An expose of the legal requirement, role and importance of the Money Laundering Reporting Officer (“MLRO”)

Appointment:

Further to the Financial Intelligence and Anti-Money Laundering Act 2002 (“FIAMLA”) and Regulation 26(1) of the Financial Intelligence and Anti-Money Laundering Regulations 2018 (“FIAMLR”), every reporting entity must appoint an MLRO to whom internal reports of suspicious activities must be made.

As per Regulation 26(2) of the FIAMLR a Deputy MLRO must also be appointed to fulfill the duties of the MLRO in their absence.

These new roles have become instrumental in the fight against money laundering, the financing of terrorism and the proliferation of the use of mass destruction.

Position and Authority:

Regulation 26(4) of the FIAMLR requires the MLRO and Deputy MLRO to be sufficiently senior or experienced within the organization and have direct access to the entity’s board of directors. The importance of these roles transcends industry and business sectors, and they are key roles even in singular professions such as Notaries, Lawyers and Solicitors.

Clear Reporting Chain:

Regulation 27 of the FIAMLR expressly provides that an entity must have clear reporting procedures that direct all employees on how to report suspicious activities to the MLRO. The MLRO shall then consider any report to be made to the Financial Intelligence Unit (“FIU”) in the light of the relevant information made available to him and his own investigations.

Access to Information:

Regulation 27(e) of the FIAMLR provides that the MLRO must have full access to any relevant information that may assist in performing their duties.

Assessment of Reports:

Regulation 29(1) of the FIAMLR provides that the MLRO is responsible for assessing internal reports to determine if they should be reported to the FIU. The MLRO is expected to use his own judgement on a case-to-case basis to in making a decision whether to report a case of suspicion to the FIU and it is advisable that he motivates all his decisions.

Reporting to the FIU:

According to Regulation 29(2) of the FIAMLR If the MLRO suspects money laundering or terrorism financing, the latter must report to the FIU promptly.

In other words, the MLRO holds a pivotal position in the realm of financial integrity and regulatory compliance. An MLRO is entrusted with the responsibility of designing, implementing, and overseeing the institution's AML framework which incorporates the strategies and policies. This includes identifying and mitigating risks associated with money laundering and terrorist financing activities and reporting any suspicious activity to the FIU.

Legal and Personal Liabilities

Failure to perform the above outlined duties may result in contravening the FIAMLA and the FIAMLR and result in civil and criminal penalties. Both the MLRO and the entity may face substantial fines or even imprisonment where there is cogent evidence of inadequate and or contraventions of AML compliance.

Conclusion:

The MLRO is therefore not merely a regulatory requirement but a fundamental player in the fight against financial crime. By diligently performing its duties, the MLRO contributes to upholding the financial integrity and safeguarding organizations from being used for illicit activities by perpetrators of crime.

Written by
Kaminee Busawah
Managing Director and MLRO
HLB Risk & Compliance Consultancy Ltd