The employee who works to combat financial crime for their companies is called Money Laundering Reporting Officer (“MLRO”). They play a crucial role in providing anti-money laundering and counter-terrorist financing regulations. MLRO is responsible for informing the relevant authorities about financial crimes or any suspicious actions. The MRLO is the individual responsible for making decisions regarding anti money laundering (“AML”) reporting, which can impact the company’s relationship with its customers and its exposure to criminal, legal, regulatory and disciplinary actions. The MRLO oversees all activities conducted within the AML framework. In order to effectively fulfill these responsibilities, the MRLO should have the necessary authority and access to all client files and business information. This enables them to trace processes and make informed decisions based on the available information.

Role of MLRO

As a best practice, MLRO of a larger organization or corporation should maintain independence from business operations, including activities related to the receipt, transfer or payment of funds. The MLRO should focus on independent monitoring and oversight of AML processes. Furthermore, the MLRO should have direct access to individuals who make business decisions within the organization, such as senior management or the board of directors. This ensures effective communication and facilitates the MLRO’s ability to address AML concerns and report findings directly to key decision-makers.

Responsibilities of MLRO

The major responsibility of the MLRO is to manage the AML and regulatory compliance related tasks and responsibilities using a risk-based approach. The major responsibilities of MLRO include deciding whether sufficient suspicion is required to generate reports on money laundering and adequately disclose it to the relevant authorities. The following responsibilities are undertaken by MLRO-

• Risk assessment, one of the most sublime duties, is to assume and manage various levels of risk. 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.
• To ensure its customers know and execute Customer Due Diligence (“CDD”). CDD is a vital part of Anti-Money launderingand Terrorism financing requirements. It enables the firm to know who its customers are and gives it a chance to decide whether to accept them according to the companies’ risk appetite.
• An MLRO also plays a role in fostering the appropriate compliance culture, which can include the development and delivery of AML as well as counter-terrorism financing (“CTF”) training to employees and executives. This includes describing the significance of a risk-based approach to compliance.
• The MLRO must have the authority to make reports to law enforcement without seeking permission from another person. Their employer must also provide the means for them to review and communicate Suspicious Activity Reports (“SARs”) to law enforcement in a timely manner.

MLRO relationship with the C-Suite

Since financial regulations may extend criminal liability for AML offenses to corporate persons, it is important that MLROs have executive level managers. In practice, this means that MLROs must be able to effectively communicate important AML/CFT information to board members and understand when to escalate compliance incidents so that suspicious activity reports are filed with the appropriate authorities. 

An MLRO’s relationship with the executive level manager may be complex. Firms should think carefully about how to embed an MLRO within their governance infrastructure, considering any relevant personal liabilities or obligations. Ultimately, an MLRO should be able to exert effective influence over an executive board and be able to instill a strong, company-wide compliance culture.

Conclusion

The MLRO, also referred to as a “nominated officer,” assumes the responsibility of supervising the AML systems within their company and acts as a crucial point of contact for inquiries related to AML. This role carries substantial obligations, as the MLRO requires access to the company’s financial records to ensure effective oversight. Additionally, they are responsible for making strategic decisions concerning money laundering and financial crime activities.

The responsibilities of the MLRO can lead to substantial legal repercussions, including civil and criminal actions. MLRO bears considerable personal liability within their organizations. In cases where AML safeguards are considered insufficient, the MLRO may face substantial fines and imprisonment. Given the critical nature of the MLRO position within a company, it is crucial for senior executives to fully comprehend and carefully consider the role and its implications.