The UK Government’s recent decision to appoint the Financial Conduct Authority (FCA) as the single professional services supervisor for anti-money laundering (AML) and counter-terrorist financing (CTF) is set to reshape the regulatory landscape for law firms across the UK, including Scotland.
AML Supervision Change – The FCA to Replace Law Society Scotland as AML Supervisor for Law Firms in Scotland
It has always been the case that the Law Society of Scotland supervised Scottish Law firms under the Office of Professional Body Anti-Money Laundering Supervision (OPBAS) framework. However, once new changes come into force, AML supervision will transition to the FCA under a single professional services supervisor, ending the Law Society’s role in this area. The FCA will now become the single professional services supervisor, including for the legal profession, the accounting profession, and other professional services.
This will not be an instant change as implementation of this decision will require primary legislation to be passed by both Houses of Parliament, the delivery of an execution plan, and the completion of a period of transition. Read more here:
Law Society Scotland: Transition of AML regulation to FCA
What Should Scottish Law Firms Do Now?
While it could be some considerable time before any changes take effect, law firms in Scotland should take this time to prepare for potential changes, including:
- Stricter compliance expectations: The FCA is known for its no-nonsense and rigorous enforcement approach
- Centralised supervision: Law firms in Scotland will be subject to the same AML standards as their counterparts in England and Wales
- Loss of localised guidance: Any localised guidance will be replaced by FCA-issued requirements and guidance, which may be less specific to Scottish legal practice
How RACO Can Help Firms with a Seamless Transition to FCA Supervision
As the Regulation and Compliance Office (RACO) also works with many professional services outside the legal services sector and has multiple clients regulated by the FCA, we are familiar with its regime and understand its regulatory approach. You can view the Financial Crimes Guide by clicking the link below. Although this does not refer to legal service providers, it is expected to be updated to encompass the required approach. RACO will be ready to embrace the change, and we will work with our firms to ensure a smooth transition to the new supervisor.
We can help firms:
- Review AML policies and procedures to ensure they align with FCA expectations, especially around risk assessments and customer due diligence.
- Train your team to ensure staff understand the FCA’s approach to their obligations, including suspicious activity and reporting.
- Provide outsourced compliance services, including our Regulation and Compliance Service Inc., Risk management, which provides a cost-effective but essential solution for law firms to ensure they achieve a compliant environment. Find out more about these services below.
Until the change takes place, Scottish law firms are highly recommended and expected to follow the guidance of the Law Society of Scotland and to continue to ensure they meet all obligations and guidance provided.
There is clearly a lot of work still to be done to affect the new arrangements, and any changes are unlikely to happen soon.
If you have any concerns about anything raised in this article or you are concerned about your firm’s compliance with the MLRs 2017, you can contact us via the details below.
Our Compliance Services
Our Services Include the following – click each link to be taken to the page that explains the service we provide under each heading.
- Regulation and Compliance Service – including Risk Management and AML Risk
- Regulation and Compliance Outsource Guidance and Support Service
- MLR 2017 Regulation 21 Independent Audit
- Complaint Management Service
All of our services have been specifically tailored to meet the needs of Scottish Law Firms, their Staff and Clients.
For more information or to discuss consultancy services you can email us info@regulationandcomplianceoffice.co.uk or make an online enquiry.
