From AML to Data Reform: The 2026 compliance agenda for UK law firms

From anti-money laundering (AML), sanctions, data protection, court transparency requirements, and the day-to-day realities of supervising matters alongside handling client money, it’s a lot to keep up with. However, there are genuine benefits for firms that prioritise getting ahead of the curve. Several new regulations are still phasing in since late 2025, which will continue throughout this year and beyond, from changes in Companies House identity verification under the Economic Crime and Corporate Transparency Act programme, to updates around the Data (Use and Access) Act 2025, and a new court pilot programme that came into place January 1st 2026 that impacts how documents referenced in hearings may become publicly accessible by default.

In this article, we’ll break down some of the key compliance challenges UK legal firms are likely to face in 2026, provide a roundup of the regulatory changes already in motion, and highlight the practical opportunities legal firms have to streamline and differentiate their workflows. 

The compliance landscape for UK legal firms in 2026

UK law firm compliance is made up of multiple complex layers. Firms must continue to meet core professional and ethical duties, while also responding to a growing set of operational, data, and financial requirements, such as the transition from the Solicitors Regulation Authority (SRA) to the Financial Conduct Authority (FCA) for legal professionals responding to or managing AML schemes in the UK. 

These layers increasingly overlap, meaning that decisions made at matter inception, client onboarding, or data retention can have consequences across multiple regulatory processes. Several forces are also driving complexity; regulators are placing greater emphasis on outcomes and evidence, and technology is improving access to information, making data easier to share and be scrutinised by clients, counterparties, courts, and regulators alike. At the same time, economic crime, sanction enforcement, and transparency remain high political and regulatory priorities in the UK.

For legal firms, this means compliance can no longer sit quietly in the background. It must be fully embedded into workflows, strategy, and culture, with partners and senior managers able to demonstrate that controls not only exist, but that they are understood, adopted, applied consistently and regularly reviewed to avoid future risks.

Key compliance challenges for UK legal firms:

• Anti-money laundering (AML) and financial crime compliance (in line with the transition from SRA to FCA) are among the rising challenges law firms are facing right now. While most firms have mature AML frameworks in place, regulators continue to focus on how risk-based judgements are made and documented in practice. Source of funds and source of wealth assessments are regularly under scrutiny, especially in complex transactions or private wealth work. In 2026, firms will be expected to demonstrate, with greater transparency, that the proper checks have been completed, evidence why decisions were made, and how risks were mitigated along the way.
  
  
• Sanctions compliance continues to be another pressure point for ongoing monitoring, beneficial ownership complexity, and changes during the lifecycle of a matter. Firms acting on long-running matters or for international clients must ensure their controls can adapt as sanctions regimes evolve, rather than relying on point-in-time checks.
  
  
• Data protection and privacy compliance remains demanding, particularly as firms balance their day-to-day obligations such as client communications, retention, marketing/external activity and data access requests. The gradual reform of the UK data protection framework is intended to support sustainable growth and future-proofing for many sectors, but in practice, it still requires careful governance, clear accountability, and strong oversight, especially for law firms that may rely on third-party cloud services, AI-enabled tools, technology partners, or outsourced support functions.
  
  
• Economic crime reforms linked to Companies House are also beginning to have practical impact. The gradual introduction of identity verification requirements and enhanced corporate transparency measures affects how firms interact with company information, conduct due diligence, and advise clients on compliance obligations. For many firms, this will require updates to onboarding processes and internal guidance during 2026.
  
  
• Transparency and confidentiality, particularly for litigation and contentious practices. Changes to court rules around public access to documents mean firms must be more deliberate about what is included in pleadings, witness statements, and hearing bundles. This places pressure on supervision, document hygiene, and client management.
  
  
• Compliance fatigue. For many busy firms, training can feel repetitive, responsibilities may be unclear, and there is a risk that compliance becomes a box-ticking exercise rather than a shared professional obligation. In 2026, regulators are likely to look closely at culture, escalation, and how firms respond when things go wrong.
  
  
• Consultations and signals from regulators, particularly around client money, supervisory effectiveness, and professional standards. Even where rules have not yet changed, the direction of travel is always important for future planning and risk management.

Turning compliance into opportunity

While the compliance burden is real, it also presents an opportunity for UK legal firms to differentiate themselves in such a competitive market. As firms continue to modernise and adopt new emerging technologies such as AI-powered solutions, clients, particularly corporate, institutional, and international, will be increasingly aware of the regulatory risks involved. By demonstrating strong compliance and understanding of client requirements, firms immediately elevate themselves in the market and position themselves as trustworthy partners. Firms that can clearly explain their controls, onboarding processes, and data handling practices will stand out and in turn, will most likely shorten their engagement cycles.

Although firms should make informed decisions about the technology they adopt, for those looking to modernise, it’s important to understand that technology can still play a vital role in improving compliance outcomes. For instance, our OneAdvanced Legal platform offers a range of tools to streamline operations, improve visibility, and manage information more effectively. By automating workflows, document management, and quality assurance reviews, firms can reduce the risk of breaches, demonstrate oversight to regulators, and maintain accurate records. 
Our File Quality Review and Matter Quality Agents enable firms to conduct automated quality assurance reviews and file audits, ensuring that all files and matters are reviewed consistently and thoroughly. This not only supports compliance but also helps firms to identify areas for improvement and stay ahead of the competition. So by adopting modern technology, law firms can not only enhance their reputation, but they can also continue to build trust with clients and regulators and improve overall compliance outcomes. 

However, perhaps the most important opportunity for law firms to invest in is their people and culture. Our recent 2026 Legal Trends Report found that client experience (including digital experience) ranked among the highest priorities across the law firms we surveyed, however staff experience ranked the lowest priority, which shows a clear misconception on how the two are linked. Skills gaps, alongside talent attraction and retention, are also highlighted as key challenges for most law firms in the UK, yet these are areas that are consistently under-prioritised as a solution to the previous challenges. It is vitally important for any law firm looking to succeed that employee experience is taken seriously. As we continue to adapt to new ways of working, digital compliance training should be mandated, clear role ownerships updated as many new tools may change daily processes, and legal professionals should be given a psychologically safe environment to raise concerns as they learn. The firms that understand this are better placed to manage both regulatory changes and unexpected risk by building a workforce that is skilled, comfortable, and able to adapt to changing governing landscapes efficiently. This human lens of compliance may be just as important as any policy update.

Practical compliance guidance for legal firms

The regulatory backdrop for the legal sector reflects a continuation of themes from recent years, with economic crime, transparency, and data governance remaining at the centre of reform.

As firms look ahead, a few practical priorities stand out:

• Governance arrangements should be regularly reviewed to ensure accountability is clear and proportionate.
• Policies should reflect how workflows are actually carried out in firms, not just how they are described.
• Digital skills training should be continuous, relevant, role-specific, and supported by real role examples.
• Treat matter inception and risk assessment as a critical control point. Many compliance issues can be avoided by investing more attention in the processes. Clear risk assessments, proportionate due diligence, and early identification of red flags reduce the likelihood of escalation later.
• Leading on from the above point, an embedded compliance culture should be proactive and reinforced, not assumed. Ensure the right processes are in place, create a safe environment to share concerns and escalate appropriately.
• Third-party and technology risk should be actively managed, but choosing the right technology partner with the right approach to compliance should be carefully considered before any agreements are in place.

Compliance in 2026 will challenge UK legal firms to move beyond static frameworks and demonstrate how controls operate in practice. While regulatory expectations continue to rise, firms that prioritise clarity and balance culture can turn compliance into a source of resilience and trust. With the right focus, it’s not about doing more but doing it better.