AML Awareness - What do Money Laundering Reporting Officers do? (Part 1)
The role of the Money Laundering Reporting Officer (MLRO) carries significant responsibility and should be undertaken by an appropriately experienced individual. Although there is no prescribed level of seniority, one of the principals of an accounting firm, or similar in other businesses, is likely to be suitable, or another senior and skilled person with sufficient authority to enable decisions to be taken independently. You should also appoint an alternate or deputy MLRO for situations when the MLRO is unavailable, and ensure that the reporting channels are well known to all relevant employees .
However, while the MLRO is often seen as the figurehead, the responsibility for complying with all AML legislation lies with the management of the entity as a whole. Where relevant, such as in a partnership, the liability is joint and several, or in a corporate situation it is a ‘senior management’ responsibility. The entity can fulfil its obligations for policies and procedures and reporting through the MLRO but remains liable and the MLRO is not personally liable for failings other than under s.331 POCA 2002 failure to report by MLRO.
The legislation requires an MLRO to do a number of things. Their primary task is to consider internal reports of money laundering, then to decide if there are sufficient grounds for suspicion to pass those reports on to National Crime Agency (NCA) in the form of a Suspicious Activity Report (SAR), and, if they think that there is, to make that SAR. They are also required to act as the key liaison point with NCA and law enforcement agencies including dealing with consent and disclosure issues.
MLROs may also take responsibility for the design and implementation of internal anti-money laundering (AML) systems and procedures; the training of staff within the business in using those procedures; and advising on how to proceed with work once an internal report and/or SAR has been made in order to guard against risks of tipping off or prejudicing an investigation. If this role is not undertaken by the MLRO, these responsibilities should be taken on by another sufficiently senior and skilled person within the business. This person should work closely with the MLRO.
Considering internal reports
When an MLRO receives an internal report, he must assess it and determine whether it meets the criteria laid down in s 331, Proceeds of Crime Act 2002 (POCA ) namely:
- Does he know, suspect or have reasonable grounds to know or suspect that another person is engaged in money laundering; and
- Did the information or other matter giving rise to the knowledge or suspicion come to him in a disclosure made under s 330, POCA; and
- Does he know the name of the other person or the whereabouts of any laundered property from the s 330 disclosure; or
- Can he identify the other person or the whereabouts of any laundered property from information or other matter contained in the s 330 disclosure; or
- Does he believe, or is it reasonable for him to believe, that the information or other matter contained in the s 330 disclosure will or may assist in identifying the other person or the whereabouts of any laundered property.
The MLRO must also decide whether an application for consent is required, and whether or not the privilege reporting exemption may apply. Both these matters are discussed further below.
In each case the MLRO should ensure the internal report contains all the relevant information known to the individual(s) making the report and records all necessary aspects. The details required are discussed in another article. The MLRO may also wish to make reasonable enquiries of other individuals and systems within the business, to confirm or eliminate any suspicion. If suspicion is eliminated, then the matter may be closed without a SAR being submitted.
Assessing internal reports
There are no hard and fast rules on how to recognise money laundering, or decide what should or should not be reported to the NCA. However, as a guide, the questions that an MLRO should ask of himself are the same as an individual should ask before drawing a matter to the MLRO’s attention through an internal report. These questions are:
- Am I suspicious, or do I know, that activity I have seen relates to the proceeds of crime and has caused someone to benefit from it in some way?
- Am I suspicious of an activity which, whilst I can’t identify a specific offence, is so unusual or lacking in normal commercial rationale that it causes suspicion that money is being laundered?
- If so, do I suspect a particular person or persons of having been involved in criminal activity (or do I know who undertook criminal activity), or does another person that I can name have details of this person(s) or information that might assist in identifying this person(s)? Note that you do not have to have the education and understanding a criminal lawyer to decide what may or may not be “criminal activity” – your judgement should be made based on than what a reasonable person in a similar situation would know or understand.
- Do I know who might have received, or still be holding, the benefit of the criminal activity or where the criminal property might be located or have I got any information which might allow the property to be located?
- Do I think that the person(s) involved in the activity knew or suspected that the activity was criminal or do I think the activity arose from innocent error?
- Can I explain coherently what and who I am suspicious of, and why, either in terms of knowledge or suspicion that an offence has been committed, or in terms of abnormal activities which may constitute money laundering?
If the answers to these questions are positive, then a Suspicious Activity Report should probably be made.
Making a suspicious activity report
Once an MLRO has concluded a SAR is required, it should be prepared and submitted promptly to the NCA.
A report should be made ‘as soon as is practicable’ after the information required is received, although in practical terms, the interval between receiving an internal report and making a SAR will vary quite widely. Some matters may be disposed of very rapidly where all the information required to make a SAR is readily available. In other cases, where not all the required information is immediately to hand, or where there is material uncertainty as to whether the matter is reportable or not, the MLRO may reasonably chose seek further information or await developments before making a reporting decision.
In preparing SARs, MLROs should seek to present information in a way that is clear and succinct. The SAR should include the full name of the reporting business and an internal reference for the report. For each subject (i.e. suspect) the identification information held by the business (name, address, date of birth, registration numbers etc.) should be given, and where it assists in explaining the matter being reported, it may be appropriate to include a number of subjects in the report.
For each subject, their role (as far as it is known) in the matter should be made clear, and the options of flagging each subject as suspect/victim/unknown used as appropriate. The activity observed should be explained clearly, without using jargon or terms which might not be readily understood by non-accountants and, as far as known, giving details of when events occurred, including details of relevant bank accounts and transaction details. Features of the activity which are unusual or are considered to be money laundering, should be highlighted as such. Any information held as to the whereabouts of any laundered property should be given. Importantly, the report should be submitted without any supporting documents and accordingly should be able to stand alone to explain the suspicion . NCA have provided a list of “glossary codes” which are short descriptions of the typical types of issues reported in a SAR. Glossary codes and further guidance on making SARs can be found here.
A SAR should not include other confidential information where this is not required for compliance with obligations under POCA. It should only show the name of the business, individual, or MLRO submitting the report once in the source ID field, and nowhere else in the report and must not include names of personnel who made internal reports to the MLRO. It should only include parties as subjects where this information is necessary for an understanding of the report, or to meet the standards of the required disclosure, and should highlight clearly any particular concern the reporter has about safety (in physical, reputational or other terms).
Making a manual SAR is still permitted, but doing it online is the NCA’s preferred method and is highly recommended as you get an immediate acknowledgement and reference number online, but you get no acknowledgement if you report offline. Details of how to report online this can be found from the NCA. If you are an MLRO and have not already registered to file online SARs, you should register online.
Some pages on the NCA website make reference to Action Fraud, which is only for individuals and charities that come across issues of fraud. It is NOT for professional firms. MLROs should NOT make reports using the Action Fraud helpline or website. Making a report to Action Fraud does not discharge an individual’s obligations under POCA. All Suspicious Activity Reports must be sent to the National Crime Agency .
Importantly, if the information you have indicates that there is an immediate danger to people, such as where human trafficking is involved, you should also inform the police using 999 or 101 as well as making your SAR.
See here for more things MLROs need to know about