Posted by Karen Garthwaite, head of professional development at Legal Futures Associate ILFM
Garthwaite: The start of a more balanced approach?
The recent announcement by HM Treasury that it wants to see “clearer and more proportionate” money laundering regulations (MLR) has been met with cautious optimism across the legal sector.
As part of the government’s recently published Industrial Strategy, HM Treasury has pledged to bring forward a package of changes to the regulations by the end of this year and last month unveiled the outline of some technical changes.
The Industrial Strategy acknowledges that anti-money laundering (AML) checks are seen as a “major burden” to law firms, representing a long-overdue recognition of some of the practical challenges facing legal finance professionals.
The current reality for legal finance teams
For legal cashiers, accountants and finance administrators working in law firms, their daily reality involves navigating an increasingly complex web of compliance requirements.
MLR obligations sit alongside client account rules, VAT regulations, professional indemnity requirements and an ever-expanding array of regulatory frameworks. Each adds layers of administrative burden that can feel overwhelming, particularly for smaller practices with limited resources.
The current AML framework, while well-intentioned, often requires disproportionate time and effort relative to the actual risk involved.
The profession has experienced an intense focus on the MLR in the past decade, with a large number of firms receiving five-figure fines in the last couple of years as the Solicitors Regulation Authority has sought to enforce the rules.
This administrative load directly impacts the time available for core financial management activities that drive firm profitability and client service.
Legal finance teams have been heard
The Treasury’s acknowledgment that existing MLR requirements constitute a “major burden” validates what legal finance professionals have long been telling us at the ILFM.
The promise of clearer, more proportionate regulations suggests a shift toward risk-based approaches that could significantly reduce unnecessary administrative overhead. While specific details are still to be provided, the government has indicated that changes will include “embracing digital technology to streamline checks and processes for firms and clients”.
This development is particularly significant given the legal sector’s substantial contribution to the UK economy – £42.6bn in 2024 alone, with a trade surplus of £7.4bn.
We know that legal finance teams are already grappling with digital transformation pressures, changing client payment patterns, economic uncertainties and evolving professional requirements. The last thing the sector needs is additional regulatory complexity that adds cost without meaningfully improving outcomes.
A step in the right direction
The ILFM is hopeful that the proposed MLR reforms could mark the beginning of a more balanced approach to wider regulatory compliance across the legal sector. Rather than blanket requirements that treat all transactions and clients equally, proportionate regulations would allow firms to focus their compliance efforts where genuine risks exist.
This, in turn, could free up valuable time and resources for legal finance teams to concentrate on more strategic activities: improving cash flow management, enhancing client billing processes, implementing new technologies and providing the financial insights that help firms thrive in competitive markets.
Looking ahead
Although details of the proposed changes remain limited, we are pleased to see this step. For our members – those at the coalface of legal finance – this represents an opportunity to engage constructively with the reform process, sharing practical insights about how current requirements impact daily operations and suggesting improvements that maintain compliance standards while reducing the existing administrative burden.
As Richard Atkinson, president of the Law Society, noted in response to the announcement: “Legal professionals are committed to fighting financial crime, but compliance measures must be proportionate, targeted and risk-based to be effective without stifling access to justice or placing undue strain and financial cost on firms and practitioners.”
The legal finance community has long demonstrated its commitment to maintaining the highest standards of financial propriety. Now, with the prospect of more proportionate AML requirements, there’s hope that regulatory frameworks will better reflect the realities of modern legal practice while keeping the essential safeguards that protect both firms and clients.
As these reforms develop, the ILFM will continue to monitor progress and provide training and support to help members navigate any changes effectively.
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