What is it and what is the Government’s approach?
- The Money Laundering Regulations (MLRs) require HM Treasury (HMT) to publish an annual report on supervision activity using information requested from the 25 Anti-Money Laundering/ Counter Terrorism Financing (AML/CTF) supervisors. The latest report was published on 8/12/25.
- The report states that the government is determined to “sharpen our defences against illicit finance, preventing criminals and hostile actors from exploiting our financial system and thereby reinforcing the UK’s standing as a trusted global hub for investment”, having concluded in 2022 that continued weaknesses in supervision needed to be addressed through structural reform, which has led to their decision (among others) to:
- move AML supervision of professional services firms (including lawyers and accountants) to the FCA (which we have discussed most recently here); and
- make amendments to the MLRs to “close loopholes, clarify obligations and ensure customer due diligence (CDD) is more targeted and risk-based”.
- It is clear that the looming Financial Action Task Force (FATF) assessment of the UK, scheduled for 2027/28, is clearly playing a big part in the government’s approach to AML/ CTF supervision, amid concerns that the UK’s rating (from 2018) could be downgraded in terms of the actions it takes to effectively tackle money laundering and terrorist financing (ML & TF), which would have implications for the UK economy and standing on the world-stage.
- The report assesses the current AML/ CTF supervisors and their role in safeguarding the country against ML & TF, using information requested from those supervisors, including the SRA, and draws on the latest National Risk Assessment published in July 2025 (and about which we wrote here).
- On the same date, HMT published their new Anti-corruption strategy which sets out their plans for tackling the threat of corruption to the UK, particularly domestic corruption, and the role of ‘Professional Enablers’ – those playing “a key role in helping corrupt and other malign actors to access [financial and professional] services and enable their wrongdoing”. Lawyers and accountants are singled out as “using financial structures to conceal or transfer wealth on behalf of corrupt actors from abroad”. The Strategy notes that the move to FCA AML supervision is one of the ways of tackling these concerns. It will be interesting to see whether HMT’s apparent faith in the FCA to significantly shift the needle in relation to AML/ CTF is well-founded.
What does the report cover?
Gatekeeping and risk assessment: how supervisors ensure businesses in scope of the MLRs have registered for supervision and demonstrated they meet the minimum necessary standards, commenting on the importance of supervisors having a clear understanding of their supervised population…a timely observation given the concerns raised by the legal profession in the recent consultation on FCA AML supervision that the FCA do not have sufficient understanding of the different types of professional services firms, the services they provide, the clients they service, and how different they can be to the financial institutions the FCA is used to supervising.
Monitoring supervised businesses: how supervisors effectively monitor those they supervise with tools such as desk-based reviews, on-site visits, questionnaires and engagement with firms’ senior management. HMT have introduced 2 new monitoring metrics this year in the form of tracking the number of firms previously assessed to be non-compliant (to better understand persistent non-compliance) and those firms which moved from low/ medium risk categorisation to higher risk categorisation. As we are seeing from all angles, data capture to assist with monitoring and enforcement of AML compliance is becoming increasingly prevalent, so the more data firms are able to capture in readiness for the requests (whether from the SRA, FCA or HMT), the better.
Ensuring compliance: how supervisors ensure that firms which breach the MLRs are subject to effective, proportionate, and dissuasive measures, with sanctioning powers including fines, public censure, suspension, restriction or cancellation of registration, referral to law enforcement agencies and/or prosecutors. Whilst previously not of specific relevance to law firms, given the move to FCA AML supervision, it is now rather more important to be aware of the FCA’s ability to pursue its own criminal prosecutions of firms in breach of the MLRs and its increasing focus (according to the report) on pursuing such prosecutions.
Cooperation, coordination and information sharing: how supervisors share their expertise with the businesses they regulate, and how they require those businesses to provide certain information, such as copies of Suspicious Activity Reports. Interestingly, this section refers to there being one piece of guidance for each sector which is approved by HMT. However, the FCA AML supervision of professional bodies consultation proposes that the FCA will be able to create its own guidance for its whole supervised population (including law firms of which it currently has little experience) without HMT approval 🤔
What does it mean?
Whilst there are no real conclusions drawn in this report from the data collected, it is an interesting insight into the government’s direction of travel, and a reminder that during the transition to FCA AML supervision the existing professional body supervisors (such as the SRA) are very much expected to maintain effective levels of AML supervision, so don’t expect any let-up in SRA AML communications! Those statisticians amongst you may be able to draw conclusions from the various tables of different activities, amounts spent, actions taken by the different sector supervisors, but the report does comment that whilst the collected data enables HMT to build up a more holistic picture of each supervisor’s effectiveness, it is not possible to directly compare individual supervisors, given that every supervisor operates in a different context and with different constraints.