This guidance provides a comprehensive checklist for new Money Laundering Compliance Officers (MLCOs) and Money Laundering Reporting Officers (MLROs) to fulfil their roles effectively while ensuring compliance with anti-money laundering regulations within the legal sector.
Both roles are crucial in preventing money laundering and terrorist financing activities.
Money Laundering Compliance Officers (MLCOs)
Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the regulations) –
Regulation 21 (1) states: “Where appropriate with regard to the size and nature of its business, a relevant person must—
– appoint one individual who is a member of the board of directors (or if there is no board, of its equivalent management body) or of its senior management as the officer responsible for the relevant person’s compliance with these Regulations.”
MLCO’s will bear ultimate responsibility for any breaches of the regulations. They can delegate some of their tasks, but we expect them to have a detailed knowledge of their firm’s AML regime and to be our point of contact for AML-related queries.
The regulations suggest that advisable to appoint an MLCO (Money Laundering Compliance Officer) a but this depends on the size and nature of the business, so it is not mandatory to have one.
Exceptions where an MLCO may not be necessary include:
– Sole practices: If a firm operates as a sole practice and has no employees or affiliations with other individuals aside from the principal, there may be no need to appoint an MLCO or MLRO.
- Occasional AML-regulated work: If a practice only engages in activities covered by AML regulations on an infrequent or sporadic basis, the requirement for an MLCO may not be applicable.
It’s essential for firms to carefully evaluate their specific circumstances and the extent of their AML-related activities to determine whether appointing an MLCO is necessary or if they can solely rely on an MLRO.
Money Laundering Reporting Officers (MLROs)
Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the regulations) –
Regulation 21 (3) states: “An individual in the relevant person’s firm must be appointed as a nominated officer.”
Under Regulation 3: “nominated officer” means a person who is nominated to receive disclosures under Part 3 (terrorist property) of the Terrorism Act 2000 or Part 7 (money laundering) of the Proceeds of Crime Act 2002.
These regulations entail a range of responsibilities and obligations, with the primary ones being to report any suspicions of money laundering or terrorist financing to the National Crime Agency (NCA) as mandated by legal requirements.
Failure to report such suspicions is a criminal offence under the Proceeds of Crime Act 2002 and the Terrorism Act 2000.
Derived directly from the SRA’s latest directives, this guidance serves as a vital roadmap for law firms seeking to understand their roles and responsibilities in combating money laundering and terrorist financing.Here’s a summary of key points for each role:
MLCO (Money Laundering Compliance Officer) Checklist:
Starting point –
– Confirm your suitability for the role, meeting the regulatory requirements.
– Ensure the SRA (Solicitors Regulation Authority) is informed of your appointment within 14 days via your firm’s mySRA account.
– Identify key colleagues, including department heads, finance staff, and compliance staff.
-Verify whether your firm falls within the scope of AML regulations.
-Seek SRA approval for your appointment, including a Disclosure and Barring Service check.
Making your mark –
– Appoint a deputy, which is considered good practice.
– Review your firm’s AML policies, controls, and procedures (PCPs).
– Confirm whether your firm has a firm-wide risk assessment (FWRA) in place.
– Familiarise yourself with relevant AML guidance and risk assessments.
– Assess your own AML knowledge and training needs, and make arrangements for training.
Within the first month –
– Ensure your firm’s PCPs are compliant and up-to-date.
– Examine other roles you hold within the firm and consider how to allocate your time effectively.
First Year:
– Assess your firm’s ongoing training needs and provide training to relevant staff.
– Consider the necessity of conducting an audit of your firm’s AML policies, controls, and procedures.
– Monitor and update your training program based on changing circumstances and regulatory requirements.
MLRO (Money Laundering Reporting Officer) Checklist:
Starting point –
– Confirm your suitability for the role, ensuring you have the authority to make accountable decisions and provide advice.
– Inform the SRA of your appointment within 14 days through your firm’s mySRA account.
– Announce your appointment to all colleagues within the firm.
– Establish a secure system for recording and storing Suspicious Activity Reports (SARs).
– Register with the NCA (National Crime Agency) to submit SARs when required.
– Understand the types of SARs (DAML and Information SARs) and how to submit them effectively.
– Familiarise yourself with NCA guidelines on SAR reporting.
Making your mark –
– Appoint a deputy, which is considered good practice.
– Establish clear procedures for internal reporting of suspicious activities within your firm.
– Be available for colleagues to report suspicions and seek advice.
Within the first month –
– Make your presence known within the firm, enhancing your effectiveness as MLRO.
– Examine other roles you hold within the firm and allocate your time accordingly.
– Ensure fee earners and staff know when and how to report to you.
– Review your firm’s PCPs to ensure clarity in reporting procedures.
– Evaluate training programs for staff and consider the inclusion of AML topics in staff induction.
– Keep up-to-date with AML guidance and risk assessments.
First Year:
– Review reports received and identify any trends or vulnerabilities in your firm’s AML regime.
– Consider how reports may contribute to the firm-wide risk assessment.
– Assess the effectiveness of your role in encouraging the reporting of suspicions and identify any training needs.
- Continue to stay informed about AML developments and updates.
Remember that these roles come with significant responsibilities and obligations under anti-money laundering regulations.
It’s crucial to stay vigilant, well-informed, and proactive in your efforts to prevent money laundering and terrorist financing within your firm. Regular training, communication, and ongoing assessment of your firm’s AML processes are key to success in these roles.