Regulatory and Compliance Training & Consultancy

Money Laundering Regulations 2017 Rule 21 Independent Compliance Audit

May 2020

As an MLCO, how do you fulfil your obligation to have an effective independent audit function?

One of the most significant changes in anti-money laundering obligations upon firms operating in the regulated sector was the requirement to appoint a Money Laundering Compliance Officer (MLCO) under Regulation 21 of the Money Laundering Regulations 2017 (MLR2017). As well as having general responsibility for the firm's compliance with the Regulations, from 25 June 2017, the MLCO was also specifically required to screen relevant employees both before recruiting them and during the course of their employment. Additionally, the MLCO must establish within the organisation an independent audit function which:

• examines and evaluates the adequacy and effectiveness of the policies, controls and procedures adopted by the organisation to comply with the requirements of the MLR 2017;
• makes recommendations in relation to the firm's policies, controls and procedures; and
• monitors the relevant person's compliance with those recommendations.

The problem which has become apparent to a number of firms is how do they satisfy the ‘independence’ requirement of Regulation 21 (1) (c) of the MLR 2017? Usually, the employees who would be capable of undertaking an audit of the type required by Regulation 21 of the MLR 2017 are those who have day-to-day responsibility for designing, implementing and monitoring the application of the firm‘s anti-money laundering policies and procedures. By any measure, it is hard to see that such an audit would comply with the ’independent' requirement Regulation 21 of the MLR 2017.

At Legal Finance Professionals Limited, we are pleased to be able to offer MLCOs and their firms a truly ‘independent’ solution to the problem. Working within an agreed budget, we will plan and carry out an ‘independent’ audit, as required by Regulation 21 of MLR 2017, which covers a detailed review and evaluation of the following areas:

• AML policies, procedures and internal controls
• the firm-wide AML risk assessment
• staff screening procedures
• provision of staff training
• record keeping
• practical application of the policies and procedures

Usually, we would look to carry the AML compliance audit onsite at the firm's premises wherever possible, however, given the impact of Coronavirus, where it is possible to carry out the required audit work remotely, we will do so.

For more information about our independent anti-money laundering compliance audit or to find out about how we can help you fulfil your legal obligation to provide appropriate anti-money laundering training to your employees, please contact Richard Lane by calling now on 0330 223 5346 or by e-mail to info@lfpro.co.uk.