supervisory regime concluded that, while further improvements could be made to the current regime, structural change may be needed to address certain weaknesses. To that end, the Government ran a consultation in 2023, which set out proposed objectives for reform: to strengthen the effectiveness of the supervisory system, improve co-ordination across the UK’s AML/CTF system, and to ensure the chosen policy is feasible. On 21 October 2025, HM Treasury published its response to the 2023 consultation, which set out the Government's intention to appoint the FCA as the sole AML/CFT supervisor for professional services.

As discussed in more detail below, HM Treasury ran a separate consultation at the end of last year, asking for feedback on what duties, powers, and accountability mechanisms the FCA should be given to ensure that it is an effective supervisor, as well as the legislative changes required to enact these (the "2025 Consultation").

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THE CURRENT SUPERVISORY LANDSCAPE

In the UK, HM Treasury appoints AML supervisors to oversee compliance with the requirements of the Money Laundering Regulations 2017 (the "MLRs"). The UK has 25 supervisors: three statutory supervisors (the FCA, HMRC and the Gambling Commission) and 22 legal and accountancy PBSs. Supervisors are required to monitor firms' compliance with the MLRs, as well as being responsible for applying several gatekeeping tests that prevent unfit or criminal persons from operating certain positions in the regulated sector.

In 2017, the government created OPBAS through the Oversight of Professional Body Anti-Money Laundering and Counter Terrorist Financing Supervision Regulations 2017, with a view to ensuring a robust and consistently high standard of supervision by the PBSs, and to facilitate collaboration and information and intelligence sharing between PBSs and other supervisors and law enforcement agencies. OPBAS works closely with the PBSs to ensure that firms meet their regulatory and legal obligations, including in respect of customer due diligence, ongoing monitoring, suspicious activity reporting, risk assessments, and internal controls.

However, despite these efforts to ensure consistent approaches across these many bodies, the supervision of AML compliance remains uneven and overly complex. For example, we have seen many cases where a professional body has fallen into a grey area of the rules and could arguably be subject to the jurisdiction of multiple PBSs, but no one PBS is willing to accept responsibility for oversight. In other cases, inconsistencies in guidance and approach across bodies has increased the compliance challenge in an already complex area. Therefore, consolidation of these functions into a single body, if well implemented, appears to be a welcome reform.

THE CONSULTATION: PROPOSALS FOR REFORM

The 2025 Consultation, which ran from 6 November 2025 to 24 December 2025, sought views on whether the proposed powers, duties, and accountability mechanisms for the FCA are sufficient and appropriate to achieve the primary aim of AML/CTF supervision reform: supervisory effectiveness. It also sought views on whether any additional powers or safeguards should be considered. The key proposals set out in the 2025 Consultation are as follows:

Registration and gatekeeping

The FCA should register all in-scope firms, and be given powers to accept, deny, suspend, or cancel registrations; it should take steps to actively “police the perimeter” to identify unregistered activity; and establish a public register to improve transparency and deter high-risk unsupervised activity.
The gatekeeping regime should be consistent. Without change, the FCA would be required under the MLRs to use two statutory tests to control who can be appointed to AML‑regulated roles, depending on which sector the individual operates. The government proposes that the FCA use the same test (the regulation 58 “fit and proper” test) across its whole supervised population with targeted amendments to strengthen gatekeeping (e.g., requiring new beneficial owners, officers and managers ("BOOMs") to pass fit-and-proper checks before acting; mandatory disclosure of arrests/charges/convictions; criminalising acting as a BOOM without passing the relevant tests; enabling court-ordered divestment where relevant).
Addressing perimeter gaps in legal services (e.g., potential activities not within an existing PBS remit), with a proposal that any legal services in scope of the MLRs must register with the FCA.

Risk-based supervision

The FCA will be given early-intervention tools, including the power to issue directions and require skilled person reports, mirroring effective FCA use in other sectors.

Enforcement and appeals

Equipping the FCA with the power (in relation to professional services firms) to impose civil penalties, suspensions, prohibitions and public censures, and to initiate criminal proceedings for breaches of the MLRs.

Funding, accountability and transition

Once established, FCA costs would be funded through fees charged to supervised firms, on a cost-recovery basis; HM Treasury will provide Economic Crime Levy funding for implementation.
The FCA will be accountable to HM Treasury and Parliament and will remain operationally independent from political control.
The role of OPBAS will continue during the transition phase, potentially with strengthened powers; post-transition, OPBAS would cease in its current form, with legal regulators retaining broader economic crime objectives under the Economic Crime and Corporate Transparency Act 2023 and remaining vital stakeholders to the regime.

CONCLUSION

The simplification of the AML/CTF supervisory system is seen as a key aspect of the UK’s broader anti-corruption and economic crime strategy. The move is intended to improve transparency, strengthen enforceability and ultimately restrict the movement of illicit funds within the UK. Although the transition to a single supervisory body is not expected to result in any material changes to the wider regulatory framework, professional services businesses regulated under the MLR should anticipate tighter gatekeeping, more uniform risk-based supervision, and clearer and stricter enforcement practices going forward. Much of this should be welcome given the complexity and fragmentation of the current supervisory environment.

As discussed in previous briefings, it is increasingly important for all organisations to adopt robust, well-implemented, risk-based financial crime policies and procedures. With this in mind, and against the backdrop of the SFO’s heightened focus on compliance programmes and ECCTA’s expansion of corporate liability, regulated businesses in the UK should seize the current consultation window to review their AML/CFT compliance processes and procedures (including reviewing whether AML/CTF frameworks align with the requirements set out in the MLRs in respect of gatekeeping and risk-based supervisory expectations) to ensure that they meet the requisite standards.

At this stage, it is not clear when the transition is expected to become effective – this will depend on the enabling legislation - however, HM Treasury flags that this “will inevitably take several years” due to the scale of the transition, including the need to establish appropriate resource and capability within the FCA. During this transitionary period, firms should take steps to ensure that their AML/CFT compliance systems are kept up to date and remain effective and well documented.

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