Payments firms, e-money businesses, cryptoasset companies, wealth managers, lenders, brokers, accountancy practices, estate agents and many others are covered by the UK’s money laundering rules, and most of them need someone formally responsible for reporting suspicions to the authorities.
For a growing business, the question is rarely whether the rules apply. It is who should take on the role, how much of their time it needs, and which parts of the work can sensibly be handed to someone outside the business.
Who Needs an MLRO?
Businesses within the scope of the Money Laundering Regulations 2017 must have a nominated officer: the person who receives internal reports of suspected money laundering and decides whether to report them to the National Crime Agency. In most regulated firms, that person is the MLRO.
For FCA-authorised firms, the requirement goes further. The FCA’s systems and controls rules in SYSC 6.3 require firms to give a director or senior manager responsibility for the firm’s anti-money laundering controls, and at firms within the Senior Managers and Certification Regime the MLRO holds a Senior Manager Function, SMF17. That means the regulator has to approve the person before they start, and they carry personal accountability for their area.
What the Role Actually Involves
The MLRO is responsible for far more than filling in the occasional report. The role typically covers:
owning the firm’s assessment of its money laundering and terrorist financing risks;
setting standards for checking who customers are and where their money comes from;
overseeing transaction monitoring and sanctions screening;
receiving internal suspicion reports, deciding whether to report to the National Crime Agency and handling any consent requests;
training staff to spot and escalate red flags; and
reporting to the board, at least once a year, on how well the firm’s controls are working.
It is a role that needs judgement as much as technical knowledge. An MLRO has to make decisions quickly, sometimes with a customer or a colleague waiting, and be prepared to say no to the business when the risk is too high.
Can the Role Be Combined?
In many smaller firms, the MLRO is also the compliance officer, or a senior executive who takes on the role alongside other duties. Combining roles can work well when the business is small and its risks are modest. It becomes harder as the firm grows: the volume of customers, alerts and reports rises, and the time needed for the MLRO role can quickly outstrip what someone with another full-time job can give it.
The FCA looks at whether the person has enough time and the right experience for the firm’s size and risks. A managing director who is also the MLRO of a fast-growing payments business, for example, is likely to face questions.
What You Can Outsource, and What You Can’t
Much of the day-to-day financial crime work can be supported from outside. Firms commonly use external providers for customer screening tools, transaction monitoring systems, independent reviews of their controls, staff training and help with periodic customer reviews.
What cannot be outsourced is the accountability. The firm remains responsible for meeting its obligations, and the MLRO remains personally responsible for the decisions that sit with the role. Using an outside provider well means having someone in the business who understands what the provider is doing, checks the quality of the work and acts on what it finds. Firms weighing up their options can find a practical breakdown of what you can and can’t outsource in compliance.
Full-Time, Interim or Fractional?
There is no single right answer to how much MLRO time a business needs. The main options are:
Full-time. Banks, larger payments firms, investment platforms and cryptoasset businesses with significant volumes usually need a dedicated MLRO, often with a team.
Smaller firms often appoint an experienced, approved MLRO for a set number of days a month. It gives the business senior expertise at a cost proportionate to its size, provided the time commitment is realistic.
When an MLRO leaves suddenly, or a firm needs to fix problems after regulatory feedback, an interim MLRO can hold the role and lead remediation while a permanent appointment is made.
Whichever route a business takes, the decision should be driven by its risks, not just its budget. The regulator will ask why the arrangement is enough.
Getting the Hire Right
Hiring an MLRO is not like hiring for most senior roles. The candidate pool is small, the best people are in demand, and the regulator has a say in the appointment. A few principles help:
Match experience to the business. Payments, crypto, wealth management and lending each carry different financial crime risks, and an MLRO from one sector may struggle in another.
Test judgement, not just knowledge. Ask candidates to talk through real decisions they have made, including ones they got wrong.
Plan for approval. For SMF17 roles, the FCA has up to three months to decide a complete application, and regulatory references from previous employers must be obtained. Starting early avoids gaps.
Be honest about time. Whether full-time or fractional, the role needs enough time to cover the routine work and the unexpected.
Specialist MLRO recruitment can shorten the search considerably, particularly where candidates need to be assessed against the regulator’s fit and proper test before they reach a shortlist.
The Bottom Line
For any business within the money laundering rules, the MLRO is one of the most important appointments it will make. Get it right and the firm has a senior person who protects it, advises it and keeps the regulator confident. Get it wrong and the business can find itself exposed at exactly the moment it is trying to grow. Thinking early about who should hold the role, how much time it needs and what support can come from outside is the best way to avoid that.
Adrian Lawrence FCA is the founder of SMF Capital, which recruits Senior Managers, compliance officers and MLROs for FCA and PRA-regulated firms, and of FD Capital Group. He is a Chartered Accountant, a Fellow of the ICAEW and a former listed-company Finance Director.
