Introduction

This past year has been marked by significant progress in our efforts to prevent and detect money laundering, as we continue to prioritise anti-money laundering (AML) initiatives. The Economic Crime and Corporate Transparency Act has not only reinforced our existing regulatory objectives but has also introduced a new explicit objective to prevent and detect economic crime. We welcome these changes and continue to take decisive action against those who seek to exploit the legal sector for criminal purposes.

Our focus on preventing money laundering has driven us to explore further how we can target our actions. We are making increasing use of data to monitor how law firms manage the risk of money laundering. By analysing trends across thousands of files and firms, we can deliver supervision that is evidence-led, helping to further protect the sector from criminal exploitation. Our 2024 data collection exercise has provided valuable insight into the way firms are affected by the sanctions regime. It also allowed us to limit our sanctions checks to those firms who are directly affected, and to take a risk-based approach to our inspections.

We engaged with a broader cross-section of the profession, with a total of 833 firms having received either an onsite AML inspection or a desk-based review. This activity demonstrates our commitment to proactive oversight and risk-based intervention. While most firms demonstrated a strong understanding of their obligations and a clear commitment to compliance, the identification of non-compliance in nearly a third of cases highlights the continued need for sector-wide improvement and sustained regulatory attention.

The publication of the UK’s National Risk Assessment in July reaffirmed the high-risk profile of the legal sector in relation to money laundering and terrorist financing. We welcome the alignment of nine national economic crime priorities, developed in partnership with the National Crime Agency (NCA), the Financial Conduct Authority (FCA), Home Office, and HM Treasury. These priorities – covering areas such as professional enablers, sanctions evasion, politically exposed persons, and misuse of corporate structures – strengthen our regulatory focus and reinforce our shared responsibility to safeguard the sector from criminal exploitation.

As we publish this report, the government has announced that the FCA will now become the single professional services supervisor for anti-money laundering and counter-terrorism financing. We have made significant progress in recent years, increasing and improving our approach to anti-money laundering supervision. We are disappointed we will not be able to build on that work.

The reform is still subject to the passage of enabling legislation, confirmation of funding arrangements, and development of a detailed transition and delivery plan. We will work closely with the FCA, government and all other stakeholders to make sure there is a smooth transition to the new arrangements. In the meantime, we will continue our work to make sure solicitors and law firms are doing all that is needed to keep dirty money out of our society.

I am proud of the progress we’ve made and grateful to the many professionals who share our dedication to upholding public trust and driving meaningful change.