Stay ahead: Compliance in 2026 and a look back at 2025

2025: A year of rapid change

It’s fair to say 2025 kept us all on our toes. From updated guidance to major announcements on supervision, it has been a lot to keep up with.

If you missed any of the major updates, we’ve collated the key resources and guidance published this year so you can bookmark them for your files.

Sham litigation and high-risk countries

We started the year with the SRA publishing new guidance on sham litigation. It’s a must-read that provides practical advice and real-life case studies to help firms spot the warning signs.

We also saw the SRA publish helpful templates for completing client and matter risk assessments. Following this, the FATF updated the list of jurisdictions under increased monitoring in February, June and October.

Fraud and LSAG

By March, the focus shifted to the wider landscape of crime. The National Strategic Assessment highlighted that fraud now makes up 41% of crime in England and Wales.

In April, the Legal Sector Affinity Group (LSAG) updated its AML guidance. This is a crucial document for legal professionals, covering everything from the Economic Crime Levy to high-risk third countries. At the same time, the Office of Trade Sanctions Implementation (OTSI) issued new guidance on enforcement powers, highlighting specific risks for the legal sector.

Risk assessments and new offenses

The summer brought us the 2025 National Risk Assessment, which maintained a "high" risk rating for legal service providers. The SRA followed this quickly with an updated Sectoral Risk Assessment in July.

In September, the new "failure to prevent fraud" offence came into effect. The SFO has since published refreshed criteria for evaluating compliance programmes, which is vital for understanding the "reasonable procedures" defence.

Supervision reform and thematic reviews

The biggest news of the year landed in October with the announcement of supervision reform. The government announced that the FCA will become the single professional services supervisor.

Finally, the SRA released two major reports to close out the year. First, the Annual AML Report revealed that nearly a third of firms engaged were non-compliant. Second, a thematic review on source of funds highlighted that 11% of files reviewed lacked any source of funds verification at all.

What to expect in 2026

As we move into the new year, we can expect more of the same. The regulatory landscape continues to change, and proactive compliance is essential.

Here are the key areas to watch:

1. Supervision reform

The transition to a single supervisor (the FCA) is the biggest change on the horizon. While the core money laundering regulations aren’t changing, the supervisor is. We expect to see more updates on implementation timelines and reporting requirements throughout the year.

2. Economic Crime Levy changes

From April 2026, the levy charges will increase substantially. Some firms could see charges rise from £36,000 to £500,000. It’s worth checking your revenue band to budget accordingly. You can see the full breakdown of the changes to bands and charges here.

3. Source of funds scrutiny

Following the SRA’s thematic review, we expect to see more rigorous file reviews. It’s no longer enough to just collect a document. You need to demonstrate how you assessed the risk and the rationale behind your decision.

4. Failure to prevent fraud

With the offence now in force, we may see the first enforcement actions in 2026. We recommend reviewing the SRA's Update 138 on preventing fraud crime and the SFO’s guidance on what constitutes "reasonable procedures."

5. Operational compliance

The SRA has indicated their next thematic review will look at the gap between a firm’s written policies and what actually happens on the ground. Internal audits and file reviews will be key to ensuring your team is following the process.