What is a Money Laundering Reporting Officer (MLRO)?

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Clarity and precision are highly prized in the world of compliance. You can therefore quite reasonably be forgiven for thinking that a Money Laundering Reporting Officer (MLRO) is no more than that – someone who reports suspicions or instances of money laundering within an institution. Whilst this is indeed one of the core responsibilities the role is much broader and is of such weight that the position carries with it a high level of personal accountability, acting as an Approved Person under the FCA’s Senior Manager and Certification Regime.

So, what are the responsibilities of an MLRO?

The MLRO is responsible for ensuring compliance with local anti-money laundering (AML) and counter terrorist financing (CTF) obligations. In the UK the MLRO also serves as the conduit for the reporting of suspicious activity to law enforcement: the MLRO is the single person in the business that is unambiguously responsible for this reporting.

The scope of reporting is not only limited to money laundering, but includes the commission of suspected predicate crimes (crimes which could ultimately result in money laundering, for example, evidence of corruption in bank dealings with a client); suspected terrorism financing; and suspected financial crime more broadly (e.g., sanctions evasion).

The MLRO is empowered not only to report instances of the above, but also any reasonable grounds for suspicions of the above. Moreover – and this is where the importance of seniority, independence and personal accountability become clear – the decision to report, or not to report, must not be subject to the consent of anyone else within the business.

All responsibilities for detecting, preventing and reporting are assigned to the MLRO (though some may also sit with the CEO). The MLRO will design and oversee the internal reporting regime, ensure through training that staff understand and act on their responsibility to report, and investigate the suspicious activity reports that come in from the business. More broadly, the MLRO will design and implement the policies and procedures and the systems and controls to mitigate financial crime risk – including conducting the regular testing of these. The MLRO is often involved in new product approvals if they are deemed to carry a high financial crime risk and likewise may also be involved in evaluating new high risk clients as part of a client acceptance committee. On top of this, the MLRO must annually report to the Board the specific financial crime risk exposures carried by the business along with describing the control environment and attesting the firm’s compliance with its regulatory obligations.

Being an MLRO or working within an MLRO function requires a range of distinctive skills. Deep financial crime subject matter expertise is a must. A strong investigative instinct and a natural bent for internal stakeholder management are equally important. Working in this domain can be highly rewarding – bringing access to the C-suite and Board; liaising with the national crime and regulatory authorities; keeping abreast of the strong pipeline of AML and financial crime technology innovations; and being involved in key business decision-making processes.

So – as should be apparent by now – bearing the designation of MLRO implies way more “than it says on the tin”!

 

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