By Legal Futures Associate SearchFlow [1]
As the UK legal sector navigates an increasingly scrutinised regulatory landscape, 2026 marks a decisive escalation in the Solicitors Regulation Authority (SRA)’s anti-money laundering (AML) enforcement agenda. With record fines, wider proactive inspections, and the imminent transfer of professional supervision to the Financial Conduct Authority (FCA), law firms are facing the most demanding compliance environment to date.
So, what’s changed, what does the latest report tell us, and what can firms do next?
What the latest SRA report reveals
The SRA’s Anti-Money Laundering Annual Report 2024–25, published in October 2025, confirmed a further rise in regulatory intensity. Key findings from the report include:
- 935 proactive AML engagements within this period, almost double from the previous period (545), including inspections, desk-based reviews, and thematic assessments
- 833 firms underwent an onsite inspection or desk-based review
- One-third of firms remain non-compliant, and 54% only partially compliant.
The SRA reviewed 5,873 files, flagging major weaknesses in:
- Client/matter risk assessments
- Source of funds/wealth documentation
- Firm‑wide AML risk assessments
- AML policies, controls, and procedures (PCPs)
Data-driven regulation is now the norm
The SRA uses sector-wide data to prioritise firms for inspection, meaning poor data returns automatically put firms on the regulator’s radar. High-risk areas are unchanged but rising in severity, and the report reinforces the UK’s National Risk Assessment:
- Conveyancing remains the single highest-risk practice area
- Sanctions compliance receives heightened attention (47 targeted sanctions inspections this year)
Fines continue to surge
Across 2025 and into 2026, fines against law firms have increased in both frequency and severity, reflecting the SRA’s promise to “ratchet up the consequences” for non-compliance.
Notable enforcement actions again various firms include:
- £300,000 for historic control weaknesses
- £172,934 for failing to identify PEP status
- £120,000 for 15 years of non-compliance
- £114,006 for multi-year failures in AML PCPs and CMRAs
- £77,784 for gaps in client verification and record keeping
- Smaller firms have faced fines as low as £658, demonstrating that the SRA will sanction firms of any size
Total regulatory penalties are escalating
By late 2025:
- 35+ fines issued by the SRA, totalling £565,000+
- FCA AML fines across sectors topped £23 million – relevant as AML supervision prepares to transition to the FCA
The common weak spots for firms
Across enforcement decisions, one pattern repeats: basic AML controls remain the biggest problem.
The most frequent failures have included:
- Missing or inadequate client/matter risk assessments: up to 39% of reviewed files did not effectively assess AML risk
- Incomplete source of funds/wealth checks: among the top two reasons for SRA referrals
- Outdated or generic firmwide risk assessments: 70% of SRA fines in early 2025 involved inadequate FWRAs
- Defective AML policies, controls, and procedures: PCP failures contributed to 67% of fines
- Insufficient AML training and governance: MLRO/MLCO oversight deemed weak in 20% of cases
Emerging threats include deepfake ID fraud, hybrid/remote working vulnerabilities, and digital onboarding without adequate verification.
New pressures for 2026
The UK government’s decision to transition AML supervision of legal services to the FCA represents a major structural change.
- The SRA has acknowledged that the FCA will become the single professional services supervisor for AML, which will be a gradual transition
- Commentary suggests the sector should expect more complex, data heavy and assertive regulatory expectations under FCA oversight, when it happens
For firms, this shift should be interpreted as an indicator that compliance expectations will tighten further, not relax.
What law firms should do now
To stay ahead of intensifying AML scrutiny, firms should adopt a proactive, measurable compliance strategy.
– Strengthen AML fundamentals
- Update your firm-wide AML risk assessment and ensure it is dynamic, not static
- Review client/matter risk assessment templates to ensure they reflect real risk indicators
- Conduct robust and documented source of funds and source of wealth analysis on all relevant matters
– Accelerate technology adoption
- Automated ID verification and AML screening tools
- Real‑time sanctions and PEP monitoring
- Systems that auto-populate risk assessments and enforce mandatory data fields
Manual processes continue to be linked with the largest oversight failures.
– Train and empower compliance teams
- Quarterly AML training
- Clear escalation routes for suspicious indicators
- Ensure MLRO/MLCO roles receive leadership-level support
– Prepare for FCA supervision
Expect:
- Increased documentation requirements
- More rigorous testing of auditing and permissions controls
- Greater accountability at partner level
The bottom line: 2026 is the year of zero tolerance
Taken together, the SRA’s latest report and ongoing enforcement trends reflect a regulatory environment undergoing fundamental transformation. The convergence of record fines, escalating inspection activity, and the forthcoming shift to FCA oversight means compliance standards are higher, and more enforceable, than ever.
Law firms that proactively invest in controls, training, and technology now will not only stay compliant but also build resilience against rapidly evolving AML risks.
To help firms stay compliant, we’ve updated our AML Best Practice Guide with practical steps, templates, and regulatory insights tailored to the changing landscape. Download the 2026 edition of our AML Best Practice Guide here. [2]