As a part of the preparation, companies should have systems and specialist employees in this field or a team of them regarding company size and risk level. Briefly, the expectation is to analyze risks uniquely for the company and implement determined steps by authorities. Local and international institutions supervise this area, and there are specified sanctions in addition to law enforcement. So, companies must comply with them and report to the related institutions if they catch something suspicious.
The employee who works to combat financial crime for their companies is called Money Laundering Reporting Officer (MLRO). UK’s Money Laundering Regulations in 2007 mandated hiring an MLRO for all related firms Under section 59 of the Act. Because it is mandatory, MRLO's meaning is a common question for firms working in the financial area.
They play a crucial role in providing anti-money laundering and counter-terrorist financing regulations with several responsibilities described in the Financial Conduct Authority (FCA) handbook. Besides other duties, MLRO is one of the reporting bodies for Anti-Money Laundering (AML) compliance to the National Crime Agency (NCA) with a Nominated Officer or Designated Officer within a company.
What is MLRO?
As mentioned earlier, MLRO works against financial crime and financing of the terrorism framework. It is its primary duty to inform the relevant authorities about financial crime information, suspicious actions, and individuals.
MRLO is the person who decides on AML reporting that may affect a company's relationship with its customers and exposure to criminal, legal, regulatory, and disciplinary action. An MLRO monitors every activity done within the AML framework.
To fulfill these duties, they should have authority and access to all client files and business information to trace processes and make the necessary decisions.
If there is a group of firms, it is enough to have one MLRO to take care of AML processes in all of them. Business executives with reporting officers in their companies should know the essential information about requirements. There are some different conditions and necessities for appointing an MLRO.
Also, MLRO can stand in for the Nominated Officer, whose responsibilities are examining businesses’ activities, reporting, detecting AML suspicious attempts, and contacting NCA for support if there is an illicit act.
Who Can Become An MLRO?
The person appointed as MLRO by a company must have the approval of the Financial Services Authority (FSA). This proves the importance of the role of AML regulations. MLRO works at a senior level and has authority over other teams and departments. Money laundering reporting officer must report relevant information to him regularly based on compliance culture. While there is no definite regulatory provision about who should be brought to the MLRO, there are still a few expected and specific criteria. These are some instances of qualifications to be a suitable MLRO;
- Having required and relevant training before applying to the FSA
- Experienced and educated in the field of the company working on and also experienced regarding AML compliance
- Knowing all recent regulations, rules, sanctions, market, and AML procedures
- Attending all necessary credible courses for this area. FSA does not recommend a specified class, but courses with examinations are preferable.
- Experience in legal fields is seen as a plus.
For small-sized companies, it is possible that the owner or one of the executives can be MLRO.
What are the Responsibilities of MLRO?
Decide whether sufficient knowledge or suspicion of money laundering is required to generate reports and adequately disclose it to the relevant authorities.
- Risk assessment and risk management, one of the most sublime duties, is to assume and manage various levels of risk. Managing, shaping, and reporting these risks. At this stage, the management needs to guide and give the necessary permissions.
- Observe and plan new legislation to develop AML policies, systems, and procedures to ensure effective implementation.
- Money laundering, terrorist financing, and fraud prevention are also under their responsibility.
- Ensure its customers know and execute Customer Due Diligence (CDD). CDD is a vital part of Anti-Money Laundering and Terrorism Financing requirements. It enables the firm to know who its customers are and gives it a chance to decide whether accept them according to companies’ risk appetite.
- Should develop and implement an in-house training program.
- Should be able to evaluate the money laundering risk, identify problems in compliance processes, and analyze them.
- Should ensure that the company complies with AML regulations. Otherwise, a firm's MLRO may be subject to higher fines or worse sanctions.
- Enforce the implementation of KYC and KYB procedures.
- Reporting to authorities outside of the company, like FCA, regularly and to senior management annually.
Which Businesses Need to Have a MLRO?
MLROs are mandated for businesses in the regulated financial services sector and those handling significant sums of money. Business sectors requiring an MLRO include estate and letting agents, accountants, solicitors, finance/credit companies, tax specialists, and high-value transaction dealers.
