Money Laundering Reporting Officer (MLROs) are responsible for ensuring regulated businesses meet their AML obligations but how? In this article we explain why your business needs an MLRO and what is expected of them.
In all businesses – there are lots of cogs in the machine to keep them turning one of which is the compliance function. The compliance function often covers a wide range of areas from financial crime prevention, to product compliance, data protection, and handling complaints.
In recent years, there have been increased penalties dealt to businesses for not complying with their AML obligations. As a result of this, the role of the Money Laundering Reporting Officer within a business has risen to the surface.
What businesses are required to have a MLRO?
Banks, estate agents, conveyancers, accountants, and art dealers should all have a nominated MLRO. If you business falls under AML supervision then you are required to have a nominated MLRO. An MLRO doesn’t have to be a dedicated role, it may be part of a Compliance Manager’s duties but should have sufficient time and resources to do their role.
What is the role of the MLRO?
The key role of the MLRO to receive reports of suspicious activity from staff and decide whether to report them to the National Crime Agency. It is expected that a MLRO has the authority to independently decide whether to proceed with transactions or not if they suspect possible money laundering. To this extent, they may even have to report senior management leaders if they are not in compliance or do not act to propagate the culture of compliance.
The MLRO will be responsible for the business’s compliance with the regulations, including:
- carrying out a regular audit on compliance with the regulations such as:
- actively checking adherence to the policies, controls and procedures
- reviewing how effective these are;
- recommending and implementing improvements following such reviews
- ensuring compliance throughout the business (including subsidiaries and branches) with anti-money laundering legislation and policies, controls and procedures
- having oversight of relevant staff screening (for these purposes, “relevant staff” are persons involved in the identification of risk, controls and procedures to reduce risk and to ensure your compliance with the Regulations).
The role of MLRO is to guide the business and protect it from unnecessary risk. At times that might mean having to slow down the onboarding of new clients or review existing relationships to make sure it is not a risky decision.
What qualifications does a MLRO need?
There are no minimum requirements or qualifications needed to be an MRLO it is dependent on the context of the business. AML supervisors such as HMRC, the FCA, and the SRA will all scrutinise and expect MRLOs to have the necessary skills, training, and experience relevant to the organisation’s risk profile.
In a small estate agency one of the owners might also be the MLRO and wouldn’t be expected to have passed a particular course. HMRC requires all MLRO to register with them and they will be expected to demonstrate how they are ‘fit and proper’ but there isn’t a formal test of their knowledge.
In contrast, an international bank would be expected to appoint someone with the experience and credentials relevant to their position. Nominating a junior AML analyst as your MRLO wouldn’t be sufficient and would likely result in punitive action by the FCA. FCA guidance on MRLO states that MRLOs / compliance officers should have completed relevant and tailored training courses before applying for approval.
If you are interested in studying and gaining a recognised qualification in anti-money laundering and financial crime, there are a number or recognised institute and associations that offer specific courses related to anti-money laundering.
- International Compliance Association – https://www.int-comp.org/
- Association of Certified Anti-Money Laundering Specialists – https://www.acams.org/en
- Chartered Governance Institute UK & Ireland – https://www.cgi.org.uk/professional-development/training/online-training/fighting-financial-crime
- Chartered institute of securities and investments – https://www.cisi.org/cisiweb2/cisi-website/study-with-us/compliance-risk/combating-financial-crime
Types of situations you might encounter as a MLRO
Essentially, as an MLRO, the most important thing that surrounds your life is risk and being able to effectively communicate this to your colleagues. Having a new client whose name is a recognised money launderer is extremely rare. Your job is important in identifying the risks surrounding money laundering and high-risk profiles such PEPs for example.
PEPs, which refers to a politically exposed person, is a recognised potential high-risk because people of power are susceptible to bribes and they will need to channel those illicit funds somewhere — that’s why banks, estate agents, and conveyancers should have processes in place to flag them as high-risk and not be an accessory to any corruptible behaviour. A PEP does not mean he/she is a bad person just that they are more likely to be put in a position that grants them access to corrupted funds.
Apart from ensuring that new clients do not fall under the various risk categories, most AML analysts/compliance officers are involved in ongoing monitoring which forms part of the prevention of money laundering.
