UK
Tackling financial crime continues to be a focus for legislators and regulators in the UK. The government and the Financial Conduct Authority (FCA) are planning several initiatives over the coming years to strengthen oversight and raise standards across the financial services sector. The FCA lists fighting crime as one of its four strategic priorities for 2025–2030, with financial crime-related issues currently dominating FCA enforcement priorities and accounting for 74% of FCA investigations opened in 2024/25. Please listen to our webinar “Ahead of the Curve: The modernizing of the UK financial crime framework” for further discussion generally on this topic.
Economic Crime Plan 2
The second Economic Crime Plan 2023–26 (ECP2) sets out the UK’s approach to reducing economic crime, safeguarding national security and promoting legitimate economic growth in the UK. Similar to the previous three years, it sets out the government’s aims for 2026 which relate to:
- developing the profession beyond investigation to counter fraud by providing technical updates, training and apprenticeships (Q1)
- continuing to deploy UK expertise to priority countries to provide technical assistance to improve transparency over ownership and control of corporate entities (2023–2026)
- launching the City of London Law Court (2026).
The Home Office published a progress report on the ECP2 in September 2025. The report notes a 36% increase in prosecutions and a 7% increase in convictions for money laundering offences in 2024 compared to the previous year, indications that Suspicious Activity Reports are having a positive effect on asset recovery, and evidence of improved transparency in company ownership, with 32,000 entities having registered on the Companies House Register of Overseas Entities as of March 31, 2025.
However, the report acknowledges data limitations and notes first steps being taken to address them, including through HM Treasury’s Effectiveness Framework and the Home Office’s Economic Crime Survey 2024. The Home Office plans to publish a further update to this progress report in 2027.
National Risk Assessment 2025
HM Treasury published a National Risk Assessment (NRA) of Money Laundering and Terrorist Financing in July 2025, addressing the UK’s exposure to financial crime. The NRA sits alongside a range of government strategies, including the ECP2, and supports the UK’s alignment with the international standards set by the Financial Action Task Force.
Building on the 2015, 2017, and 2020 assessments, the 2025 NRA evaluates:
- the UK’s anti-money laundering (AML)/counter-terrorism financing (CTF) framework and the government’s response to the 2020 NRA
- overarching AML risks
- overarching CTF risks
- sector-specific AML/CTF risks under the Money Laundering Regulations (known as the MLRs)
- emerging cross-cutting risks in sectors not in scope of the MLRs.
Noteworthy developments in risks since 2020 include increased convergence between AML and sanctions evasion due to global instability and the growing use of financial technologies, such as electronic money institutions, payment service providers, cryptoassets and artificial intelligence, which can enhance criminals’ ability to operate covertly. Persistent risks which remain include:
- high levels of cash-based money laundering through smuggling, cash-intensive businesses, money mules and legitimate channels like Post Offices for inserting criminal proceeds into the banking system
- continued exploitation of financial and professional service firms by organised criminal groups
- the misuse of UK corporate structures by both domestic and international actors to launder illicit funds through front companies and complex cross-border arrangements.
Looking ahead, the findings of the NRA will directly inform the government’s policy, regulatory, and operational priorities and response.
Reform of the MLRs
HM Treasury’s (HMT) response and policy relating to its 2024 consultation on improving the effectiveness of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (known as the MLRs) was published in July 2025. The 2024 consultation concentrated on four areas: (i) customer due diligence; (ii) system coordination around economic crime; (iii) clarifying scope; and (iv) registration requirements for the Trust Registration Service.
HM Treasury’s response confirms that a number of updates will now be made to the MLRs and associated guidance, including:
- narrowing enhanced due diligence (EDD) obligations to focus on “unusually complex” transactions rather than all complex transactions, and in relation to high-risk third countries, EDD requirements will now be limited to transactions or customers linked to countries on the FATF “Call for Action” list
- decoupling pooled client accounts from the simplified due diligence framework and setting out new criteria for offering pooled client accounts
- financial institutions will not have to conduct customer due diligence (CDD) on all underlying clients
- introducing flexibility for identity verification in bank insolvency cases
- strengthening information-sharing among AML supervisors
- clarifying exemptions and converting monetary thresholds from euros to sterling
- requiring trust and company service providers to conduct CDD across their services, including “off-the-shelf” company sales and reforming registration requirements for the Trust Registration Service.
For cryptoasset firms, HM Treasury’s response helpfully confirms that the MLRs will be aligned with the new crypto Financial Services and Markets Act 2000 (FSMA) authorisation framework, and in future the current requirement for cryptoasset firms both to register under the MLRs and to be authorised under FSMA will be removed. As a result, firms authorised under FSMA by the FCA will no longer need to register separately under the MLRs as cryptoasset exchange providers or custodian wallet providers.
HM Treasury’s response also gives the green light to digital verification. HMT will produce guidance on using digital identities for MLR checks jointly with the Department for Science, Innovation and Technology, with the guidance providing clarity on the definition of a digital identity and giving further detail on how digital identities can be used in line with the MLRs’ risk-based approach. The guidance will also clarify how MLR requirements interact with the digital identity trust framework set up under the Data (Use and Access) Act 2025.
