Solicitors Call on Treasury to Reconsider Proposed AML Rules
Solicitors have called on HM Treasury to reconsider proposed changes to anti-money laundering (AML) rules that would impose full due diligence obligations on pooled client accounts — regardless of assessed risk levels. The revisions, contained in a draft Statutory Instrument, have sparked concern among legal practitioners about cost, delay, and disproportionate regulation.
Proposed Changes and Industry Reaction
Under the draft Money Laundering, Terrorist Financing (Amendment and Miscellaneous Provision) Regulations 2025 (MLRs), all clients in pooled accounts could be subject to full customer due diligence (CDD), even in low-risk cases. The changes would eliminate the possibility of applying simplified due diligence (SDD) in such contexts. Law Society
The Law Society responded with a strong warning: requiring blanket full diligence on pooled accounts would lead to “significant administrative and financial burden” for legal practices, especially small and medium-sized firms. It argued that excessive AML obligations could drive up costs, delay legal services, and ultimately impair access to justice. Law Society
President of the Law Society, Richard Atkinson, emphasized the risk of undermining a risk-based approach:
“By eroding the risk-based approach — where solicitors have the option of using SDD in low-risk circumstances — the UK’s defences against economic crime would be undermined and compliance resources diverted away from higher-risk cases.” Law Society
In practice, pooled client accounts are common in conveyancing, probate, and corporate transactions. Many firms already implement strong internal controls and oversight over pooled funds.
Context: AML Reform & Regulatory Pressure
The push for reform in the AML regime comes amid broader government efforts to reduce regulatory friction in the legal sector. The Treasury’s industrial strategy commits to introducing “clearer and more proportionate” AML rules by year-end. Law Gazette+1
However, solicitors remain flagged as “high risk” under the government’s latest national risk assessment. While AML non-compliance rates within the legal profession are relatively low, the number of suspicious cases involving legal professionals remains elevated relative to the size of the sector. Law Gazette
Meanwhile, the Solicitors Regulation Authority (SRA) has responded by pledging to issue updated guidance “as soon as possible.” The regulator confirmed that forthcoming changes will address due diligence in complex transactions, high-risk third countries, and operations of non-financial firms. Law Gazette
Implications for Legal Practices
- Increased Compliance Costs & Delays: Firms may face higher due diligence burdens and longer client onboarding periods.
- Operational Strain on Small Firms: Smaller practices may struggle to absorb additional compliance requirements without impacting service delivery.
- Access to Justice Concerns: Heightened compliance costs could translate into increased client fees or delays in services.
- Risk of Overregulation: Critics argue that the proposals depart from a proportionate, risk-based framework that differentiates between high- and
- low-risk cases.
What’s Next & How Firms Should Prepare
The Law Society is urging HM Treasury to preserve an option for SDD in pooled account scenarios where risk assessments validate it. It also calls for more intensive dialogue with practitioners to understand operational realities and ensure final regulations strike a balance between preventing abuse and maintaining legal access.
Practitioners are advised to begin reviewing their AML frameworks now, particularly their approaches to pooled accounts, client risk assessment, and due diligence capacity. With further guidance expected, early preparation may mitigate disruption once the revised rules take effect.
Regulatory changes are expected to be introduced via a draft SI by the end of 2025, subject to parliamentary approval.