Depending on what industry you work in, your role will differ also. If you work in the Banking sector, transactional monitoring will be a big aspect of your role. Banks spend millions (rising compliance cost is also an increasing concern) on the latest transaction monitoring tools to help track any dubious activity. For example, the system may raise a red flag when multiple customers conduct international funds transfers through another individual (use of third-party authorised transfer) or account activity that is inconsistent with the customer profile that is recorded.
An example of account activity that is inconsistent would be this: Customer A profile: low-risk salaried employee according to the onboarding documents
- 1st month: no transaction
- 2nd month: middle of the month comes a deposit of £5,000 (still reasonable as this could be salary)
- 3rd month: comes in a deposit of £100,000 (red flag is raised)
Criminals are survivors and they get smarter every day. Tactics deployed by money launderers include using retired folks to create accounts on the behalf of money launders as they have a low-risk profile for banks. A career as a Compliance Officer presents a deep meaning to the purpose of your job, but the day-to-day could well be a check-and-balance game until you stumble across a real red-flag situation.
Checklist on what will be expected of you as a MLRO
Dedication, honesty, and integrity are fundamental traits of any Money Laundering Reporting Officer but you will also be expected to be:
Personable – you will need to manage stakeholders from all sides and with different interests and agendas.
Firm and persuasive – to help your stakeholders understand why some decisions are made. Be ready to stand up for what you think is right. If you feel that onboarding a high-risk client is not beneficial for the business, don’t be afraid to present your case but remember that you are there to help and advise. Accepting and taking risks is part of the job. Be ready to defend your decisions whatever they may be but be empathetic and conscious to reduce any tension between the business and compliance.
Be a life long learner – You need to have a passion for learning and self-education because regulation changes often and you need to be a step ahead to keep your business safe. You also need to know what regulations your business is exposed to. Even if you’re doing business just in the UK and have studied MLR 2017 back to front 100 times other regulations like the GDPR will also impact your business and what you do. Having a broader understanding of the regulatory landscape will aid you in protecting your business from unnecessary risks.
Be well organised – As an MLRO you be responsible for ensuring that reports, reviews, and meeting minutes in compliance-related discussions are well documented and kept for inspection. Being well organised and thorough will aid you if you are asked to provide information to you’re AML regulator as good record keeping a key component of AML regulation.
Be discrete – As an MLRO you will be exposed to a lot of sensitive information both about your organisation, colleagues and clients. When raising suspicions this needs to be conducted in a manner that could intentionally alert the client or others connected with them.
Detailed orientated – As the individual responsible for devising your company’s AML processes and procedures, you will need to understand how processes can create loopholes that can be exploited and it is your responsibility to raise these issues. Other examples of being detailed orientated include understanding that with over 800 regulatory blacklists around, you may need to clear out “false positives” in your system. What this means is that the system may pull out matches due to the huge data points, but they are not true matches. That’s the kind of detailed work needed in volume.
Be analytical – Your processes and procedures will help identify and screen potential risks but you will often be asked to step in and investigate individual accounts. You will need to combine an eye for detail with good analytical skills to assess the risk they imposed. Make sure your due diligence work has covered any doubt before proceeding.
How technology can help MLROs
If you’ve got to this point in the article then it must be clear to you that the demands on an MLRO’s time are very high. Technology can help MLROs manage their time more effectively and reduce time-consuming manual tasks such as accessing the latest PEPs/Sanction lists and analysing customer records.
The type of activities technology can help an MLRO with includes:
- ID checks and document verification
- PEPs and Sanctions screening
- Ongoing monitoring
- Transaction monitoring
- Source of Funds analysis
- Identifying UBOs
A lot of these tasks can be automated and tailored to your risk appetite, reducing manual intervention. Digitising your AML processes can also help document and capture evidence more effectively from one centralised platform rather than relying upon local record keeping and paper copies. There are many vendors in the market, including Credas, that will offer some or all of the above services. When considering utilising technology to help with your AML procedures, Money Laundering regs suggest you use vendors that have met government standards such as the UK’s Digital Identity and Attributes Trust Framework.
In conclusion, the role of a Money Laundering Reporting Officer is not just a requirement for most businesses but it can also help reduce risks and streamline burdensome processes. It is a rewarding role that can help make a positive impact on society as well as offering good progression opportunities for those working within compliance.