HM Treasury published a draft statutory instrument amending the MLRs, the Money Laundering and Terrorist Financing (Amendment and Miscellaneous Provision) Regulations 2025, for technical consultation in September 2025. The final statutory instrument is expected to be laid before Parliament in early 2026. The provisions relating to cryptoasset firms will align with the commencement of the FSMA cryptoasset perimeter in 2027 (please refer to the Fintech/Digital assets section for further information on the Future UK crypto regime).
For more detailed information, please see our blog post “Improving the effectiveness of the UK Money Laundering Regulations – what do the proposed amendments mean for fintech firms?”.
Reform of AML/CTF supervision for non-financial professional bodies
HMT’s response following its 2023 consultation on reform of the AML and CTF supervisory system was published in October 2025. The consultation built upon a 2022 review of the UK’s AML/CTF regulatory and supervisory regime, which concluded that weaknesses in supervision may need to be addressed through structural reform. The 2023 consultation assessed four models proposed in the 2022 review and sought views on whether to expand requirements on supervisors and their regulated populations relating to sanctions compliance.
HMT has now confirmed its intention to implement a new Single Professional Services Supervisor (SPSS) model. Under this model, the FCA will become the sole AML/CTF supervisor for in-scope legal service providers, accountancy service providers and trust and company service providers, consolidating supervisory responsibilities previously held by 23 separate professional supervisory bodies. The FCA will be granted new powers through forthcoming legislation and will operate independently of HMT in its supervisory role. Professional Body Supervisors will retain their broader regulatory and representative functions outside of AML. The Office for Professional Body Anti-Money Laundering Supervision will no longer be needed and so will be disbanded.
Given the scale of the proposed reform, implementation will take time and is contingent on the passage of enabling legislation, confirmation of funding arrangements and the development of a detailed transition and delivery plan. As such, the timeline for implementation will depend heavily on the availability of parliamentary time. A separate consultation which was published in early November and ran until December 24, 2025, outlines the powers the FCA should hold as the new supervisor.
FCA findings on financial crime controls
As part of its wider strategy to fight financial crime, the FCA published its findings from a recent survey on financial crime controls in corporate finance firms which are not required to submit financial crime data returns. The findings reflect firms’ self-reported practices and are not based on an FCA review. They highlight both good practices and areas needing improvement. It was concluded that approximately two thirds of respondents may be non-compliant with one or more aspects of the MLRs. Key deficiencies include the absence of documented business-wide risk assessments, gaps in customer due diligence and inadequate oversight of appointed representatives.
Despite these concerns, the FCA identified some good practices, such as regular reporting to senior management and the use of risk registers. The FCA has begun contacting firms falling short of expectations to prompt remedial action and will follow up with these firms in due course to understand what remedial actions they have taken. Firms are reminded of their obligations under the MLRs and are expected to address identified gaps in their financial crime frameworks.
FCA treatment of PEPS
The issue of politically exposed persons (PEPs) has been on the agenda in light of “de-risking” priorities, resulting in client terminations by banks and others, some of which have been high profile, and pressure from UK members of Parliament who are finding it increasingly difficult to obtain access to basic financial services. An FCA review into the treatment of PEPs was published in July 2024 and identified areas for improvement which called upon firms to, among other things:
- ensure their definition of a PEP, family member or close associate is tightened and in line with the MLRs and the FCA’s guidance
- review the status of PEPs and their associates promptly once they leave public office
- communicate to PEPs effectively and in line with the consumer duty, explaining the reasons for their actions where possible
- effectively consider the actual level of risk posed by the customer, and ensure that information requests are proportionate to those risks
- improve the training offered to staff who deal with PEPs.
As a result, the FCA consulted in 2024 on amendments to its guidance on the treatment of PEPs under the MLRs. The final updated guidance was published in July 2025 and reflects the new legal starting point that UK PEPs should be treated as lower risk. The updated guidance clarifies that firms should not treat non-executive board members of UK civil service departments as PEPs and makes amendments to the definition of a PEP, providing a reference link to the government’s list of international organisations to assist firms in identifying relevant roles such as directors or board members of an international organisation.
The guidance also gives greater flexibility in who can approve or sign-off PEP relationships and confirms that this no longer needs to be the Money Laundering Reporting Officer (MLRO) if the MLRO still has oversight of all PEP relationships within the firm. A firm must also (i) document its reasoning if it continues to apply enhanced due diligence to a customer who is no longer a PEP, and (ii) include the definition of “family member” that applies to a situation, and its reasoning. In addition, the updated guidance clarifies that with regards to beneficial ownership, a legal entity should not be classified as a PEP unless the firm is satisfied that a PEP is exercising significant control. Looking ahead to 2026 and beyond, the FCA has highlighted that firms must “do more to ensure parliamentarians, senior public servants and their families are not treated unfairly”.
