Financial Crime World

Lack of Experience and Knowledge Plagues Financial Institutions’ Money Laundering Reporting Officers

A recent report by the Malta Financial Services Authority (MFSA) has highlighted several key issues affecting financial institutions’ Money Laundering Reporting Officers (MLROs). The report analyzed 51 proposed MLRO interviews conducted throughout 2023, revealing a plethora of problems.

Lack of Experience and Knowledge

The majority of instances identified by the MFSA involved MLROs lacking basic knowledge on money laundering and financing terrorism (ML/FT) related matters. A significant number of candidates also showed insufficient training and academic background to fulfill their duties effectively.

  • 51 proposed MLRO interviews were analyzed throughout 2023.
  • Many candidates lacked experience in the role of an MLRO.
  • Poor legislative proficiency was demonstrated by many candidates.

Inadequate Reporting and Non-Compliance

The report found that many MLROs were not aware of business-specific risks, which can lead to inadequate reporting and a higher risk of non-compliance. The lack of knowledge on ancillary financial crime-related matters was also a common issue.

  • Many MLROs lacked awareness of business-specific risks.
  • Inadequate reporting and non-compliance with regulations are potential consequences.
  • Lack of knowledge on ancillary financial crime-related matters was a common theme.

Consistent Findings Across Years

The MFSA’s findings are consistent with previous years’ reports, which identified similar issues. For example:

  • In 2021, out of 54 supervisory interactions, the authority noted that two instances involved insufficient autonomy for MLROs.
  • In 2022, three instances were observed.

Ongoing Concerns

Conflicts of interest also remained a significant concern, with the MFSA noting that many MLROs held multiple roles within their organizations. While this number decreased slightly in 2023, it remains an ongoing issue.

  • Conflicts of interest remain a concern.
  • Many MLROs hold multiple roles within their organizations.

Recommendations for Financial Institutions

The report highlights the need for financial institutions to prioritize training and professional development for their MLROs. The lack of knowledge on internal governance, processes, and systems was also a common theme, as well as insufficient risk-awareness among MLROs.

  • Prioritize training and professional development for MLROs.
  • Ensure that MLROs have necessary skills and knowledge to effectively carry out duties.
  • Review internal processes to ensure compliance with regulations.

Conclusion

The report’s findings serve as a wake-up call for financial institutions to prioritize compliance and risk management in order to maintain the trust of customers, regulators, and the wider public. The MFSA urges all license holders to review their internal processes and ensure that their MLROs are equipped to meet the changing regulatory landscape.

“These findings are concerning and demonstrate the need for financial institutions to take a more proactive approach in ensuring that their MLROs have the necessary skills and knowledge to effectively carry out their duties.” - MFSA spokesperson.