Briefing Note: Upcoming Changes to Money Laundering Regulations (MLRs) – July 2025 Consultation

In July 2025, HM Treasury published its consultation response on reforming the Money Laundering Regulations 2017 (MLRs). The proposals aim to reduce regulatory burdens by up to 25% while ensuring the UK’s regime remains robust, proportionate, and aligned with international standards.

These reforms will impact all businesses supervised under the MLRs, including:

• Accountants and tax advisers
• Trust and company service providers (TCSPs)
• Estate and letting agents
• High Value Dealers (HVDs)

Key Proposals

1. Simplified Due Diligence (SDD) and Onboarding

• Broader scope for applying SDD to genuinely low-risk clients.
• Increased use of digital ID verification and Companies House’s new ACSP regime.
• Clearer expectation that onboarding should be risk-based, not tick-box driven.

2. Firm-Wide Risk Assessments (FWRA)

• Streamlined requirements to reduce duplication across supervisors.
• Explicit confirmation that firms may cluster similar client groups to simplify assessments.

3. Suspicious Activity Reports (SARs)

• Planned reform of the SARs regime to reduce “defensive reporting.”
• Greater emphasis on reporting quality over quantity.

4. Sanctions and High-Risk Countries

• Enhanced focus on sanctions compliance, with dynamic high-risk country lists.
• Firms may be given more flexibility to apply risk-based discretion in applying controls.

5. Supervisory Expectations

• Supervisors (ICAEW, ACCA, HMRC, Law Society, etc.) will be assessed on effectiveness, not just technical compliance.
• Firms should expect a stronger emphasis on outcomes-based compliance during reviews.

Timeline

• Consultation feedback period: July – September 2025
• Government response: Q4 2025
• Legislative updates: Expected to take effect from 2026 onwards

What This Means for Your Business

1. Lower compliance burden – Certain low-risk clients may qualify for simplified checks, saving time and costs.
2. More emphasis on judgment – Regulators will expect firms to apply professional scepticism and tailor controls to their risk profile.
3. Enhanced training needs – Staff must be updated on new SDD criteria, SARs reforms, and sanctions requirements.
4. Audit trail remains critical – Even with simplification, firms must evidence their risk-based decisions.

Next Steps with Bonham & Brook

Bonham & Brook is already adapting to these upcoming reforms by:

• Piloting risk-based onboarding and digital ID solutions with our clients.
• Updating AML policies and templates to align with proposed MLR changes.
• Preparing training modules on revised SARs expectations and sanctions controls.
• Advising sector-specific clients (accountants, tax advisers, property firms, jewellers) on how to implement proportionate AML measures while remaining fully compliant.

Our Recommendation

Now is the right time to review and refresh your AML framework so you are ready for the 2026 reforms. We recommend:

1. Reviewing your client risk assessment methodology.
2. Ensuring your staff training reflects a risk-based culture.
3. Updating your policies, controls, and procedures to evidence compliance.
4. Planning for a firm-wide risk assessment refresh before the legislative changes take effect.

Contact us today to arrange an AML compliance health check or training session tailored to your firm.