The FCA Takeover – A New Era for Anti-Money Laundering Supervision at the Bar

Fatima Jama discusses the Government’s announcement to transfer anti-money laundering supervision responsibilities from private sector professional body supervisors, including the Bar Standards Board, to the Financial Conduct Authority.

Introduction

The landscape of anti-money laundering supervision at the Bar has undergone a radical change.

Last month, His Majesty’s Treasury (“HMT”) announced its decision on reforming anti-money laundering/counter-terrorist financing (“AML/CTF”) supervisory responsibilities across the professions from the current 22 private sector professional body supervisors (“PBS”), which includes the Bar Standards Board (“BSB”) to the Financial Conduct Authority (“FCA”). This fundamental restructuring represents the most significant change to professional services regulation in decades, marking the end of self-regulation for money laundering compliance and ushering in an era of unified government oversight.

For barristers, this transition raises critical questions about professional independence, the practical implications of dual regulation, and the effectiveness of enforcement mechanisms that have, to date, been notably absent. The BSB’s enforcement record, or rather, the lack thereof, forms part of the broader rationale for this seismic shift.

The announcement

Economic Secretary to the Treasury Lucy Rigby KC MP set out the government’s position in her ministerial foreword: “The Government is determined to address these deficiencies and to ensure that the UK’s regulatory system is cohesive and easily navigable for professional services firms.” She continued, “Therefore, the Government has taken the decision that AML/CTF supervisory responsibilities for some professional services sectors will, going forward, be undertaken by the Financial Conduct Authority (FCA).” The consultation response document makes clear that this decision followed extensive analysis of responses from 95 stakeholders across the legal, accountancy, and financial sectors. The government’s rationale is straightforward: “The government believes that a public organisation overseeing professional services firms is the most effective approach to AML/CTF supervision of the sector.”

The numbers alone illustrate the extent of this reform. As HMT notes, “This supervisor will have a large remit, supervising all professional services firms. This will enable it to take a risk-based approach across a population of approximately 60,000 regulated firms.”  The consolidation represents a dramatic simplification from the current fragmented system of 22 different supervisors across the professional services sectors. The government’s justification extends beyond mere administrative efficiency.  The fact that there are 22 different supervisors for professional services firms inevitably leads to inconsistencies in supervision and enforcement and complicates essential collaboration with law enforcement agencies.  The consultation response states: “Integrating professional services into the FCA’s AML/CTF supervisory framework will bring professional services in line with all other sectors in scope of the MLRs (money laundering regulations), which are already overseen by public bodies, and it will simplify a highly complex regulatory regime.”

R (on the application of World Uyghur Congress) v National Crime Agency

The timing of the FCA announcement cannot be divorced from a significant legal development last year. The Court of Appeal’s decision in R (on the application of World Uyghur Congress) v National Crime Agency [2024] EWCA Civ 715 (“the World Uyghur Congress case”) fundamentally changed money laundering compliance including for the legal profession. The Bar Council’s updated practice note explains that the World Uyghur Congress case clarifies that the “adequate consideration” exemption in section 329(2)(c) of the Proceeds of Crime Act 2002 does not apply to offences under sections 327 or 328. The Court held that property remains “criminal property” if the recipient knows or suspects it represents criminal benefit, even if adequate consideration was provided. The note warns barristers that receiving payment suspected to be criminal property could still expose them to liability, urging them to seek independent legal advice and consider Suspicious Activity Reports only with great caution. The case is explained in depth in my earlier article How clean is your cash?

The BSB’s Track Record

The elephant in the room throughout the consultation process has been the PBS’s enforcement records, particularly that of the BSB. While the BSB has issued guidance and updates following legislative changes and the World Uyghur Congress case, its enforcement activity in the AML/CTF sphere has been virtually non-existent. This enforcement vacuum did not go unnoticed in the consultation responses. Law enforcement agencies specifically noted that “low levels of PBS referrals remain a problem in the current regime.” The government’s response acknowledges that “where firms breach the MLRs, public body AML/CTF supervisors have a strong record of taking dissuasive enforcement action.”

