Financial Crime World

MLRO Involvements Plagued by Lack of Experience and Knowledge

MFSA Report Highlights Concerns over Money Laundering Reporting Officers (MLROs)

The Malta Financial Services Authority (MFSA) has released a report highlighting concerns over the effectiveness of Money Laundering Reporting Officers (MLROs) in the financial services sector. The report, which covers 2021, 2022, and 2023, reveals that many MLROs lack the necessary experience, knowledge, and expertise to effectively perform their roles.

Key Findings

  • Poor legislative proficiency was noted in 8 instances
  • Lack of basic ML/FT-related knowledge was observed in 7 instances
  • Insufficient training and academic background was recorded in 6 instances
  • Lack of knowledge on ancillary financial crime-related matters was found in 5 instances
  • Many MLROs are not aware of business-specific risks, involved in multiple roles, or have conflicts of interest due to personal or business relationships with Ultimate Beneficial Owners (UBOs) or Directors

Autonomy and Training Issues

  • Only 1 instance of sufficient autonomy was recorded in 2023
  • “One-man show” situations were identified, resulting in a weak compliance culture
  • Many MLROs do not enjoy sufficient training to staff, demonstrating a disinterest in providing training

Progress Made

  • A significant reduction in observations regarding conflicting roles from 9 instances in 2021 to only 1 instance in 2023 was noted
  • However, concerns over MLROs’ knowledge and expertise persist, with many exhibiting insufficient awareness of internal governance, processes, and systems relevant to their functions.

Conclusion and Recommendations

The MFSA’s findings have raised concerns over the effectiveness of MLROs in preventing financial crime and maintaining a robust compliance culture within the financial services sector. The authority has emphasized the importance of MLROs having the necessary knowledge, expertise, and autonomy to perform their roles effectively and ensure that financial institutions are adequately equipped to prevent money laundering and terrorist financing.

In light of these findings, it is essential for financial institutions to review their MLRO appointments and ensure that they have the necessary qualifications, experience, and training to perform their duties effectively. The report serves as a wake-up call for financial institutions to take immediate action to strengthen their compliance culture and prevent financial crime.