Posted by Yazad Bajina, director at Legal Futures Associate Checkboard
Bajina: Strong data controls are vital
One expectation as the Financial Conduct Authority (FCA) takes control of anti-money laundering (AML) oversight is a move towards more supervision rather than simply writing new rules.
That should mean greater clarity around your regulatory obligations, but also higher expectations as everyone shifts to the same standard of supervision. The burden won’t necessarily increase for law firms, but the FCA may adopt a tighter focus in line with the approach it already takes with financial services.
We forecast an emphasis on maintaining robust AML controls, underpinned by real-time risk monitoring and better data integration
These two principles are key to the changing face of money laundering – and the FCA will be looking for law firms to get on board quickly.
The FCA wants law firms to take this adaptable, data-informed approach to AML because the threats are no longer predictable.
The message is that, as money laundering patterns become more complex, simply building controls to align with the regulators is no longer enough – they must adopt a proactive approach to mitigate evolving criminal risks.
Adapt to survive
The reality is you can no longer build AML controls with the expectation that criminal behaviour will be predictable.
Money launderers are getting more sophisticated, always probing for weak links all along the chain. In that reality, rule-based monitoring just can’t keep up – you can’t fight adaptive criminals with static controls.
The FCA will expect law firms to adopt real-time monitoring that detects patterns of risk, rather than simply triggering alerts when it emerges. They want to see a scalable approach that meets evolving threats. Manual and static processes simply won’t scale.
Data is still king
Data controls are also set to become increasingly important.
The FCA won’t simply expect firms to have strong AML controls, but to underpin this with accurate, up-to-date data.
Looking at some of the FCA’s recent fines within financial services is instructive here.
In 22 cases between 2020 and 2025, around 68% of AML fines involved material data issues. The result was more than £430m in penalties.
While the legal profession certainly won’t face the same scale of fines as financial services, the FCA will be looking for some of the same issues.
These financial services firms often had policies in place, but they weren’t backed up by robust data controls.
Customer records were outdated, source of funds evidence was poor and there were mismatches between declared information and public data.
Law firms need to heed the same warnings. If banks shore up their defences, criminals will simply move to weaker links in the chain, and if solicitors’ data policies are still lagging, they’ll become an easy target.
The way forward
As oversight tightens, taking an approach that combines robust AML processes with real-time monitoring and strong data controls is the way forward.
We expect the FCA to insist on the same approach it takes with the financial services firms it already oversees. Firms therefore need to invest in adaptive, technology-driven compliance that manages risk and regulation alike.
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