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Professional indemnity explained
FCA AML supervision reform is the government's plan to make the FCA the single anti-money laundering supervisor for legal, accountancy and trust or company service providers. It matters because supervision, enforcement and investigation costs will look different for around 60,000 firms.
Part of: Professional indemnity insurance
In short
In October 2025 HM Treasury confirmed that the FCA will become the single AML supervisor for law firms, accountancy firms and trust or company service providers, replacing the professional body supervisors and HMRC in that role. Primary legislation is needed first, and the FCA expects to begin a phased transition in late 2028, completing around 2030. OPBAS is expected to cease. Professional bodies keep their wider conduct roles, including PI rules. The FCA will be able to fine, censure, prohibit senior managers and appoint skilled persons, so regulatory investigation cover and fines wording in PI policies deserve attention.
The short answer: the FCA will become the single anti-money laundering (AML) supervisor for law firms, accountancy firms and trust or company service providers, but not yet. In its October 2025 consultation response, HM Treasury confirmed that the FCA will act as the Professional Services Supervisor for legal service providers, accountancy service providers and trust or company service providers. The response puts the affected population at approximately 60,000 regulated firms.
All firms currently supervised for AML by a professional body supervisor, and the accountancy and trust or company service providers supervised by HMRC, are due to move to the FCA. Professional bodies lose their AML supervision role but, in the government's words, are expected to continue in their wider regulatory and representative roles. A firm may therefore be supervised for AML by the FCA while remaining regulated for professional conduct by its existing body, such as the SRA.
The Office for Professional Body AML Supervision (OPBAS), which oversees the professional body supervisors, is expected to cease its functions once the FCA fully takes over. For background on how AML risk already shows up in PI, see AML and PI for solicitors.
The change needs primary legislation and a phased transfer, so it will take several years. The FCA's AML supervisory reform page says nothing changes immediately and firms do not need to take any action now.
| Date | Milestone | Status |
|---|---|---|
| October 2025 | HM Treasury confirms the FCA as single professional services AML supervisor | Published |
| June 2026 | HM Treasury response on the FCA's duties, powers and accountability | Published |
| 22 September 2026 | FCA publishes its plans: no action needed by firms yet | Published |
| 2027 | FCA expects to complete its operating model review, following expected government legislation; HM Treasury plans some amendments to the Money Laundering Regulations by statutory instrument | Planned |
| Autumn to late 2028 | FCA expects to begin taking on supervision, in phases | Planned |
| Around 2030 | Transition expected to complete, with remaining professional body supervisors moving over | Planned |
Dates beyond 2026 depend on parliamentary time, and the FCA itself gives both autumn 2028 and late 2028 for the start. Treat them as expectations, not deadlines.
The June 2026 powers response sets out the toolkit. The FCA will use the existing enforcement powers in Part 9 of the Money Laundering Regulations 2017, which allow it to:
Separately, HM Treasury intends to give the FCA supervisory intervention powers, such as appointing a skilled person and issuing directions, through secondary legislation.
Firms will need to be registered with the FCA to carry out in-scope work lawfully, and the FCA will keep a public register. The regulation 58 fit and proper requirements will be applied to the beneficial owners, officers and managers of legal and accountancy service providers once the FCA takes over. Ongoing supervision will be funded by fees charged to supervised firms, with the fee structure subject to a further consultation. The FCA says it will not be able to use information-gathering powers to obtain legally privileged material.
The reform changes who supervises AML compliance. It does not, of itself, change the PI rules set by professional bodies. PI requirements such as the SRA Minimum Terms and Conditions for solicitors and the ICAEW PII regulations for accountants are set by professional bodies, which the government expects to keep their wider regulatory roles. See the SRA minimum terms explained and ICAEW PI requirements for accountants.
| Exposure | How insurance usually responds |
|---|---|
| Client or third party sues over a negligent AML or due diligence failure | PI may respond to the civil claim, subject to the policy terms and any dishonesty or fraud exclusions |
| Legal costs of responding to a regulator's investigation | Sometimes covered by a regulatory investigation and disciplinary costs extension, often with a sublimit |
| Financial penalty imposed on the firm | Commonly excluded or covered only where insurable by law; see fines and penalties under PI |
| Action against an individual manager | May fall under management liability rather than PI, depending on the wording |
A more intrusive supervisor with skilled person powers could increase the time and legal cost of responding to supervision, so investigation costs cover deserves a closer look at each renewal.
Illustrative example 1: conveyancing source of funds. A conveyancing firm accepts funds without adequate source of funds checks and the transaction is later linked to fraud. A lender sues the firm for its loss. Under the current regime the SRA would look at the AML failings; after transition the FCA would. The lender's civil claim would usually be considered under the firm's PI, subject to the terms. Our solicitor AML failure scenario walks through a similar case.
Illustrative example 2: small practice inspection. After 2028 a sole practitioner accountant is selected for an FCA inspection and a skilled person review. The practitioner instructs a solicitor to help respond. Whether those costs are paid depends on whether the PI or management liability policy includes regulatory investigation cover and how it defines an investigation.
Illustrative example 3: company formation agent. A trust or company service provider currently supervised by HMRC moves to FCA supervision during the phased transition. The firm has no PI because no professional body requires it, but a client later alleges negligent advice on a company structure. Without a policy, the firm meets the claim itself.
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Not before legislation is passed. The FCA says it does not expect to begin taking on supervision until autumn 2028, with a phased transition likely to complete around 2030. Primary legislation is needed first. Until then, firms stay with their current supervisor, such as the SRA, ICAEW or HMRC, and the FCA says they do not need to take any action now.
For conduct and other matters, the government expects so. HM Treasury's response says professional body supervisors will continue in their wider regulatory and representative roles and will continue to supervise firms for purposes other than AML. Their PI requirements, such as the SRA Minimum Terms and Conditions, are separate from the AML reform.
OPBAS oversees the professional body AML supervisors. Because those bodies will lose their AML supervision role, HM Treasury says OPBAS's existing function will no longer be needed, and its functions are expected to cease once the FCA fully assumes AML supervisory responsibility for the professional services sector.
Sometimes. Many PI policies include an extension for regulatory investigation and disciplinary costs, usually with a sublimit and conditions about what counts as an investigation. Fines and penalties themselves are commonly excluded or limited to what is insurable by law. Check the wording with your broker rather than assuming cover.
The FCA's ongoing AML supervision will be funded by fees charged to the firms it supervises, and it has said it will consult on its fee approach before taking on the role. The fee structure has not yet been set, so any comparison with current professional body fees would be speculative.
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