Treasury officials have been cautioned that proposed reforms could impose heavier anti-money laundering (AML) responsibilities on solicitors, particularly in relation to client accounts.

Under the government’s draft regulations, full due diligence would be required on pooled accounts, regardless of risk assessment or existing safeguards. Currently, many law firms operate pooled accounts and may apply simplified due diligence (SDD) in low-risk situations. If the proposals proceed, this flexibility would be removed. In its formal response to the Treasury’s consultation, the Law Society warned that enforcing full due diligence on pooled client accounts would cause significant delays and added costs.

Law Society president Richard Atkinson described the blanket requirement as “disproportionate, operationally burdensome and inconsistent with previous policy.”

He added: “By eroding the risk-based approach – where solicitors have the option of applying SDD in low-risk circumstances – the UK’s defences against economic crime would be undermined and compliance resources diverted away from higher-risk cases, while creating unnecessary work in low-risk contexts. We urge HM Treasury to retain the option of applying SDD in pooled accounts, where the risk assessment supports it.”

Pooled accounts are widely used in conveyancing, probate, and corporate work. Lawyers argue these accounts already have robust safeguards, as client-level due diligence provides the oversight the government seeks.

The Law Society also highlighted the disproportionate administrative and financial impact, particularly on small and medium-sized firms. Atkinson emphasised: “To date no compelling evidence has been provided that the current approach to pooled accounts presents a systemic risk to the UK’s AML regime. Without clear evidence of abuse or regulatory failure, the proposed amendment appears disproportionate and misaligned with the principles of better regulation.”

The government intends to implement these changes by amending a statutory instrument, allowing only a four-week window for consultation—a move that has raised serious concern.

John Binns, a partner at BCL Solicitors specialising in AML compliance and financial crime, commented that while debate on the issue is valid, introducing such a fundamental shift through so-called “technical” amendments is not. He said: “HMT should pause, reconsider its proposed changes on this issue, and return them to the table only when it has considered and consulted on them properly.” 

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Source: The Law Society Gazette