Financial Crime World

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Money Laundering Reporting Officers in Financial Services Sector Lacking Key Knowledge and Support

A recent investigation by the Malta Financial Services Authority (MFSA) has revealed that many Money Launderling Reporting Officers (MLROs) in the financial services sector are lacking key knowledge and support, putting them at risk of failing to effectively identify and report suspicious transactions.

The Investigation

The MFSA conducted interviews with proposed MLRO candidates throughout 2021, 2022, and 2023, as part of its authorization process. The results showed a persistent lack of basic knowledge surrounding Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) among applicants.

Results

  • In 2021, 85 interviews were conducted, with:
    • 5 instances of MLRO candidates lacking basic AML/CFT knowledge
    • 4 cases of poor legislative proficiency
    • Observations of a “One-Man Show” culture, where one person was responsible for multiple roles, leading to weak compliance
  • In 2022, 29 interviews were conducted, with:
    • Continued lack of knowledge on internal governance and processes
    • 13 instances of insufficient knowledge on licence holder’s internal governance
    • 22 instances of insufficient knowledge on internal processes and systems
  • In 2023, 4 instances of MLROs lacking knowledge on internal governance and 10 instances of insufficient knowledge on internal processes and systems were observed. However, many MLROs still lacked awareness on other relevant financial crime typologies.

Autonomy

The investigation found that many MLROs were not given sufficient autonomy to carry out their duties effectively. In 2021, 9 instances of conflicting roles were observed, where the same individual held multiple positions. This number decreased in 2022 and 2023, with only 1 instance of conflicting roles observed in each year.

Conclusion

The MFSA’s investigation highlights the need for improved training and support for MLROs in the financial services sector. Without sufficient knowledge and autonomy, these officers are at risk of failing to effectively identify and report suspicious transactions, putting the integrity of the financial system at risk. The industry must take action to ensure that MLROs receive the necessary resources and training to carry out their duties effectively.