We've reviewed mainstream practices to identify key responsibilities and pull together tips on how best to undertake reporting as an MLRO.
While our focus is on UK Money Laundering Reporting Officers (MLROs), the role of an AML compliance officer is similar in other jurisdictions, especially across the EU, where the risk-based approach stands at the core of a financial crime risk mitigation programme.
A Money Laundering Reporting Officer (MLRO) is a senior position within a company that is responsible for overseeing all activities related to anti-money laundering (AML). They are tasked with ensuring that the company complies with all relevant AML regulations and procedures.
Therefore, the MLRO needs sufficient authority and seniority to challenge any frontline or senior management decisions that may conflict with the firm's risk appetite and subsequent controls.
If the MLRO decides that something needs reporting, they must not be overruled, yet unfortunately, it can happen. Management can update the risk assessment, risk appetite and subsequent controls to support a different view, but these changes must be reasoned and documented.
We've created a checklist of the 20 key responsibilities that may fall under the MLRO's remit. Every firm has a different organisational structure. You can use the list for a self-assessment to help you create the role from scratch or benchmark your existing setup.
Not really. Even though some claim to be 'qualified' MLROs, there is no such qualification. Seniority and authority come with experience, and a firm's senior management fully backs the MLRO even when the MLRO's stance is not commercially attractive.
Effective training and communication are not enough. The Board must promote a culture where compliance is not just a good thing but an essential part of the firm's cultural fabric. Too often, firms run AML courses for everyone without ensuring that the training focuses on understanding the risks the firm is exposed to and how to deal with unusual and suspicious activity.
Senior management needs continuous and focused training to understand their individual accountability in the context of financial crime. Finally, a firm needs to have a clear and comprehensive training strategy that ensures that its financial crime teams (including the MLRO) are equipped to stay informed of regulations and evolve with the ever-changing regulatory and criminal landscape.
A Money Laundering Reporting Officer's (MLRO) report is far more than a box-ticking exercise. In fact, it's one of the most effective tools a regulated entity's senior management and board have at their disposal. It helps them demonstrate compliance and understand the firm's financial crime prevention capabilities.
An MLRO Report is a regulatory requirement, written and presented to senior management and the board once a year. Regulators and crime prevention agencies can also view the document if they deem it necessary.
For MLROs, the report is an opportunity to highlight how the company's systems and controls protect the business and steer its financial crime framework. With that in mind, we've collated top tips for making the most of your MLRO Report.
Often, an MLRO Report complements financial crime-related updates made to senior management throughout the year. With that in mind, an MLRO Report shouldn't contain any surprises. Its purpose is to:
This section sets the scene in terms of basic information: the date of incorporation, number of employees and geographical locations. These facts enable readers of the report to understand the remit of the report and the extent of the organisation's potential risk exposure. It's also a good place to state the firm's AML and CTF risk appetite.
Here, MLROs need to indicate the date your company became regulated by the FCA, whether you're an authorised payment institution, and which guidance you adhere to – for example, the Joint Money Laundering Steering Group (JMLSG). Additional things to communicate include:
The MLRO should give their name and the date they were approved by the board. It's also an opportunity to summarise their responsibilities as the MLRO. For example, the MLRO is often the Nominated Officer – the person in charge of MLRO reporting to the National Crime Agency (NCA).
Additionally, the MLRO should indicate whether they're well-supported and have appropriate access to resources. If the answer is no, they should have the confidence to be honest in the report.
This involves stipulating that the MLRO is the second line of defence in a 'three lines of defence model'. It's also important to summarise any factors that have hindered the MLRO's effectiveness within that approach. This is a relatively brief section before you move on to company policies and procedures.
Here, it's about outlining AML and CTF policies and procedures. Have they been updated, and if so, why, when and how? Including the following, too:
This section involves outlining the risk profile of your client base. Has it changed over the last year, by how much, and why? It's also useful to give the following details:
Specify core AML and CTF management information, including:
Pull the threads together from earlier sections by reiterating key risks and indicating whether the firm is in a better position than the previous year. Point out potential risks for the next 12 months and formally record recommendations for senior management and the board to approve.
Prioritise proposals and clarify whether they're 'must do' versus 'nice to do'. Finally, note the submission date of the MLRO Report and when the recommendations were approved.
We've created a comprehensive AML roadmap to help you navigate the compliance landscape, supported by several financial crime prevention courses in our Essentials Library.
We also have 100+ free compliance training aids, including assessments, best practice guides, checklists, desk aids, eBooks, games, posters, training presentations and even e-learning modules!