UK Government proposals to reform AML add cost without benefit for Scotland

The UK Government’s proposal to overhaul anti-money laundering (AML) enforcement will impose additional complexity and cost for law firms and consumers of legal services in Scotland, according to the Law Society of Scotland.

The Government has announced that the Financial Conduct Authority will become the sole AML regulator for all professional services firms, with the Law Society’s AML function removed despite a strong track record of enforcement and education. The decision also impacts all other professional body regulators in Scotland and other parts of the UK.

The announcement follows consultation launched by HM Treasury in 2023 on four possible AML supervision models, when the Law Society argued strongly against the approach now being adopted.

David Gordon, the Convener of the Law Society of Scotland’s Regulatory Committee, said: “We are frustrated and disappointed with this decision, which imposes a finance sector focused AML regulator on law firms and all other professional services. It also flies in the face of other changes made here in Scotland which actually granted the Law Society new and strengthened regulatory powers over law firms.

“The Government has made this decision despite acknowledging our strong record of maintaining high standards in our role as an AML supervisory body, thanks to our detailed understanding of the Scottish legal services sector. We do not believe the FCA will be able to replicate our knowledge of Scotland’s legal sector, let alone improve oversight.

“Law firms in Scotland now face the prospect of dealing with multiple regulators, including one with little experience of legal businesses. This will inevitably add to the bureaucratic burden on them at a time when the Government says it is prioritising economic growth and business competitiveness.

“It is difficult to see how a body overseeing banks and other finance sector businesses with thousands of staff can also provide effective enforcement and support for single-solicitor law firms. This will be especially the case if FCA resources remain so heavily concentrated in London.

“We would urge the Government to reconsider this expensive and potentially counterproductive change. It is consumers of legal services who ultimately pay the price for inefficient and ineffective regulation.”