15th May 2018
Money Laundering Reporting Officer
What Is A
A Money Laundering Reporting Officer (MLRO) provides oversight for their firm’s AML systems and acts as a focal point for related inquiries.
What Is A Money Laundering Reporting Officer (MLRO)?
Under the UK’s Money Laundering Regulations 2007, all businesses within the regulated financial services sector are required to appoint a Money Laundering Reporting Officer (MLRO).
The MLRO – sometimes referred to as a ‘nominated officer’ – provides oversight for their firm’s anti-money laundering (AML) systems, and acts as a focal point for related inquiries. The role involves a significant amount of responsibility: MLROs must have access to their firm’s financial records in order to provide oversight and must make strategic decisions about activities relating to money-laundering and financial crime.
The duties of the MLRO may involve serious legal consequences that result in a civil and criminal action. MLROs take on significant personal liability within their firm: if AML protections are found to have been insufficient, a firm’s MLRO may face steep fines and, in worst cases, prison sentences of up to 2 years.
MLRO is an extremely important position within a business, so it is vital that senior managers understand and think carefully about the role.
The role of Money Laundering Reporting Officer is defined by the Financial Conduct Authority and is outlined in the FCA handbook. In addition to ensuring their firm’s compliance with anti-money laundering controls, MLROs have a duty to deal with any information, knowledge or suspicion of money laundering – and properly disclose such matters to law enforcement, in this case the National Crime Agency (NCA).
From a practical perspective, MLROs are involved in designing relevant policies and procedures, record-keeping, filing internal and external reports, and ensuring due diligence is performed on customers and clients. MLROs should also participate in the ongoing review of their firm’s internal policies, procedures, and professional relationships, to ensure that money laundering and other financial crimes are detected and reported in compliance with the law. In this capacity, MLROs may need to provide training to colleagues within their firm.
The FCA points out that a person appointed as MLRO should have sufficient authority to carry out their duties effectively. Crucially, MLROs will have to advise senior management about their firm’s risk of exposure to money laundering – and how to manage that risk. In larger organizations, MLROs may have to delegate some of their responsibilities, or may, in some cases, appoint deputies to help manage their work.
It goes without saying that dedication, honesty and integrity are fundamental traits for a Money Laundering Reporting Officer. Similar, senior management must be committed to giving their MLRO ongoing professional support.
While there are no regulatory requirements for who should be appointed MLRO, certain prominent criteria should be considered when hiring for the role.
An MLRO should hold a position of sufficient seniority within their firm – so that they can access the files and information they need to carry out their anti-money laundering duties. Their position should also allow them to design, implement, and enforce their firm’s compliance systems and procedures.
Given the legal implications of the role, and the personal liability they assume, your MLRO should be at least a director-level employee, with the knowledge and experience to be able to make decisions with confidence.
MLROs must be able to assess money-laundering risk. This skill requires not only an understanding of criminal methodologies but an understanding of the behavior and business practices of customers and clients, who may themselves be exposed to risk.
Risk-assessment is so important for MLROs because they are responsible for calibrating their firm’s anti-money laundering systems to suit their compliance obligations. In practice, this means avoiding the dangerous legal liabilities of under-compliance, and the potentially costly burdens of over-compliance.
An MLRO should have a strong grasp of the concept of legal professional privilege since they might be required to disclose sensitive information to the NCA – with legal implications for their firm and its employees. Knowing what information must be revealed, and when, is therefore, a central focus of the MLRO mandate. With this in mind, while an MLRO does not necessarily need to be legally-trained, knowledge of the field is useful. Alternatively, an MLRO might be given access to good legal advice about this aspect of their role.
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Disclaimer: This is for general information only. The information presented does not constitute legal advice. ComplyAdvantage accepts no responsibility for any information contained herein and disclaims and excludes any liability in respect of the contents or for action taken based on this information.
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