Michael Ross

Change in the area is welcome but, on the surface of it, the proposals are unlikely to feel like reform at all.

Nevertheless, the Money Laundering and Terrorist Financing (Amendment) Regulations 2026 will impact Scottish legal firms – but the question is, to what extent?

Pooled client accounts: an erosion of the risk-based approach

One of the most consequential changes for the legal sector concerns pooled client accounts (PCAs). The current regulatory position allows for Simplified Due Diligence (SDD) to be applied by financial institutions that offer PCAs to the regulated sector, such as solicitors.

The proposed change itself is to decouple SDD from the provisioning of PCAs and introduce a ‘risk-based approach’ for financial institutions. Banks offering these products have already said this is unlikely to have the desired effect, and professional services are perched nervously on the potential for due diligence demands that increase time, cost, and potentially clients.

But why does this matter so much? Client accounts are critical components of legal practice, particularly in conveyancing, executries and corporate work. They already operate within a dense web of regulatory controls, including accounts rules, professional obligations, and anti-money laundering (AML) supervision. Introducing another avenue of ‘red tape’ places another straw on the back of an already laden professional.

It’s worth noting the intention is to improve access to PCAs for those who require them, so the purpose is honourable, but the proposal offers little evidence of closing a systemic weakness in the UK’s AML regime. Instead, the reform appears driven by difficulties experienced by some sectors in accessing pooled accounts at all, with the solution appearing like a shift in pressure.

Cosmetic change, minimal practical relief

Beyond pooled client accounts, much of the reform package is underwhelming. References to “complex or unusually large” transactions are reordered; Euro thresholds are converted into Sterling; and “highrisk third countries” are restricted to Financial Action Task Force (FATF) “Call for Action” countries.

These are, at best, technical clarifications. They do not address the structural problems firms encounter when applying the MLRs: uncertainty around when a business relationship begins, inconsistent interpretations of enhanced due diligence triggers, and defensive overcompliance driven by a growing red tape regulatory culture.

Notably, the consultation response itself acknowledges that confusion and inconsistency persist in core areas of customer due diligence – yet the regulations stop short of resolving these issues.

Regulation by more guidance

A recurring theme in the consultation response is delegation. Where respondents raised concerns about proportionality, clarity or practicality, HM Treasury has frequently deferred resolution to future guidance rather than legislative change.

For the legal sector, this means renewed reliance on the Legal Sector Affinity Group (LSAG) guidance. The Law Society of Scotland has confirmed that LSAG guidance will be updated to reflect the amendments and issued in due course. While guidance is essential, it is no substitute for clear, workable, and relevant regulation.

An underwhelming outcome

For Scottish solicitors, the changes relating to PCAs deserves closer attention than it has perhaps received to date. It risks undermining the riskbased approach that the MLRs are meant to embody, while adding cost and complexity to areas of practice that are already heavily regulated.

Overall, rather than meaningfully driving proportionate compliance, there’s a real sense that any potential issues affecting client accounts risks have been overlooked amid what is largely regulatory housekeeping.

Michael Ross is a director at Anderson Strathern