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In order to respond to the concerns and questions that are regularly received, the 6and April 2022, the Financial Intelligence Analysis Unit (the “FIAU”) issued a Guidance Note to provide further guidance on the role of the Money Laundering Reporting Officer (the “MLRO”) ).

Independence and autonomy

It is of significant importance that the MLRO acts autonomously when performing the functions related to this role. Although, in accordance with the Implementation procedures Part I (the “IP”), the MLRO is authorized to communicate directly with the Board of Directors, one always remaining responsible for any decisions made during the performance of the duties of the MLRO.

No one within the reporting person should put pressure on the MLRO not to exercise their own discretion. While the MLRO may certainly seek advice or consult with respect to internal reporting, it is still entirely up to the MLRO whether such a report should be submitted to the FIU or otherwise.

If an MLRO feels that their independence in such a role is to some extent limited, they should take appropriate steps to address this issue. More often than not, this may involve a conversation with one’s elders to explain the legal requirements of someone in such a position. Of course, the latter is not always the case and so it is very important that the MLRO documents all the reasons for any course of action taken so that they can justify their decisions at any time.

On a separate note, one should also know that the Regulation on the prevention of money laundering and terrorist financing (“PMLFTR”) provides an alternative through which the MLRO can seek redress if one is subject to discriminatory treatment.

Conflicts of interest

There are several references in the PIs that highlight the importance of the MLRO appointee to avoid any conflict of interest. The FIU is often asked why the MLRO should be separated from the business activities of the subject person. In response to this concern, the FIU is focusing on the “three lines of defense” model where, essentially, the MLRO is primarily responsible for monitoring whether decisions made by the first line of defense comply with the AML/CFT policies of data subject, controls, procedures and measures.

Outsourcing, Secondment and Employment

The question here is mainly about whether the position of MLRO can be outsourced, i.e. not an employee of the data subject. The answer is negative. The FIU pointed out that the only situation where secondment may be possible is in the scenario provided for in paragraph (iv) of section 5.1.2 (a) of Part I of the IP. Therefore, unless the latter condition applies – there must be a contract of employment between the MLRO and the reporting person.

As to whether the MLRO is employed on a full-time or part-time basis, the law is silent on this. However, the time commitment is essential for this role and therefore the FIU may question whether the functions are carried out efficiently if the person works for more than one reporting person.

Knowledge, skills and expertise

The first part of the PI emphasizes that the MLRO is know the ML/FT risks faced by the person concerned and the measures, policies, controls and procedures implemented to mitigate these risks.

Naturally, in order to decide whether a report should be filed with the FIAU, the MLRO must have the appropriate knowledge and understanding.

Generally, the appointment of a person as an MLRO requires the approval of a supervisory authority, however this does not mean that the activity and effectiveness of the MLRO once appointed cannot be assessed by the FRC. The reason for this is that a person is approved based on their past experience, background, and academic qualifications. However, she would then be assessed once approved based on how effectively she fulfills her obligations as an MLRO and her day-to-day duties. daily basis.

Personal responsibility

Regulation 21(7) of the PMLFTR defines the circumstances in which the liability of the MLRO can be engaged. In this regard, two elements must be present:

  • There must be a breach by a person subject to their AML/CFT obligations; and

  • The MLRO must have contributed to or caused such breach intentionally or through gross negligence.

In addition to the above, FIAU clarifies that this clause does not apply if it is evident that the MLRO has done everything possible to remedy the shortcomings. It may, however, be applied where it is evident that the MLRO could have done more to resolve a situation which is clearly of a serious nature.

Record keeping

The PIs describe the records that must be kept in relation to any decision made by the MLRO. The FIAU also reminds that the recordings must be:

  1. Kept in order on file, whether physical or electronic;

  2. They should contain sufficient information explaining the reasoning behind each decision made by the MLRO;

  3. They must demonstrate a consistent approach to decisions made by the MLRO; and

  4. Document the reasons why it was impossible for the MLRO to act in accordance with the requirements of the IPs.1

Footnote

1. Common-Issues-related-to-the-Money-Laundering-Reporting-Officer.pdf (fiaumalta.org)

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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