The concern follows yesterday’s King’s Speech, which included UK government proposals for two pieces of legislation dealing with regulation, the Regulating for Growth Bill and the Enhancing Financial Services Bill. One of these bills is widely expected to introduce measures transferring anti-money laundering (AML) regulation away from professional bodies such as the Law Society of Scotland and into the London-based Financial Conduct Authority (FCA).

The move follows a decision by HM Treasury last year to consolidate AML regulation under the FCA. However, professional bodies across the legal, accounting and other regulated sectors have strongly opposed the changes, warning they could dilute effective specialist oversight while increasing costs and bureaucracy for businesses.

Ben Kemp, chief executive of the Law Society of Scotland, said: “The UK government’s proposals risk weakening the fight against economic crime while imposing unnecessary cost and bureaucracy on hundreds of Scottish law firms.

“We have a long and proven track record of regulating Scottish solicitor firms, including in relation to money laundering. Our specialist regulatory teams operate clear rules alongside a proactive programme of inspections. The UK government itself has recognised our strong commitment to tackling economic crime and driving high standards across the sector.

“Removing anti-money laundering regulation from specialist professional regulators and centralising it within the Financial Conduct Authority creates a real risk that this robust and effective approach will be undermined. This centralised approach cannot provide the same detailed knowledge or understanding of the Scottish legal sector, which adds to the potential for added cost and complexity without benefit.

“No evidence has been provided and no impact assessment published that supports this proposal, which would risk increasing costs, bureaucracy and administrative burdens for law firms. Even under the new arrangements, we would continue regulating law firms and how they handle client money, meaning firms could face multiple regulators operating simultaneously. That additional complexity comes at a time when many firms are already under significant financial pressure.

“Smaller firms serving local communities are likely to be hit hardest, as they are least able to absorb additional compliance costs.

“As this legislation progresses through Parliament, we will continue making the case that these reforms are misplaced, misguided and counterproductive. There is still time for the UK government to reconsider its approach, protect the public and preserve the robust anti-money laundering framework that is already delivering results in Scotland.”