Regulatory pressures are ramping up
As we’ve often said, there’s never a dull moment in the world of risk and compliance!
2026 has kicked off with a wave of regulatory activity, and it’s something every firm should have on their radar. The SRA has had a busy start, dealing with unexpected firm closures and stepping up interventions—most notably the sudden collapse of PM Law Ltd, which triggered a response (not the quickest, as some have commented) to protect clients and manage the practical fallout, and most recently, receiving a formal censure from the LSB for its handling of the collapse of SSB Law – only the second time such a sanction has been issued.
Then there’s AML. The SRA’s most recent report didn’t pull its punches: almost a third of firms were found to be non‑compliant, and more than half only partially compliant. Weak client and matter risk assessments, inconsistent source of funds checks, and policies that look good on paper but don’t hold up in practice continue to be major weak spots. SRA AML investigations are increasing, as are the sanctions.
The SRA and FCA have teamed up to warn firms involved in motor finance commission claims to improve their processes so clients aren’t double‑represented or charged unreasonable termination fees, and we’ve seen a number of SRA visits/investigations to firms in the high-volume consumer claims sector.
Complaints handling is also in the spotlight. The latest Legal Ombudsman’s annual data indicated an 8% year – on – year increase in new complaints accepted. Poor service findings were made in 70% of investigated cases, up and poor complaint handling was identified in 49%. The latest update focused on delays caused by third parties—something firms can’t always control—but the message was clear: keep clients informed and manage expectations early and often. With an increasing use of AI by clients to write complaints and respond to firms, there is additional pressure on fee earners.
Added to all of this, is MOJ’s consultation on the proposed Interest on Lawyers’ Client Accounts Scheme, open until 9 March 2026. The proposal would see a portion of interest generated on client accounts diverted to the MoJ, which would have implications for firms’ finances and client‑money processes. Manchester Law Society is submitting its response, ensuring members’ concerns and practical realities are formally on record.
All in all, 2026 is shaping up to be a year where regulators expect firms to step up their game. Stronger AML processes, clearer communication, and better‑aligned internal practices aren’t just “nice to have” —they’re essential. With regulatory scrutiny rising across the board, now is a good time for firms to take stock and tighten up.
How Compli can help…
The Compli Solicitor Regulatory and Professional Discipline Team can provide expertise and advice on risk and compliance, AML, disciplinary assistance etc. If we can help in any way, please get in touch at [email protected]