The FCA Has Raised the Stakes on Financial Crime.
Earlier this month, the Financial Conduct Authority did something it has never done before. It applied to the High Court to place a regulated firm into special administration, not because of insolvency but because of serious concerns about the firm’s financial crime controls.
This is highlighting where AML enforcement is heading and what it means for every regulated business that will soon find itself answering to the FCA.
What the FCA Found
The FCA’s published statement is careful with its language, but the substance is clear. It identified systemic weaknesses in the firms financial crime framework, not an isolated gaps, but systemic failings across the firm’s AML controls, safeguarding arrangements, and governance structure.
Crucially, the FCA did not wait for evidence that money laundering had actually occurred. It acted on the basis that the firm’s control environment created significant financial crime risk. The distinction matters because the FCA is demonstrating its not only interested in whether harm has happened. it is interested in whether a firm’s framework is capable of preventing it.
Matthew Long, the FCA’s director of payments and digital assets, was direct: “The risk of payment firms being used by criminals to launder cash to fund other offences is significant, which is why they must meet expected standards. Fighting financial crime is at the heart of our strategy.”
This is a Step Change, Not a One-Off
The FCA has taken serious AML enforcement action before but what is new about this case is the mechanism. Special administration, effectively, shutting a firm down and placing it under independent control has never previously been used by the FCA on AML grounds. The regulator itself described it as the ‘first of its kind’. That it was prepared to use this route and beyond financial penalties.
The future is clear, where the FCA finds that a firm’s AML framework is systemically inadequate, it will not limit itself to fines. It will act on the firm’s ability to operate.
Why This Matters for Law Firms
This firm is a payments company who the FCA already supervises directly. Law firms are currently supervised for AML by the SRA, not the FCA, and the FCA’s enforcement powers over law firms do not yet exist in the same form.
In October 2025, HM Treasury confirmed that the FCA will become the single AML supervisor for legal services, replacing the SRA in that function. When that transition happens, the regulator that law firms will answer to for AML is the same regulator that just shut down a payments firm for having a framework it considered systemically inadequate. Not a framework that had facilitated proven money laundering. A framework that the FCA judged to be insufficiently robust.
That is a fundamentally different standard to the one most law firms have been assessed against under SRA supervision. The SRA has historically asked: do your policies exist and do they conform to the regulations? The FCA asks a harder question: does your framework actually work, and can you demonstrate that it does?
The Question Law Firms Need to Ask Now
FCA supervision of law firms is not a future administrative change, it is a change in the standard of scrutiny your AML framework will be held to. And the FCA has now shown, in the clearest possible terms, what it is prepared to do when it finds that standard has not been met.
The firms that will be best placed when the transition happens are not those that update their policy documents in advance. They are the firms that have taken an honest look at whether their AML framework would hold up under a regulator that expects evidence, not assurance.