Economic Crime and Corporate Transparency Act 2023
The Economic Crime and Corporate Transparency Act 2023 (ECCTA) is an important legislative development in the UK’s fight against economic crime with the introduction of a new “failure to prevent fraud” offence which came into effect on September 1, 2025. Other changes include amendments to the “identification principle” relevant to corporate liability and the granting of additional powers to law enforcement to aid the seizure and recovery of cryptoassets which are the proceeds of crime or associated with illicit activity such as money laundering, fraud and ransomware attacks.
ECCTA has also refashioned existing duties on companies to collect information about their persons with significant control (PSCs), place it on registers maintained by the companies and report the information to the registrar, so those duties now form part of a legal regime in which a PSC register for all companies is held centrally, rather than companies holding their own “local” PSC register. This requirement has applied since November 2025. Companies House may follow-up after companies have identified such PSCs and companies need to be prepared for this.
While many of the substantive provisions of ECCTA are already in force or partially in force, implementation activity and transitional periods will continue until completion in 2027. Provisions still being rolled out include by spring 2026, Companies House being able to enforce identity verification for all presenters of information, making it a compulsory aspect of filing any document, and new restrictions on who is authorised to file documents at Companies House on behalf of companies.
By the end of 2026 Companies House should be able to complete the 12-month transition period for all individuals on the register requiring identity verification and start compliance activity against those who have failed to verify their identity. The Home Office and Companies House are evaluating the impact of ECCTA as it is being implemented. The second progress report was published in June 2025 with the third progress report expected by June 2026.
EU
AML package
The EU’s package of key AML and CTF reforms was published in the Official Journal of the European Union in June 2024. The package comprises:
- A new Regulation on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (AML Regulation), which will apply from July 10, 2027, except in relation to football agents and certain transactions conducted by professional football clubs, to which it will apply from July 10, 2029. The requirements set out in the Fourth Money Laundering Directive (MLD4) that apply to obliged entities are being moved to the AML Regulation so that they become directly applicable provisions with a view to ensuring supervisory convergence within the EU. However, the provisions in the AML Regulation are more detailed and granular than the former MLD4 requirements and, furthermore, will be supplemented by technical standards and guidelines.
- The Regulation establishing the Anti-Money Laundering Authority (AMLA Regulation), which has mostly applied since July 1, 2025. AMLA is based in Frankfurt and is a central authority coordinating all national AML and CTF supervisors (i.e. not just those in the financial services sector). AMLA will not replace national AML and CTF supervisors. However, it will have some direct supervisory powers over certain high-risk credit institutions and other financial institutions. AMLA is expected to start the first process to select the initial high-risk credit and other financial institutions for direct supervision in July 2027, with a view to becoming fully operational by January 1, 2028.
- The Sixth Money Laundering Directive (MLD6), which EU member states must generally transpose into national laws, regulations, and administrative provisions by July 10, 2027. MLD6 will repeal and replace the MLD4, as amended by MLD5, and complement the AML Regulation. It contains provisions that organise the institutional AML and CTF system at national level, including provisions on the powers and tasks of national supervisors, as well as the establishment and access to beneficial ownership and bank account registers.
- The recast revised Wire Transfer Regulation, which extends the scope of the “travel rule” to the transfer of certain cryptoassets and has applied since December 30, 2024.
The European Banking Authority (EBA) transferred its AML/CTF powers to AMLA on December 31, 2025. However, the EBA will remain responsible for addressing AML/CTF risk across its prudential remit and will cooperate closely with AMLA. The EBA has also provided the European Commission with technical advice on important aspects of the future EU AML/CTF framework which AMLA will now take forward. Many provisions in the AML Regulation are detailed and granular, and there will therefore be more technical standards and guidelines which AMLA is tasked with preparing.
In December 2025, AMLA published final reports containing draft regulatory technical standards (RTS) on risk assessments specifying data points and criteria that national supervisors will use to assess the entities they supervise, and draft RTS on selection applying these same data points and criteria to set out how AMLA will assess risks for the purposes of selecting entities for direct supervision. The draft RTS are expected to be adopted by the European Commission in Q1 2026.
AMLA has also launched a consultation on draft implementing technical standards that set out how AMLA and national financial supervisors will cooperate during the selection process and when transferring supervisory powers for institutions or groups that will be directly supervised by AMLA. In 2026, AMLA will continue to work with national supervisors to test the risk assessment methodology and selection process. Firms will need to start preparing in 2026 for the implementation of this new regime.
EU Guidelines on governance arrangements for EU and national restrictive measures
In 2026, firms should ensure compliance with the EBA’s two sets of final guidelines on governance arrangements and the policies, procedures and controls that financial institutions should have in place to be able to comply with EU and national restrictive measures. In this context, restrictive measures applicable to financial institutions comprise targeted financial sanctions and sectoral measures, e.g., economic and financial measures. Both sets of guidelines have applied since December 30, 2025.
For information on payments fraud, please refer to the Payment services and payment systems section.
