As 2026 gets underway, it is clear that the Solicitors Regulation Authority (SRA) closed 2025 with a strong emphasis on enforcement, particularly in relation to anti-money laundering (AML) and wider regulatory controls. A number of published outcomes towards the end of last year highlight the consequences for firms that failed to meet their obligations under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 and the SRA’s own Principles and Codes of Conduct. (sra.org.uk)

These decisions set a clear tone for the year ahead. They demonstrate that regulatory scrutiny is not easing and that firms entering 2026 must be prepared for continued focus on AML frameworks, governance arrangements and supervisory engagement, especially in light of the anticipated shift to Financial Conduct Authority (FCA) supervision for AML matters.

December 2025 Enforcement Outcomes: A Snapshot

Towards the close of 2025, the SRA published several decisions involving financial penalties and regulatory settlement agreements for firms that failed to maintain adequate compliance systems.

One firm in London agreed to pay a fine of £33,438 plus costs after its AML proactive supervision review identified that it had not put in place a documented firm-wide risk assessment or appropriate systems and controls as required by the 2017 Regulations and the SRA’s Code of Conduct for Firms. The agreement, reached in December 2025, underscores the importance the SRA places on basic AML infrastructure being in place from the outset. Read the full outcome details here.

Another London firm was fined over £17,000 plus costs for similar regulatory breaches as it was identified that the firm failed to have in place an appropriate firm-wide risk assessment (FWRA) that identified and assessed the risks of money laundering to which it was subject taking into account all risk factors pursuant to Regulation 18(2) of the MLRs 2017. Full outcome details can be found here: Regulatory Settlement Agreement – firm fined £17,302 under Rule 3.1 (b) of the SRA Regulatory and Disciplinary Procedure Rules (RDPRs).

Towards the end of December 2025, the SRA published the outcome of another regulatory settlement agreement in which a firm based in Oxfordshire was fined over £9,000 plus costs. During the investigation, it was found that the firm failed to establish and maintain any PCPs to mitigate and effectively manage the risks of money laundering and terrorist financing, identified in any risk assessment (FWRA), pursuant to Regulation 19(1)(a) of the MLRs 2017. It was also discovered that some of the files reviewed did not contain a Client and Matter Risk Assessment (CMRA), as required by Regulation 28 of the MLRs 2017. Therefore, the firm was unable to demonstrate that the extent of the measures it had taken to satisfy the requirements of Regulation 28 was appropriate, as required by Regulation 28(16) of the MLRs 2017. Read the full details here – firm fined £9,500 plus costs.

What These Decisions Tell Us About Regulatory Priorities

Collectively, the recent SRA decisions illustrate several consistent priorities:

1. Compliance Infrastructure Matters
Firms have been held to account for not having adequate policies, procedures and risk assessments that align with the AML Regulations and the SRA Code of Conduct. These are fundamental elements of a compliant practice, not optional extras.

2. Documentation and Review Are Essential
It is not enough to have systems in place; firms must be able to demonstrate that those systems have been maintained, reviewed and updated in line with evolving practice risks.

3. Supervision and Governance Are Under Scrutiny
Decisions often reference breaches of the SRA Principles or Firm Conduct Rules, reminding regulated entities that compliance is a firm-wide responsibility and must be embedded at all levels of the organisation.

These themes echo wider guidance issued by the SRA and sector bodies on your AML obligations and reinforce that robust systems and documented oversight remain central to professional responsibilities. Read more: ‘SRA Publishes Thematic Review of Source of Funds and Wealth Compliance‘

Preparing Your Firm for 2026

With the regulatory spotlight still firmly focused on AML and systemic compliance, firms should take the opportunity early in 2026 to assess how well their arrangements stand up to scrutiny. Some practical areas to consider include:

Revisit Your AML Risk Assessments

Ensure that your firm-wide risk assessment is properly documented, reflects your current client base and services, and has been reviewed recently. AML risk profiles evolve over time, and documentation should evolve with them.

Update Policies and Procedures

Policies should be tailored to your firm’s size, complexity and risk exposures. Generic or out-of-date documents are unlikely to satisfy supervisory expectations.

Strengthen Oversight and Accountability

Senior management and compliance leads should be able to demonstrate oversight of AML controls, including evidence of training, monitoring and action taken in response to identified issues.

Embed a Compliance Culture

Compliance should not be viewed as a box-ticking exercise. Training, awareness and accountability across fee-earners and support teams all contribute to a culture where regulatory obligations are taken seriously.

Looking Ahead: FCA Supervision and What It Means for AML

One of the most significant regulatory developments for the legal sector in 2026 is the anticipated transition of AML supervision for law firms from the SRA to the Financial Conduct Authority (FCA). This change forms part of broader reforms aimed at strengthening the UK’s anti-money laundering regime.

