Financial crime: What do MLROs do?

12 June 2015 Matt Owen

An MLRO is one of the most important appointments a financial company can make, so you need to ensure you’ve chosen somebody with the right mix of skills. Unfortunately, the actual responsibilities of the role can still be a bit of a mystery, so here is a quick overview of key points:

What is an MLRO?

a Money Laundering Reporting Officer is an important appointment, although the key responsibilities are actually very straightforward.

Under the Money Laundering Act 2007, the Terrorism Act 2000, and the Proceeds of Crime Act 2002, businesses in various financial sectors are required to keep an eye out for suspicious financial activity on the part of their clients, so must nominate someone to report any issues to SOCA (The Serious Organised Crime Agency).

This is usually done by filing a suspicious activity report, and if it is taken further, then the nominated person is in charge of liaising with the authorities while an investigation takes place.

Who should you nominate as an MLRO?

While that is simple enough on the face of things, it’s easy to understand just how labyrinthine a process this can be in practice. All the fun of a full company audit with the added weight of Interpol hovering in the wings.

Because of this, an MLRO needs to be a fairly senior member of staff with in-depth knowledge of finance. While it’s fairly rare to hire for the position externally, it is a director-level role. The officer has to have the authority and autonomy to report independently on the firm’s relationships.

If you’re nominating someone internally, then a CFO may be appropriate, providing there’s no conflict of interest apparent, or a Chief Compliance Officer may be more appropriate.

What are their key areas of responsibility?

The MLRO needs to make sure the company approach to due diligence is up to scratch. The should be implementing regular reviews of Customer Due Diligence, and also the ‘Know Your Customer’ and ‘Know Your Business’ procedures.

Areas of investigation and review might include source of funds, account suitability, and carrying out regular client profiling.

The officer also needs to be fluent in financial law, as they’ll be the one guiding the business through the regulatory process. This isn’t a role for anyone who doesn’t have a keen handle on rules and regs.

The main thrust of the role involves putting ongoing processes in place, which means there is a lot of auditing and analysis going on, with a particular focus on weaknesses. They’ll be making sure line managers are on top of internal security as well, so there’s a lot of hands-on work. People skills are a must.

Finally, this is also an educational role (among many, many other things). It may be confined to the C-suite for the most part, but a good MLRO will be constantly trying to teach best practice internally.

It’s a complex role that requires a huge range of skills and knowledge, so expect to pay well for a good officer. A good MLRO will have soft skills that enable them to communicate effectively both internally and with local law enforcement, as well as the hard knowledge of law and finance needed to wade through swathes of compliance detail.