By contrast, other legal professional bodies internationally have demonstrated more robust enforcement approaches. The Law Society of Ireland, for instance, has issued formal reprimands and substantial fines for AML breaches. Even smaller jurisdictions have shown greater willingness to act: The Ministry of Law in Singapore recently named the three law firms penalised for anti-money laundering breaches over the purchase of properties in Singapore’s largest case of money laundering involving $3 billion. The BSB’s virtual absence from this enforcement landscape stands in stark relief to these examples, lending credence to the government’s observation that “public body AML/CTF supervisors have a strong record of taking dissuasive enforcement action”.

The aim and rationale

HMT states: “The FCA will be equipped to take strong enforcement action where it is necessary, ensuring there is a clear incentive to comply and that robust action is taken against the minority of wilfully negligent or complicit firms.” This represents a shift from the current approach. As the consultation response notes: “A public supervisor with staff dedicated to AML/CTF supervision will be well placed to work with firms, both through information and guidance, and directly during supervisory inspections, to ensure firms understand their obligations under the MLRs.”

The government’s decision reflects broader concerns about system coordination and intelligence sharing. The consultation response emphasises: “From a system coordination perspective, a public sector supervisor will be able to build strong relationships with law enforcement agencies to facilitate information and intelligence sharing.” This addresses a longstanding criticism of the current regime. As HMT notes: “Ultimately, close coordination between public sector authorities is more likely to lead to success when taking on the most complex money laundering and terrorist financing investigations.”

The consultation response also references the Financial Action Task Force’s (“FATF”) assessment: “In the most recent peer assessment of the UK by the Financial Action Task Force (FATF), the international standard setting body for tackling money laundering, terrorist and proliferation financing, FATF identified some inconsistencies and weaknesses in the UK’s supervisory system – in particular in the professional services sector – that represent a significant vulnerability.”

Practical implications for the Bar

The creation of the Single Professional Services Supervisor (“SPSS”) model (under this model a single public body would be granted responsibility for all AML/CTF supervision for the legal and accountancy sectors, trust and company service providers, and potentially other sectors, such as estate agency and letting agency businesses, who are regulated under the MLRs) means barristers will face dual regulation, the FCA for AML/CTF matters and the BSB for professional conduct and other regulatory issues. The government acknowledges these concerns: “This reform will also mean some firms, for instance, legal service providers, are regulated for AML/CTF purposes by the FCA, and for professional conduct and other matters by their existing PBS.” However, HMT seeks to provide reassurance: “Where this happens HM Treasury and the FCA will work with PBSs to minimise duplication in registration processes, fee payments, and other administrative matters.”

The financial implications are noteworthy. The consultation response acknowledges: “The current system of fees is complicated, with all 23 professional services AML/CTF supervisors charging a different fee level and structure. The FCA will seek to simplify this and ensure that fee structures are fair and proportionate.” Importantly, the government emphasises: “This does not change firms’ obligations under the MLRs. Firms that are already compliant should not need to make changes to their AML/CTF controls.”

Legal sector stakeholders raised concerns about professional independence. The consultation response notes: “Some legal sector respondents argued that a public sector supervisor could risk undermining the independence of the profession from government and political interference, if the body allowed direct political interference in firms’ affairs.” The government’s response to these concerns is telling: “This important point was considered in the choice of the FCA as the new supervisor, due to its existing effective independence arrangements.”

What to expect

The government has committed that “the FCA will build specific expertise in the particularities of each sector it supervises. This includes issues such as legal privilege, the importance of which we recognise, as well as the distinct legal systems of England and Wales, Scotland, and Northern Ireland.” This acknowledgment of legal professional privilege is crucial for the Bar, given its fundamental importance to the administration of justice and the barrister-client relationship.The FCA’s approach will be fundamentally risk-based. As the consultation response explains: “This will enable it to take a risk-based approach across a population of approximately 60,000 regulated firms. This means it can target resources towards the UK’s highest risk accountancy, legal, trust and company service providers, and ensure that lower risk firms receive supervisory attention appropriate to their risk-profile.”

