Beyond compliance: The new anti-money laundering frontier and its impact on lawyers

Bar grad Abbas Hussain explores the implications

It is a strange time to be a lawyer. On the one hand, the solicitors’ profession has long been seen as a safeguard of the legal system, protecting client confidentiality, supporting legitimate business, and delivering complex transactions that support the economy. On the other, the UK’s anti-money-laundering (AML) regime is being reshaped with a level of intensity that may fundamentally change how legal services are delivered and regulated.

The Treasury’s reform programme, including its 2024–25 review and the subsequent consultation responses and draft instrument, goes beyond minor regulatory adjustments. It signals a structural shift in supervision, a move towards tighter and more centralised controls, and a renewed appetite for enforcement. Lawyers need to understand what this shift means in practice and why the profession must respond strategically rather than reactively.

What is changing?

HM Treasury’s consultation work on the Money Laundering Regulations (MLRs) followed the 2022 review of the UK’s AML supervisory architecture. The aim as the government frames it is to make customer due diligence more “proportionate and effective”, strengthen system coordination, and close loopholes in the supervisory regime. The consultation response and draft amendments published in 2025 set out a number of concrete initiatives, including clarifying the scope of the MLRs, encouraging greater use of digital identity, tightening trust registration, and, for lawyers in particular, reforming how professional supervision operates, including a move towards a single or more centralised supervisor for professional services.

Two clear trends are emerging. First, the government is signalling that the current profession-specific approach, where bodies such as the SRA or the Law Society act as sector supervisors with tailored guidance, may be replaced by a more centralised model designed to ensure consistency and stronger enforcement. Second, the reform package seeks to narrow and clarify what compliance requires in practice, with more precise CDD, clearer rules on pooled accounts and trust reporting, and a firmer response where non-compliance is identified.

Key findings from the proposals — and their legal significance

1. Centralised supervision changes the regulatory grammar

The move towards a single professional services supervisor, and away from sector-specific discretion, is more than an administrative change. It reshapes the relationship between solicitors and regulators, with tailored guidance and professional judgement giving way to uniform supervisory standards. This shift sets a clear precedent for an “FCA-style” approach, which prioritises systemic risk, data-driven oversight, and enforcement over dialogue. For lawyers, this is likely to mean less regulatory flexibility and a greater risk of investigation, even in borderline or novel cases.

2. Proportionality rhetoric is not the same as proportional outcomes

Treasury documents repeatedly reference proportionate, risk-based CDD. But the profession’s sector bodies are clear, making rules “more proportionate” on paper does not automatically reduce day-to-day burdens. Much of the friction in law firms arises from legal uncertainty (when to act, when to rely on third-party ID checks, how to treat pooled accounts). Unless the legislative amendments address those points, lawyers will continue to bear compliance costs and criminal exposure with little reduction in risk. The Law Society and SRA have both warned that reforms must be operationally workable.

3. Enforcement will follow evidence of non-compliance — and inspections show problems

Recent regulatory reviews and inspections are stark: around a third of inspected firms were found to be non-compliant in 2024–25. That finding is significant. Where a regulator, or a single professional supervisor, has both the authority and the willingness to act, enforcement is likely to increase. This is not just a theoretical concern. It has real effects on day-to-day risk appetite, insurance costs, and the long-term viability of small practices.

The profession’s fault lines: who is critical and why

Unsurprisingly, the Law Society and the solicitors’ representative organisations have been vocal. Their objections centre around three themes:

• Operational feasibility: The profession argues that some proposed rules — e.g. changes around pooled client accounts or timings for CDD, risk imposing substantial administrative burdens on firms with marginal AML risk. The Law Society warns that poorly drafted changes could “place substantial new burdens on solicitors”.

• Loss of sectoral nuance: The SRA and others caution that a one-size-fits-all supervisory model risks overlooking the specificities of legal practice, where professional privilege, client confidentiality and the lawyer’s gatekeeper role interact in ways that differ from, say, banking. A centralised supervisor may not be best placed to calibrate those trade-offs. (lawgazette.co.uk/news/sra-pledges-aml-update-as-soon-as-possible-after-treasury-outli nes-reform-plans/5123977.article)

• Criminal law exposure and timing: Solicitors are anxious about the criminal consequences that can arise from inadvertently breaching AML obligations, and the risk that reliance on third-party checks will leave them exposed. Practitioners want clearer, safer mechanisms for delegating identity verification without creating a liability minefield.

Implications — practice, access and principle

What does this mean for litigators, transactional lawyers and the clients they serve?

• Compliance costs and access to justice: Smaller firms may find the compliance price-tag difficult to sustain. If that leads to consolidation, clients in niche or local markets could see reduced choice and higher costs, an outcome that would be politically awkward given the reform’s stated aim of protecting the public.

• Privilege, tipping off and client trust: As AML checks become more invasive or routine, lawyers must walk a tighter line between reporting suspicious activity and preserving client rights. Practitioners will need clearer statutory and supervisory guidance on the interplay between client confidentiality and reporting duties.

• Precedent in regulatory posture: The move toward central supervision sets a legal and administrative precedent: UK AML enforcement will lean towards uniformity, data centralisation and quantitative oversight. That may be defensible from a national security perspective, but it narrows professional discretion and will shape case law on supervisory overreach and proportionality in the years to come.

My argument: lawyers should seize the narrative — and demand proportional, evidence-based reform

Reform is both necessary and inevitable. The UK’s AML architecture had real gaps that required attention. But there is a difference between making rules clearer and supplanting professional judgment with mechanistic supervision. The profession must not cede the narrative to technocrats. Lawyers should press for three things:

1. Practical exemptions and safe harbours for low-risk activities (backed by clear operational guidance), so that the duty to carry out CDD does not become an open-ended compliance tax.

2. A robust, transparent transition to any central supervisor, with guarantees that sectoral nuance, especially around privilege, will be preserved in practice, not just in statements of intent.

3. A calibrated enforcement framework that uses remediation and supervision rather than criminal sanction as the default response for procedural breaches.

If the Treasury’s package becomes the new normal, it will set a precedent: AML supervision in the UK will be centralised, less forgiving, and more data-driven. That outcome may reduce some kinds of economic crime, but it will also reshape the legal profession, its costs, its risk calculus, and its relationship with clients. Lawyers must engage now, with evidence and argument, to ensure that the precedent we set is both effective against crime and proportionate to the realities of legal practice.

Abbas was called to the Bar in October 2025, with experience in local government and civil litigation. Prior to call, he has worked as a Principal Lawyer, and lawyer across multiple local authorities, advising on and conducting matters including commercial disputes, contractual litigation, public law, housing and regulatory enforcement, and regularly appearing in the County Court and Magistrates’ Court. He has a particular interest in civil, public and commercial law, including inquests and inquiries, and writes on issues relating to legal practice, public decision making and access to justice.