The role of Money Laundering Reporting Officer – of which this MLRO meaning refers to – first became established under the UK’s Money Laundering Regulations 2007. Those regulations have since been replaced by the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, but the description of an anti-money laundering officer remains the same.
Ultimately, an MLRO is an individual who ensures their company stays compliant with the rules on money laundering, which are described and overseen by the Financial Conduct Authority (FCA). MLROs are also often known as a ‘nominated officer’, and they are the central figure in charge of managing the company’s anti-money laundering (AML) strategies. Because this role comes with so much responsibility, the MLRO must be properly vetted – and in an ongoing capacity – as they will have unfettered access to the company’s financial records and have the capacity to make strategic decisions on what actions to take regarding financial crime and money laundering schemes.
With the MLRO being an extremely sensitive role within the company, senior management and decision-makers must have comprehensive frameworks in place to select and oversee an MLRO’s responsibilities, and ensure they always carry out their reporting obligations legally.
The Role of Money Laundering Reporting Officers
While an FCA MLRO is mainly concerned with being a compliance officer with AML controls, they also have a variety of other duties. For example, they must manage the inflow of knowledge, suspicions and any other information regarding potential money laundering activities. Subsequently, they must inform the proper authorities – such as the National Crime Agency – of this information in a timely manner.
In their day-to-day role, the nominated officer is expected to conduct a range of activities, such as:
- Draw up policies and procedures around AML controls;
- Manage record-keeping, including the filing of relevant internal and external reports;
- Perform customer due diligence and know your customer (KYC) checks; and
- Regularly review the company’s internal policies and procedures, and manage the appropriate professional relationships to ensure money laundering schemes are uncovered and reported in compliance with national law.
Within the context of their role, a Money Laundering Reporting Officer may be required to conduct initial and ongoing training for staff in their company. They may also be required to communicate with senior management and key stakeholders about any potential risk or exposure to money laundering activities within the company – as well as lay out strategies for how to mitigate those risks. With so much to carry out in their role, it is understood there may be instances where MLROs need to delegate some of those duties to deputy MLROs in order to manage their workload.
The overarching responsibilities of an MLRO relate to complying with the relevant anti money laundering laws and regulations of the country in which the business practices. This involves having access to all of the company’s business records so they can make the best-informed decisions on how to maintain the firm’s compliance. In other words, they act as a compliance officer for the company.
The MLRO also takes full control over creating, updating and maintaining the company’s AML policy and procedures, particularly in light of any new developments or changes within the regulatory environment. In all likelihood, the MLRO will be periodically updating the policies to ensure they are still compliant and the outlined strategies are still effective.
Finally, the firm’s MLRO plays a strong role in developing an appropriate culture of compliance. As the firm’s compliance manager, the role may involve education tasks, such as training staff and delivering ongoing AML and counter-terrorist financing (CTF) training sessions – which could, and should, include senior management and executives.
Authority and Qualifications of an MLRO
To be a Money Laundering Reporting Officer, the individual must have the authority to contact law enforcement and make reports without needing the permission of another person. The company must also ensure any review or communication of SARs (Suspicious Activity Reports) is done so efficiently.
In terms of qualifications, the sensitive nature and responsibilities of an MLRO necessitates an appropriate level of experience. However, they need not have specific qualifications around anti money laundering at the time of their appointment. What is most important is that the MLRO stays up to date on the latest tools and techniques used to uncover and thwart regulatory breaches. Depending on the size of the company and the scope of their responsibilities, it may be wise to hire deputy MLROs to support the lead MLRO.
Who can be an MLRO?
There are three traits that are absolutely essential for a Money Laundering Reporting Officer to be successful: integrity, honesty and dedication to the cause. Likewise, senior decision-makers must have the confidence in their MLRO to give them the freedom to do their job properly, as well as additional support through professional development.
The role of MLRO does not have specific regulatory requirements around who can be appointed to this position. However, company management will want to ensure any MLRO applicants showcase honesty and integrity, and that they have the capacity to handle the following criteria.
High Level of Authority
The position of MLRO in any company should come with sufficient seniority. This is because the MLRO must be able to access sensitive business information to carry out their AML duties. In terms of the individual’s legal implications and liability in the role, MLROs should be at the director level at least, and possess the knowledge to make difficult decisions confidently.
Ongoing Risk Management
Assessing money laundering risk is a key MLRO responsibility. In order to possess this skill, the individual must not only be well acquainted with the methodologies of financial crimes—they must know how to vet for politically exposed persons (PEPs). They must also understand the most common behaviours of anyone who may be exposed to the risk of money laundering, and monitor sanctions lists regularly.
Finally, MLROs must understand legal professional privilege, especially as their role will most likely require them to disclose sensitive information to the relevant legal authorities. Central to carrying out their role with integrity is knowing what information to reveal and when. So while a legal background is not essential for an MLRO, knowledge of law is helpful. If this is not possible, support for a Money Laundering Reporting Officer may be provided through good legal counsel.
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