Europe’s overhaul of anti-money laundering regulations, which is set to take effect in July 2027, is expected to be one of the most significant regulatory updates we have seen in recent years.

The EU Anti-Money Laundering Regulation, known as AMLR 27, will introduce a single, directly applicable rulebook across every EU Member State, backed by a new supervisory authority, AMLA, to enforce it.  Regulation (EU) 2024/1624, known as AMLR 27, replaces the directly applicable provisions within the 4th and 5th AML Directives. It is supported by the 6th Anti-Money Laundering Directive (AMLD6), which regulates areas to be implemented at the national level, such as Financial Intelligence Unit (FIU) cooperation and supervisory authorities. Key aspects of the update will affect who must comply, how customer due diligence is conducted, and what regulators will demand as evidence.

Although the UK is no longer subject to EU law, it would be unwise for law firms and their compliance officers to assume this is not their problem. It is more likely to assume that the UK may very well follow suit, and with the FCA expected to take over as the legal sector’s AML supervisor, the timing could not be more significant.

Law firms should not sit on their laurels but view this as a warning shot to prepare for potential changes ahead.

What AMLR 27 Will Change

The EU’s previous approach to AML was more directive-based, meaning that each Member State was able to translate requirements into national laws, thereby introducing variations in how rules were interpreted and enforced. AMLR 27 ends that flexibility. From 10 July 2027, the same requirements apply in Frankfurt, Warsaw, and Lisbon without any national filter. The new authority, the Anti-Money Laundering Authority (AMLA), is already operational in Frankfurt and has direct supervisory responsibility over the highest-risk cross-border entities, with the ability to issue binding standards and conduct cross-border investigations.

Some of the most significant changes will include a reduction in the Client Due Diligence (CDD) threshold for occasional transactions from EUR 15,000 to EUR 10,000, a new EU-wide cash payment cap of EUR 10,000 for commercial transactions, a strict five-working-day deadline for responding to financial intelligence unit requests, and a strengthened approach to enhanced due diligence for politically exposed persons.

While this does not apply directly to UK law firms now, the question is whether it will.

The Beneficial Ownership Threshold: A Small Change with Significant Impact

One of the most notable changes to be introduced by AMLR 27 deserves particular attention from UK Law firms and compliance professionals alike. This change concerns beneficial ownership.

The regulation will standardise the beneficial ownership threshold across all EU Member States at 25%. This means that ownership, voting rights, or other controlling interests of 25% or more trigger full identification and verification obligations. That one indicator “or more” may not seem like a lot, but it matters enormously in practice.

Under the UK’s current beneficial ownership framework, the threshold is more that 25%. That distinction may sound like a technicality, but if the UK follows suit in matching the new EU directions, it will have direct and immediate consequences for CDD. As an example, suppose a company has four equal shareholders, each holding exactly 25%. Under the current UK standard, none of these shareholders meets the threshold because none of them holds more than 25%. However, under the EU’s revised standard, all four will now qualify as registrable persons with significant control and would require full UBO verification.

In practice, a change from “more than 25%” to “25% or more” can take a client’s UBO count from three to four, or from none to four in an equally divided structure.

If the UK updates its regulations to align with this standard, and it would be logical to assume it will, law firms would need to revisit their existing client risk profiles, updating their CDD procedures, and in many cases, re-examine, client relationships they have previously considered fully documented and compliant. Regardless of the size of a firm, these changes would not be a trivial exercise.

Why the Change to FCA AML Supervision Matters

The FCA’s anticipated assumption of AML supervisory responsibility for the legal sector is not simply a change in regulator. The FCA operates with an approach shaped by financial services regulation, with a data-driven, risk-based approach that is likely to involve greater levels of proactive disclosure and operational transparency. A regulator with the FCA’s resources, enforcement appetite, and alignment with international AML standards, including the Financial Action Task Force recommendations, is considerably more likely to look at what leading international frameworks are doing and expect UK firms to operate to a comparable standard. AMLR 27 represents exactly that kind of international benchmark, and the FCA will be well aware of it.

What Law Firms Should Be Doing Now

The instinct to wait for formal UK regulatory changes, including focusing efforts in assuming what changes the FCA will enforce, is understandable, but it is a compliance risk in itself.

Firms should treat this as an opportunity to assess the robustness of their current AML frameworks against where regulation is clearly heading. That means reviewing beneficial ownership identification procedures to understand how a threshold change would affect the current client base, assessing whether CDD policies are genuinely risk-based or whether they have drifted towards tick-box compliance. Firms must also ensure that its firm-wide risk assessment is current and proportionate, and confirm that the current MLRO has the authority, resource, and training to respond to a more demanding supervisory environment.

However, firms should also be mindful of their continuing obligations under their respective regulators including the Solicitors Regulation Authority. In an article published by the Law Gazette, ‘AML: Firms warned against complacency ahead of FCA takeover’, firms have been warned not to ‘ignore the threat of a knock on the door from the Solicitors Regulation Authority despite the transfer of anti-money laundering regulation.’

The transition to FCA supervision does not eliminate a Firm’s existing regulatory obligations. Law firms will answer to two regulators: the FCA for AML matters and professional regulator (SRA, CLC, or CILEx) for everything else.

This dual regulation requires careful coordination to ensure your compliance architecture serves both relationships efficiently without creating conflicts or gaps.

How the Regulation and Compliance Office Supports Regulated Businesses

AML compliance isn’t just about avoiding enforcement. It’s about protecting your business, your team, and your reputation.

If you need help strengthening AML controls, updating documentation, or preparing for HMRC supervision, the Regulation and Compliance Office (RACO) can provide practical, proportionate advice and support. 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:

• SRA Compliance Essentials – Our SRA Compliance Essentials, including Risk Management Assessment and AML Compliance, 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.
• Risk and Compliance Management – Risk & Compliance Management provides your firm with an outsourced compliance team, delivering structured register administration, regulatory guidance and monthly reporting to support your COLP, COFA and MLRO. Designed to ensure ongoing oversight, documented monitoring and clear evidence of effective compliance management.This addition to the SRA Compliance Essentials service 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.
• Client 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 the 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