A money laundering reporting officer (MLRO) is an employee appointed to oversee a firm’s compliance with anti-money laundering (AML) regulations, training of staff and to alert the company where there is knowledge or suspicion of money laundering.
All companies subject to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 should have a money laundering reporting officer.
The role is can alternatively be called the nominated officer. This article explains why businesses need an MLRO and what their main responsibilities are.
What is an MLRO?
An MLRO leads the organisation’s approach to AML policies and is responsible for submitting reports of suspicious activity to the Financial Conduct Authority (FCA). They are required to keep abreast of regulatory changes, advise they wider business, and ensure the proper training and tools are given to staff.
According to the FCA, the MLRO is a senior management function. This means that a board director should be appointed to have ultimate responsibility for AML processes, even if the role is largely carried out by members of staff.
Why do businesses need MLROs?
If you work in an industry that is subject to AML regulations, also known as the regulated sector, then it is the law to have an MLRO.But having an MLRO is not just to satisfy your compliance obligations and also offers a range of other benefits relating to your AML processes, including:
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They keep you up to date with the latest regulatory requirements.
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They ensure that your processes and systems meet those requirements.
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They provide clarity on who to go to with AML questions.
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They can take responsibility for reporting and audits.
- Alert law enforcement where there is knowledge or suspicion of money laundering
- They ensure staff have the required training and tools to identify money laundering activity
- They provide the specialist knowledge and skills needed to navigate a complex ad shifting regulatory landscape
- They help protect your business
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What sort of businesses need to have a Money Laundering Reporting Officer?
According to the Money Laundering Regulations 2007, any business operating within the regulated sector is required to appoint a Money Laundering Reporting Officer (MLRO). These are sectors which are at increased risk of being targeted by money launderers to facilitate their financial crime due to the services or products they provide.They are also required in sectors where companies handle large sums of money.
Examples of businesses that must appoint an MLRO include:
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Estate and letting agents
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Accountants
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Solicitors
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Finance/credit companies
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Tax specialists
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High value transaction dealers handling cash to the value of over 10,000 EUR
What are the responsibilities of an MLRO?
- Lead Companywide Risk Assessments
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Oversee Company Financial Crime Policy and Procedures
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Be an Authority
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Keep Up with Regulatory Change
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Nurture a Strong AML Culture
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Document Risk Management Policies
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Assist with Risk Management
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Monitor Risk
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Investigate Suspicious Activity
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Provide Management Information
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Solve Compliance Issues
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Access the Right Data and Tools
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Managing Regulator Audits
The MLRO’s role is outlined in the FCA Handbook. Below we’ve listed some of the responsibilities that they may have. These responsibilities could be assigned to several people, a whole team or just one person, depending on the size and structure of the business, but there will always be a MLRO who is ultimately responsible and accountable.
Lead Companywide Risk Assessments
A companywide risk assessment forms the basis of a company's understanding of their exposure to risk and informs their strategies and approach to protecting against it.
MLROs work with board level and other key employees to define their AML risk and ensure that the AML processes that are developed adhere to required compliance standards.
The MLRO will ultimately be responsible for recording the findings of the assessment, seeing processes are followed and the assessment is repeated as is required.
Oversee Company Financial Crime Policy and Procedures
The MLRO will be responsible for ensuring that the proper AML processes are being followed by the rest of the business and reporting on this to the board.
By doing this they also are able to spot if there are any weaknesses in the company's defences or if any ew risk exposures have appeared.
Be an Authority
AML law is extremely complex, often changing, and places almost all responsibility on the private sector. Due to this, having an individual who is a specialist in this area that can lead the rest of the business reduces the risk of accidental non-compliance.
Keep Up with Regulatory Change
AML, financial crime and counter-terrorist financing legislation is changing all the time. It is the MLRO’s job to stay up to date with the latest developments and ensure that their policies and procedures meet any new requirements set by law enforcement and regulatory boards. This often involves going to seminars and events and taking training courses.
Nurture a Strong AML Culture
MLROs are responsible for ensuring that all staff know what money laundering and financial crime are, why they are important and how to spot potential threats. They also need to ensure that each employee is trained in the company’s AML policies and procedures and that they follow them. Each employee should also receive an annual refresher course so that they are up to date with the latest threats. Records of training should be kept for tracking and audit purposes.
Document Risk Management Policies
All AML activities that take place at a business should be recorded and stored in a manner that they are easily accessible. This is mainly due to two reasons. The first is that if a company is found to have been implicated in a money laundering plot they will have to show investigating authorities and regulators that they had met compliance standards and done their up most to reasonable block money laundering activity. The second is that regulators can ask to review a company's AML processes at any time, and often do, and will issue fines if they are found to be lacking.
Assist with Risk Management
A company with a strong AML regime will ensure all products and services are delivered in a manner that minimises money laundering risk exposure. The MLRO will assist with the creation of these delivery models, help advise frontline staff and raise any issues that arise with management.
Monitor Risk
The MLRO is responsible for setting up and maintaining processes to monitor money laundering risk among existing clients. These should be proportionate to the scale, nature and complexity of the firm’s operations. The MLRO will regularly
Investigate Suspicious Activity
Frontline staff that suspect suspicious activity will report this to the MLRO, who will then lead the investigations and ensure that the correct processes have been followed. If they agree that the activity is suspicious, they submit a suspicious activity report (SAR) to the National Crime Agency (NCA).
Provide Management Information
MLROs regularly report to senior management and the board. They also provide a formal annual report for the institution’s board on the firm's compliance efforts.
Solve Compliance Issues
Money laundering reporting officers seek to remedy any issues with their company’s policies, procedures, systems or controls. They also help deal with any regulatory breaches.
Communicate with Regulatory Bodies
The money laundering reporting officer (MLRO) acts as the main point of contact for agencies like the NCA and other regulatory and enforcement bodies. They also respond to any other third-party inquiries related to money laundering prevention, investigation or compliance.
Access the Right Data and Tools
The money laundering reporting officer should ensure that the company has access to a high-quality business database and tools that allow them to spot risky customers. This includes politically exposed persons (PEPs) and sanctions lists, as well as data on corporate linkage and ultimate beneficial owners.
In today's regulatory landscape it is impossible to conduct compliant and accurate AML checks without the use of technology.
Managing Regulator Audits
The anti-money laundering officer is responsible for ensuring that the company is audit-ready. They also support the auditors during inspections, providing them with any information or documents they request.
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Set up monitoring alerts so you know as soon as your client’s risk profile changes.
