Do we need to appoint an MLCO if we have an MLRO?
My three-partner firm has a money laundering reporting officer (MLRO). Do we also need to appoint a money laundering compliance officer (MLCO)? Can it be the same person?
Depending on the size and nature of your business, you may need to appoint a money laundering compliance officer (MLCO).
The appointment of an MLCO is regulated by regulation 21 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 and subject to an appropriateness test.
Regulation 21(10) provides:
“In determining what is appropriate with regard to the size and nature of its business, a relevant person –
(a) must take into account its risk assessment under regulation 18(1); and
(b) may take into account any guidance which has been—
(i) issued by the FCA; or
(ii) issued by any other supervisory authority or appropriate body and approved by the Treasury.”
The Solicitors Regulation Authority’s (SRA) view is that the need to appoint an MLCO is likely to be appropriate in the “vast majority” of cases.
Practices not needing an MLCO are likely to be:
- sole practices, who do not need to appoint an MLCO or MLRO if they do not employ, and are not in association with, anyone other than the principal, or
- practices that only carry out work that falls within scope of the regulations on a very occasional basis
If you determine that it’s appropriate to appoint an MLCO, they must be a “board-level person”, and should have:
- an understanding of the business, its service lines and clients
- sufficient seniority to direct the activities of all members of staff (including senior individuals) and to influence resourcing levels and AML controls
- the authority to ensure the business’s compliance with the regime, and
- the time, capacity, and resources to fulfil the role
You must inform the SRA of the identity of your MLRO and, where relevant, your MLCO within 14 days of appointment (regulation 21(4)(b)).
A money laundering officer will automatically be a manager and must be approved as a beneficial owner, officer or manager of the firm (BOOM) before their appointment (regulation 26).
These are roles with distinct duties. However, most firms choose to have one person holding both roles.
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While every effort has been made to ensure the accuracy of the information in this article, it does not constitute legal advice and cannot be relied upon as such. The Law Society does not accept any responsibility for liabilities arising as a result of reliance upon the information given.
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