If you work in a law firm that’s subject to the Money Laundering Regulations, you’ll have come across the acronyms MLRO and MLCO. They sound confusingly similar, don’t they? And in smaller firms it is quite common for one person to hold both titles. The trick is remembering that the responsibilities are very different, and muddling them up can cause problems.
The Money Laundering Reporting Officer (MLRO)
Think of the MLRO as the fire warden. If someone smells smoke, they are the person you tell. They investigate, decide if there really is a fire, and if necessary, call the fire brigade.
In practice that means:
- Receiving and assessing internal suspicious activity reports (SARs);
- Deciding if there are reasonable grounds to suspect money laundering or terrorist financing;
- Making the call on whether to send a report to the National Crime Agency (NCA);
- Keeping careful records of decisions, SARs and contact with the NCA; and
- Protecting colleagues who raise concerns and ensuring confidentiality.
So if you are worried a client is up to something they should not be, the MLRO is the one you need to speak to.
The Money Laundering Compliance Officer (MLCO)
Now imagine the MLCO as the health and safety officer. Their job is to make sure the fire exits are clear, the extinguishers are in date, and everyone knows what to do if an alarm goes off. They take care of the framework that keeps the firm safe every day.
That includes:
- Designing, maintaining and overseeing AML policies, controls and procedures;
- Making sure the Firm-Wide Risk Assessment is completed and reviewed regularly;
- Overseeing staff training and making sure people know what to do in practice;
- Monitoring how well AML systems work and commissioning independent audits; and
- Reporting back to the board or partners on how the firm is performing against its obligations.
If the AML framework is creaking or something is not working smoothly, the MLCO is the person to tell.
How the Compliance Roles Fit Together
Let me put it another way:
- MLRO = the fire warden who deals with incidents when they happen
- MLCO = the health and safety officer who makes sure the whole system is robust enough to prevent problems in the first place
Both are absolutely essential. The MLRO makes sure suspicious activity is handled properly, while the MLCO ensures the firm’s framework supports everyone in their AML responsibilities.
In smaller firms one person might wear both hats, but it is really important they have the authority, time and training to do the job well. In larger firms the roles are usually separated, which helps reduce conflicts and brings extra oversight.
A Final Fiery Thought
What I’m seeing is that some firms still underestimate the MLCO role. It is not just a box-ticking exercise. It is a strategic position that helps keep the firm safe, protects your clients, and ultimately supports the whole profession. And remember, we are all in this together when it comes to tackling financial crime, so making sure your MLRO and MLCO are properly supported is one of the best investments you can make in compliance.
We run Masterclasses throughout the year, which I host and train on. They are always live, so you have my full support and undivided attention!
Amy
