What the FCA’s expanded AML role signals for firms

What happened?

The FCA has published details of the Government’s planned reforms to the UK’s AML and counter-terrorist financing supervisory regime. The reforms would transfer AML supervisory responsibility for legal service providers, accountancy service providers, and trust and company service providers from professional body supervisors and HMRC to the FCA. The FCA currently expects a phased transition to begin in late 2028 and complete around 2030, subject to the necessary legislation and further development of its transition plans. 

Why does it matter?

Although many FCA-regulated firms will not be directly affected, the reforms provide insight into how financial crime supervision is evolving across the UK. The consolidation of responsibility for these sectors under the FCA reflects a broader policy objective: improving the consistency of AML supervision across sectors that play an important role in preventing financial crime. 

While the regulatory structure may be changing for professional services firms, the underlying expectation is familiar. Firms should be able to demonstrate that risks are understood, governance is effective and controls operate as intended. That expectation is increasingly consistent across regulated sectors. 

The Government’s objectives include: 

• Simplifying the supervisory landscape 

• Improving consistency across sectors 

• Strengthening the UK’s response to financial crime 

The FCA says its approach to supervising these sectors will be risk based, targeted and proportionate. In our view, this is consistent with its broader approach to allocating supervisory attention according to risk and potential harm. 

The significance of this reform is not simply who supervises whom. It is what the change says about the future direction of AML oversight. Policymakers are seeking greater consistency, clearer accountability and more comparable supervisory standards across sectors. For firms, that reinforces the importance of being able to evidence how financial crime risks are identified, monitored and managed.  

Who is affected?

Directly affected 

• Legal service providers 

• Accountancy service providers 

• Trust and company service providers 

• Firms currently supervised by professional body supervisors or HMRC for AML purposes 

The FCA estimates that the changes could affect around 60,000 businesses and sole practitioners, although this figure may change as the transition plan develops. 

Wider relevance for financial services 

• FCA-regulated financial services firms 

• Boards and senior managers responsible for financial crime governance 

• Compliance and financial crime teams 

• Risk and assurance functions 

Although the reform does not alter their supervisor, FCA-regulated firms remain subject to existing expectations concerning the effectiveness of their financial crime systems and controls. 

Key risks

For FCA-regulated firms, the announcement does not create a change of supervisor or introduce an immediate requirement to revise existing arrangements. It does, however, provide a useful prompt to consider whether the effectiveness of those arrangements could be demonstrated if challenged. 

Areas worth examining include: 

• Weak AML governance frameworks 

• Poor quality management information 

• Insufficient board oversight 

• Lack of independent assurance 

• Inadequate evidence of operational effectiveness 

• Outdated financial crime risk assessments 

• Resource and operational challenges impacting ongoing monitoring 

While the FCA has not presented the reform as a change in expectations for existing FCA-supervised firms, it provides a useful indication of the policy direction towards more consistent AML supervision. 

Actions to take

Firms do not need to implement changes as a result of this announcement.  

However, they should consider: 

Reviewing governance arrangements 

Ensure accountability for financial crime risks is clearly defined and understood across the organisation. 

Testing control effectiveness 

Assess whether AML controls are operating as intended and delivering the expected outcomes. 

Challenging management information 

Confirm that reporting supports effective oversight and decision-making. 

Evaluating independent assurance 

Consider whether recent reviews have provided sufficient challenge and insight into the effectiveness of AML controls. 

Refreshing risk assessments 

Review whether emerging risks, business changes and regulatory developments have been incorporated appropriately.

Recommendations

The wider lesson is that firms need to be able to demonstrate not only that AML controls exist, but that they operate effectively in practice. TCC recommends that firms use the announcement as a prompt to assess whether the effectiveness of their financial crime framework can be clearly evidenced. 

Key questions include: 

• If the FCA reviewed our AML framework tomorrow, what evidence would demonstrate that our controls operate effectively? 

• Does senior management receive sufficiently clear and timely information to challenge financial crime risk? 

• Have our controls been independently tested recently? 

• Are financial crime risks adequately understood and managed?