The consultation indicates that the FCA will have substantial powers. Some stakeholders suggested these should be “modelled on the powers the FCA exercises through the Financial Services and Markets Act 2000 (FSMA) in its supervision of financial services firms. Powers mentioned under this were the ability to issue directions, a rule making power and a power requiring a skilled person to write a report.”

The transition period

The implementation timeline remains uncertain. HMT is clear: “Implementation of this policy is subject to the passage of enabling legislation, confirmation of funding arrangements, and development of a detailed transition and delivery plan. As such, the date at which the FCA will commence supervision of the professional services sector will be heavily dependent on the availability of parliamentary time.” The government promises careful management of the transition: “To minimise risk during the transition period, we will work with the current supervisors and OPBAS (the Office for Professional Body Anti-Money Laundering Supervision) to identify an approach to phasing in firms and sectors into the FCA. This will help to maintain a sufficient level of supervision in the interim period.” For existing enforcement actions, the consultation responses suggested “it would be preferable for PBSs who lost their AML/CTF supervisory responsibilities to take on AML/CTF enforcement actions for past events for a time-limited period.”

Conclusion

Given the World Uyghur Congress case and pending FCA supervision, individual barristers and chambers should undertake immediate review of their AML procedures.  Individual barristers and chambers should begin preparing for the transition to FCA supervision by ensuring their current AML/CTF procedures are robust and well-documented. The government’s assurance that “firms that are already compliant should not need to make changes to their AML/CTF controls” suggests that proper preparation now will ease the transition later. The shift to FCA supervision will likely bring new training requirements and compliance expectations. Interested parties should consider investing in enhanced AML training programmes that align with FCA standards rather than waiting for the formal transition.

The transfer of AML/CTF supervision to the FCA represents more than a mere administrative reorganisation. It signals the end of an era of professional self-regulation in this critical area and the beginning of direct state supervision of the legal profession’s compliance with money laundering regulations. The government’s statement that “AML/CTF supervision is crucial work in the fight against crime and corruption which, ultimately, is the job of the state” encapsulates this philosophical shift. For a profession that has prided itself on independence and self-regulation, this represents a profound change. The combination of the World Uyghur Congress case removing the adequate consideration defence and the prospect of FCA supervision with meaningful enforcement powers creates an environment where compliance can no longer be treated as a mere formality. The BSB’s historical absence of enforcement action in this area will soon be replaced by an FCA with, in the government’s words, “a strong record of taking dissuasive enforcement action.”

For individual barristers and chambers, the message is clear: the era of light-touch self-regulation in AML/CTF matters is ending. The future will bring more rigorous supervision, meaningful enforcement risk, and the need for demonstrable compliance with money laundering regulations. Those who begin preparing now for this new regulatory landscape will be best positioned to navigate the transition successfully.

The implications for barristers accepting private fees in criminal or quasi-criminal proceedings warrant particular attention. Following the World Uyghur Congress case and the incoming FCA regime, barristers who receive private payments instead of legal aid funding or act on private instructions in Proceeds of Crime Act proceedings, asset forfeiture cases, or account freezing order applications face heightened scrutiny. The source of those funds must be rigorously examined. The days of accepting a brown envelope of cash from a defendant’s associate with minimal questions are definitively over. Barristers must now document the ultimate beneficial owner of funds, conduct enhanced due diligence where the client is politically exposed or high-risk, and maintain detailed records that will satisfy FCA inspectors accustomed to financial sector standards rather than the historically light-touch approach of the BSB.

The Bar must now grapple with what it means to have a fundamental aspect of professional practice supervised by a body outside the traditional structures of the Bar. While concerns about professional independence are valid and must be carefully monitored, the reality is that the decision has been made. The focus must now shift to ensuring that the transition is managed effectively and that the unique characteristics of the Bar are properly understood and respected by the new supervisor.

As Lucy Rigby KC MP concluded in her foreword: “Preventing economic crime requires the ongoing support of regulated firms and professional bodies and I look forward to working with you as we make this change.” The success of this new regime will depend not just on the FCA’s approach, but on the profession’s engagement with and adaptation to this new regulatory reality.