Money Laundering is to ensure that the money which has been acquired illegally appears to have been obtained legitimately. It is the process of disguising the proceeds of crime and integrating them into the legitimate financial system. In simpler terms, it is the process of turning the profit of illegal activity into a legitimate income. It can also be defined as activities aimed at hiding, covering, or showing the qualification, source, location, status, or movement. This financial crime threatens organizations more than individuals. Therefore, companies in the financial sector must protect their organizations and customers from this risk. In addition, it requires being ready systematically for possible situations.
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 regulations. 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. This article will cover all necessary information about them and their role, and the essential qualifications they must have.
They play a crucial role in providing anti-money laundering regulations with several responsibilities described in Financial Conduct Authority (FCA) handbook. Besides other duties, MLRO is one of the reporting bodies for AML compliance to the National Crime Agency (NCA) with 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 responsible for informing the relevant authorities about financial crime information, suspicious actions, and individuals as its primary duty.
MRLO is the person who decides on AML reporting that may affect a company's relationship with its customer and exposure to criminal, legal, regulatory, and disciplinary action. He monitors every activity done within the AML framework.
To fulfill these duties, MLRO 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 who must have MLRO 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.
Key Takeaway
What is the difference between MLRO and Compliance Officer (CO)?
The main difference is that MLRO is a senior and more competent specialist on the issue. An MLRO can cover all responsibilities of CO and work for two titles at the same time. Also, MLROs must be approved by FSA, whereas there is no entity to control CO employment.
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 for AML regulations. MLRO works at a senior level and has authority over other teams and departments. They must report relevant information to him regularly, whereas MLRO works free. 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 FSA
• Experienced and educated in the field of the company working on and also experienced regarding AML compliance
• Having knowledge of 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 suspicion is required to generate reports on money laundering and adequately disclose it to the relevant authorities.
• Risk assessment; One of the MLRO's 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 (AML / CTF), 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 give 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 risk of financial crimes, 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
What Does MLRO Stand For?
In conclusion, MLRO is the most competent, authorized person in a company with the duty to ensure AML compliance and implementation of its policy.
Qualified MLROs can be individuals who have developed integrity, leadership, management, sound analysis, reporting, and presentation features, are aware of their duty, and have the authority to follow up on current legislation and correct their own company's regulations following these legislations.
The position indicates to have senior manager permission on collecting information from each department and authority for the management role of a compliance team for bigger companies. MLRO is an extraordinarily significant and risky business position, so senior executives must understand the role.