Firms under FCA supervision in other sectors have experienced:

• More data-driven oversight
• Higher expectations for risk-based monitoring
• Stricter enforcement outcomes and significant financial penalties

While the timing and detailed requirements of the FCA transition are still evolving, early preparation will position firms to adapt more easily once the new supervisory regime is in place.

Read our previous article for detailed guidance: ‘Preparing Your Law Firm for AML Supervision Move to FCA’.

Prepare Your Law Firm Now

The SRA’s enforcement activity at the end of 2025, particularly in regard to requirements under the AML obligations, sends a clear signal: regulatory compliance remains a priority, and firms must treat it as an ongoing operational imperative.

Entering 2026, investment in proper risk assessments, up-to-date policies, documented procedures and a culture of compliance will not only help manage risk but also position your firm to meet the expectations of both current and future supervision frameworks. Proactive action now can reduce the likelihood of enforcement outcomes further down the line.

Support and Defence Services for Firms Facing an Investigation

At the Regulation & Compliance Office (RACO), our regulatory defence and disciplinary support consultants understand what is at stake personally and professionally if you or your firm is facing an investigation by the SRA.

We have a proven track record of delivering honest, pragmatic advice and building strategies that ensure any breach is managed correctly and the engagement with the SRA is controlled and measured. Whilst we cannot guarantee an outcome, we can help to prepare the case, the firm, and the individual for any sanctions that may follow.

We provide tailored services that deal with the following:

• SRA Enquiries
• Self-Reporting – including for the SRA, ICO, CLC, CILEX
• Solicitor Disciplinary Tribunal Support
• Regulatory Settlement Agreements
• Agreed Outcomes – Statements and Judgments

Regardless of the reason for engaging with the regulator, RACO has supported multiple law firms and individuals in addressing and overcoming issues.

Read some of our previous guidance articles for further information:

The SRA’s 2024-25 Enforcement Data: What It Means If Your Law Firm is Facing an Investigation

SRA Disciplinary Defence: What Solicitors Must Know About Public Outcomes

Compliance and Support Services

At RACO, our specialist regulatory defence teams have the expertise to help when things go wrong. However, most of our work is helping firms avoid investigations altogether. All firms must demonstrate and uphold high standards in their AML systems and processes, as well as in their management and supervision. This also involves outlining how the firm operates, including the conduct of staff in accordance with established policies, controls, and procedures.

At RACO, we can offer a number of outsourced support solutions, including:

• Regulation & Compliance Service – Our Regulation and Compliance Service, including Risk Management Assessment and AML Risk, provides a cost-effective but essential solution for law firms to ensure they achieve a compliant environment. We work with firms of all types, from sole practitioners through to partnerships, Limited Companies and ABSs. We recognise that it is essential to recognise how a firm implements compliance to tailor the solution to each firm’s working practices. This is why our service is completely bespoke to each firm we work with.
• Regulation & Compliance Outsource Guidance and Support Service – This service provides law firms with a cost-effective outsourced solution which sees the compliance managers of RACO take on the day-to-day guidance and support expected to be provided by COLPs, COFAs, Data Compliance Officers, MLROs and MLCOs. This addition to the Regulation and Compliance Service, including Risk Management and AML Risk, relieves the Compliance Officers from most of the day-to-day burden of keeping up with regulatory requirements and ensures staff have access to compliance and risk advice when they need it.
• Due Diligence & Risk Assessment Service – At the Regulation and Compliance Office (RACO), we provide law firms with a seamless, outsourced solution for Client Due Diligence (CDD) and Risk Assessments. Our Due Diligence and Risk Assessment Service has been designed to enable law firms to focus on the provision of legal services while we collate the necessary documentation for Due Diligence, Enhanced Due Diligence (where needed), and completion of the Client and Matter Risk Assessment, which must be completed on all matters in scope of the Money Laundering Regulations 2017.
• MLR 2017 Regulation 21 Independent Audit – As a body that is independent of the Firm, RACO would qualify as being truly independent and be able to meet the requirements of Regulation 21 of the MLR 2017. The regulation 21 independent audit extension will further include a review of the approach adopted by the firm for compliance with AML regulations.
• AML Training Courses – Our Typical AML Training Includes:
  • AML Training for ALL staff to meet the firm’s obligation to provide annual training.
  • One-to-one training for the MLRO and MLCO on their obligations and requirements.

Contact Us To ask any questions about the Regulation and Compliance Office and how we can support your Law Firm, please call us on 0203 985 8550, complete the online enquiry form, or email us at info@regulationandcomplianceoffice.co.uk