Are money laundering reporting officers at risk in financial services?
This final blog in our anti-money laundering series focuses on the risks money laundering reporting officers can face from fulfilling their crucial roles.
Any UK business that falls within the regulated sector must appoint a ‘nominated officer’, which is a person who is assigned to receive disclosures under Part 3 (terrorist property) of the Terrorism Act 2000 or Part 7 (money laundering) of the Proceeds of Crime Act 2002. Such a person is commonly known as a money laundering reporting officer (MLRO).
In the UK, MLROs face multiple risks that include:
- Sanctions from regulators for failing to carry out their roles properly
- Repercussions for making whistleblowing reports
- Internal displeasure from colleagues for making reports to the National Crime Agency that either stop or delay them from completing transactions
However, elsewhere in the world, the risks for compliance officers filling equivalent MLRO roles are far more significant, including being killed.
Why are the risks so great?
With over $2 trillion currently being laundered around the world, criminals will do whatever they can to protect their empires and lifestyles, and one way of achieving this is to silence those who are at the forefront of reporting their illegal activities.
A recent article written by Nathan Lynch at Thomson Reuters highlighted the risks to those responsible for reporting suspicious activity to enforcement agencies. In one case he called attention to a compliance officer in Pakistan that had to be permanently allocated two security guards by his employer to protect him and his family from those who had much to gain from their activities going unreported.
In Mexico, a main financial informant in a money laundering investigation involving drug cartels was found murdered in the back of a car.
In Jordan, a money laundering compliance officer reported being followed after making reports to the authorities about his suspicions. He commented that this was normal in the environment in which he worked, and it was simply criminals reminding him that they were watching him.
A call for tighter safeguarding measures
In previous blogs, we highlighted wide-ranging concerns about whether the current anti-money laundering regime was working effectively. Plus, whether some organisations were participating in money laundering activity as a part of their normal business operations and seeing the payment of fines as an ordinary business cost. With the fees and profits that can be generated from such activity being far greater than anything regulators are likely to throw at them, is there any real surprise such views are taken?
With many MLROs believing that the regime in which they operate is unfit for purpose, it’s an uphill battle and many of these key role holders will be asking themselves whether the risks they face are worth taking. MLROs in the UK may not yet be subject to death threats or feel the need to have 24-hour security to look after them and their families, but this could well change as members of the criminal fraternity work harder to hide their activity.
Financial institutions, like other businesses, have a duty to ensure their employees work in a healthy and safe environment - and this applies tenfold to those filling the role of MLRO. Firms in the financial sector should carry out ongoing risk assessments to see whether these officers are at risk from those they may be reporting to the enforcement bodies.
Shifting targets
It seems clear that MLROs in UK institutions acting for high and ultra-high net worth clients could become more exposed to intimidation. And worse, from those whose activities could become the subject of suspicious activity reports, especially with the increase in county-lines crime, people trafficking, and cybercrime.
However, smaller financial organisations should not think they are exempt. If the focus from regulators on larger institutions becomes too intense, criminals may be inclined to move their money laundering activities to smaller firms, where systems and procedures may be laxer, and egos (not to mention fees) of senior managers are inflated by attracting new high-value clients.
MLROs undertake critical roles and do so with care and diligence. Employers should, therefore, do their part to grant greater protection to MLROs from those whose activities they may be looking to disrupt both now and in the future.
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