A money laundering reporting officer (MLRO) is an employee appointed to oversee a firm’s compliance with anti-money laundering (AML) regulations 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 someone appointed to this role.
The role is sometimes referred to as the nominated officer.
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).
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.
This article explains why businesses need an MLRO and what their main responsibilities are.
Why do businesses need MLROs?If you work in an industry that is subject to AML regulations, then it is the law to have an MLRO.
But having an MLRO also offers a range of other benefits relating to your AML processes, including:
They help keep you up to date with the latest regulatory requirements.
They ensure that your processes and systems meet those requirements.
They provide clarity on who to go to with AML questions.
They can take responsibility for reporting and audits.
- Alert Law enforcement where there is knowledge or suspicion of money laundering
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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 financial services sector is required to appoint a Money Laundering Reporting Officer (MLRO).
They are also required in sectors where companies handle large sums of money.
Examples of businesses that must appoint an MLRO include:
Estate and letting agents
High value transaction dealers handling cash to the value of over 10,000EUR
What are the main responsibilities of an MLRO?
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.
Understand Company Risk Tolerance
MLROs need to understand the level of AML risk that their business is willing to accept. This is usually discussed with and signed off by senior management.
An MLRO should seek clear written guidance on the risks their firm faces, the level of risk the company is willing to take on and what resources are available to help them manage these risks.
Develop a Financial Crime Policy and Procedures
Once the MLRO knows the risks the business faces and what the acceptable risk tolerance is, they can develop policies, systems and procedures that allow them to manage these risks and stop the business from getting involved in financial crime.
The senior management board is ultimately accountable for the Financial Crime Policy, so they have to review and sign it off before it can be implemented.
Be an Authority
Senior management teams don’t always make good decisions, especially when it comes to something as detailed as AML policies. An MLRO needs to have enough authority to challenge senior management if their decisions conflict with the company’s risk tolerance, its policies or even national regulations. Therefore, it’s usually a good idea to appoint someone who is used to engaging with top management.
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
The MLRO needs to ensure all risk management policies, risk assessment profiles, and various forms are adequately documented. They also need to be easily accessible by anyone who needs to use them. A regulatory auditor may ask the MLRO to produce these documents.
Assist with Risk Management
A company with a strong AML regime will ensure all products and services are built around its money laundering risk tolerance. A money laundering officer may have to be consulted by product development teams to help ensure new and existing offers are compliant.
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.
Investigate Suspicious Activity
The money laundering reporting officer (MLRO) will swiftly investigate any suspicious activity forms that staff send to them. 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 report AML data to management when required. They also provide an 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.
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.
AML Checks from Red Flag Alert
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