The Solicitors Regulation Authority’s latest Anti-Money Laundering Annual Report arrives at a pivotal moment for the United Kingdom’s financial crime framework. As the government prepares to consolidate all professional body supervisors under the Financial Conduct Authority, the SRA has published one of its most comprehensive overviews to date of the legal sector’s exposure to financial crime and its own regulatory response.
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SRA Anti-Money Laundering Supervision in 2024–25
The 2024–25 report captures the scale of the SRA’s activity in fighting illicit finance within the legal sector. It documents 935 proactive AML engagements with firms, a record level of scrutiny that represents a sharp increase from previous years. The regulator reviewed 5,873 files, assessed more than 800 firm-wide risk assessments, and issued numerous sanctions ranging from regulatory settlement agreements to fines exceeding £290,000.
This intensity of oversight shows that the SRA has been far from passive. It treated AML supervision as a core mandate, not a compliance add-on. Yet, the publication coincides with the government’s decision to designate the FCA as the single supervisor for anti-money laundering and counter-terrorism financing across all professional sectors. That timing adds tension to the findings. While the SRA demonstrates measurable progress and growing sophistication in data-led supervision, its future role in AML enforcement is now uncertain.
The report’s core message is that the legal profession remains at high risk of criminal exploitation. Around one-third of firms reviewed were not fully compliant with money laundering regulations. Many deficiencies related to inadequate firm-wide risk assessments, weak client due diligence, or poor documentation of the source of funds. Yet, the SRA’s strategy—focused on targeted inspections, thematic reviews, and enforcement escalation—has begun to narrow those gaps.
The SRA’s chief executive described the year as one of “significant progress,” emphasizing the regulator’s commitment to protecting the sector from misuse. That statement now reads with a certain poignancy, as the SRA prepares to hand over its supervisory function to a centralized regime led by the FCA.
The Legal Sector’s AML Reality
The 2024–25 report paints a granular picture of how money laundering risks manifest in the legal profession. Law firms act as trusted intermediaries in property transactions, corporate structuring, and client account management—all attractive channels for concealing illicit funds.
The SRA supervises over 5,500 firms for compliance with the Money Laundering Regulations 2017, as amended. It has adopted a risk-based approach that adjusts oversight intensity according to a firm’s exposure profile. Inspections target firms engaged in conveyancing, trust formation, and complex cross-border transactions.
Findings reveal persistent vulnerabilities. Some firms failed to perform source-of-funds checks or maintain proper client-matter risk assessments. Others lacked independent audit reviews or adequate staff training. Despite years of guidance, a small but concerning share of firms still operate without a documented firm-wide risk assessment.
Nonetheless, progress is evident. The SRA reports that 47% of firm-wide risk assessments were compliant, up from 43% the previous year, while non-compliance dropped below 10%. The regulator identified clear improvements in staff training quality, documentation standards, and awareness of sanctions obligations. A growing number of firms now integrate electronic identification and verification tools into their client onboarding processes, using automated screening for politically exposed persons and sanctions matches.
The SRA’s data-driven methodology has been central to this progress. Supervisors review digital submissions from thousands of firms, cross-referencing them with internal risk models. This allows the regulator to direct its inspections where risks are most acute. Such analytical capacity has positioned the SRA as one of the more advanced professional body supervisors under the OPBAS framework.
However, the incoming reform may render much of this infrastructure redundant. Once AML oversight shifts to the FCA, the SRA’s bespoke supervisory systems, staff expertise, and established communication channels with law firms could be dissolved or repurposed.
Centralization and Its Consequences for AML Enforcement
The government’s plan to centralize AML supervision under the FCA forms part of its wider Economic Crime Plan and the Economic Crime and Corporate Transparency Act. The logic is efficiency: one supervisor with a national mandate, consistent enforcement, and unified data collection. For policymakers, the consolidation promises a streamlined, less fragmented regime that closes the gaps exploited by launderers who navigate between differing sectoral standards.
Yet for professional bodies like the SRA, this shift feels more like a displacement than an optimization. The SRA’s 2024–25 report highlights years of cumulative improvement in governance, risk profiling, and collaboration with other regulators. Its enforcement outcomes doubled within twelve months, reaching 151 AML-related sanctions, including 14 prosecutions before the Solicitors Disciplinary Tribunal.
These metrics demonstrate a regulator that has matured into a capable AML supervisor. It has developed sophisticated processes to handle everything from client-due-diligence failures to inadequate source-of-wealth verification. Its staff are trained to interpret the nuances of legal practice—something a financial regulator may struggle to replicate.
Critics of the centralization warn that the FCA’s broader focus on financial markets could overshadow the specific AML challenges within the legal profession. Law firms deal with issues of client confidentiality, privilege, and ethical constraints that differ markedly from banking or insurance. Applying uniform enforcement templates may unintentionally penalize compliant firms while missing nuanced risk indicators.
There are also operational challenges. The FCA will inherit thousands of active supervision cases, pending investigations, and ongoing compliance plans. Transitioning that portfolio without interruption requires significant coordination and funding. While the government has pledged a “smooth transition,” many firms fear regulatory uncertainty, particularly over how ongoing AML investigations will be handled.
The SRA’s report implicitly acknowledges this tension. It reiterates a commitment to cooperate with the FCA and ensure continuity but also expresses disappointment at losing its AML mandate. That sentiment reflects a deeper unease within the profession: whether the centralization will strengthen the UK’s AML defences or dismantle the progress already achieved under specialized supervision.
The Bigger Picture: Consolidation Meets Complexity
Centralizing AML oversight is not inherently misguided. The UK has faced longstanding criticism for its fragmented supervisory landscape. Multiple watchdogs with overlapping jurisdictions created inconsistent standards and diluted accountability. Consolidation under the FCA could eliminate duplication, align data strategies, and deliver more coherent enforcement.
However, the SRA’s latest report illustrates the complexity that such centralization must now absorb. The regulator’s findings offer a snapshot of sectoral risk management that is both technical and human. It reports that 78% of firms conducted proliferation financing risk assessments, a new requirement under Regulation 18A of the Money Laundering Regulations. The SRA also notes that 90% of firms use technology for electronic identity verification, but only a third regularly test those tools for accuracy. These details underscore the uneven maturity of AML systems across the sector—a challenge that will not vanish under a different regulator.
The SRA’s thematic reviews further reveal the practical realities of compliance. Many law firms continue to rely on template-based client-risk assessments that fail to justify risk ratings or align with firm-wide assessments. Some maintain outdated policies that overlook emerging typologies, such as virtual asset transactions or foreign trust arrangements. Others lack adequate controls to verify the beneficial owners of corporate clients.
In short, even as the SRA has raised standards, large portions of the sector remain vulnerable. The FCA will inherit a complex ecosystem requiring sector-specific understanding and continuous education. Without that depth, uniform supervision risks becoming mechanical.
The centralization also raises governance concerns. The SRA’s disciplinary model has been transparent and proportionate, balancing corrective engagement with punitive measures. Under FCA oversight, law firms may face stricter financial penalties and less flexibility in remediation. The SRA’s record of engaging firms through compliance plans and letters of engagement could be replaced by a heavier, more adversarial approach.
Supporters of the reform argue that the FCA’s stronger statutory powers and intelligence resources will enhance deterrence. The FCA’s access to national financial intelligence data could allow it to spot cross-sector patterns that professional bodies could not. Yet, the integration of professional oversight into a financial regulator will require sensitive calibration to preserve proportionality and trust.
The SRA’s report indirectly underscores this risk. Its emphasis on collaboration—through consultations with HM Treasury, the Home Office, and OPBAS—reflects the cooperative culture built over years. That cooperative fabric now faces restructuring. The shift could mark the end of a uniquely participatory approach to AML supervision within the legal sector, replaced by a single, centralized model that prioritizes uniformity over engagement.
A Turning Point for the UK’s AML Framework
The 2024–25 SRA report stands as both an achievement and a farewell note to an era of professional self-regulation. It demonstrates that AML supervision within the legal sector can be data-driven, evidence-based, and responsive. It also exposes the limits of voluntary alignment across multiple supervisory bodies—a weakness the government now seeks to correct through consolidation.
Whether the new model succeeds will depend on how the FCA integrates existing expertise and whether it maintains the tailored risk-based approach pioneered by the SRA. Centralization alone does not guarantee effectiveness. What matters is whether oversight remains close enough to the realities of legal practice to detect misuse early and intervene proportionately.
As the transition unfolds, law firms face an evolving regulatory landscape that will test their adaptability. They must not interpret the shift as a relaxation of standards. If anything, the FCA’s approach will likely intensify expectations for documentation, data integrity, and audit trails. The SRA’s record shows that progress is possible through persistent supervision and sector-specific dialogue. The challenge now is ensuring that such progress survives under a broader, more centralized regime.
The UK’s experiment with consolidation will serve as a case study for other jurisdictions contemplating similar reforms. It illustrates the enduring tension between efficiency and specialization in AML supervision. The SRA’s work over the past year proves that targeted, professional oversight can yield tangible improvements. The FCA’s task will be to build on that foundation rather than replace it.
If successful, the transition could finally give the UK the cohesive AML architecture policymakers have long envisioned—one capable of matching the sophistication of modern financial crime. If mishandled, it risks setting back years of incremental gains and eroding confidence within the very professions that form the first line of defence against illicit finance.
Related Links
- Financial Conduct Authority
- Solicitors Regulation Authority
- HM Treasury – Economic Crime Plan
- National Crime Agency
- The Law Society – Money Laundering Regulations 2017
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Source: SRA(PDF)
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