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E Evidential Provisions

Legal Instruments

Deleted

ML 7.1 The money laundering reporting officer

MLRO: approval by the FSA and role

ML 7.1.1 G 01/12/2001

A relevant firm has to appoint an individual as its MLRO (see ML 7.1.5 R). Under section 59 of the Act, the function of acting in the capacity of the MLRO has been specified as a controlled function (see SUP 10.1.13 R). As a consequence, any individual invited to perform that function must be individually approved by the FSA, on the application of the relevant firm, before performing the function. The job of the MLRO is to act as the focal point within the relevant firm for the oversight of all activity relating to anti-money laundering. He needs to be senior, to be free to act on his own authority and to be informed of any relevant knowledge or suspicion in the relevant firm. In turn he has to pass on issues to NCIS as he thinks appropriate. He can be expected to liaise with NCIS on any question whether to proceed with a transaction in the circumstances.

Firms within a group

ML 7.1.2 G 01/12/2001

If a relevant firm is part of a group, it may choose to appoint as its MLRO an individual who performs that function for another relevant firm within the group.

Delegation by the MLRO to others

ML 7.1.3 G 01/12/2001

If a relevant firm that is a member of a group chooses the approach in ML 7.1.2 G, it may wish to permit the MLRO to delegate anti-money laundering duties to other suitably qualified individuals within the relevant firm . Similarly some relevant firms, particularly those with a number of branches or offices in different locations, may wish to permit the MLRO to delegate such duties within the relevant firm. Where anti-money laundering tasks are delegated by a relevant firm's MLRO, the FSA will expect the MLRO to take ultimate managerial responsibility for ensuring that the duties imposed on the MLRO by this sourcebook are complied with. The responsibilities to be discharged by the MLRO are set out in ML 7.1.11 R.

MLRO as "nominated officer" under Money Laundering Regulations

ML 7.1.4 G 01/03/2004

If convenient, a relevant firm may decide that the same person can carry out the responsibilities of the MLRO and of the "nominated officer" under the Money Laundering Regulations. "Nominated officer", under those Regulations, has the meaning given by Regulation 7.1

Duty to appoint MLRO

ML 7.1.5 R 01/12/2001

A relevant firm must appoint an individual as its MLRO and operate arrangements that are designed to ensure that it and the MLRO comply with the relevant obligations of this chapter.

ML 7.1.6 R 01/12/2001

When a relevant firm appoints an individual to be its MLRO, it must choose someone who is employed within the relevant firm, or within another relevant firm in the same group, whether as part of its governing body, management or staff.

Qualifications and resources of MLRO

ML 7.1.7 R 01/12/2001

So that he can carry out his controlled function effectively, a relevant firm must ensure that its MLRO:

(1)
has a sufficient level of seniority within the relevant firm; and
(2)
has sufficient resources, including sufficient time and (if necessary) support staff.

ML 7.1.8 G 01/12/2001

"Sufficient resources" should include arrangements to apply in any temporary absence of the MLRO, who should take reasonable steps to ensure the adequacy of such arrangements. An individual who performs the role of MLRO for a period of less than 12 weeks in a consecutive 12 month period does not need approval by the FSA (see SUP 10.5.5 R (periods of less than 12 weeks)).

ML 7.1.9 R 01/12/2001

A relevant firm must ensure that its MLRO is able to:

(1)
monitor the day-to-day operation of its anti-money laundering policies; and
(2)
respond promptly to any reasonable request for information made by the FSA.

ML 7.1.10 E 01/12/2001

(1)
A relevant firm should ensure that its MLRO is based in the United Kingdom.
(2)
Contravention of (1) may be relied on as tending to establish contravention of ML 7.1.9 R.

Responsibilities of the MLRO

ML 7.1.11 R 01/03/2004

A relevant firm must make its MLRO responsible for:

(1)
receiving internal reports under ML 4.1;
(2)
taking reasonable steps to access any relevant know your business information;
(3)
making external reports to NCIS under ML 4.3 (External reporting);1
(4)
obtaining and using national and international findings under ML 5;
(5)
taking reasonable steps to establish and maintain adequate arrangements for awareness and training (whether by himself or someone else) under ML 6; and
(6)
making annual reports to the relevant firm's senior management under ML 7.2.

ML 7.1.12 G 01/12/2001

APER 4.7.2 E and APER 4.7.9 E make provisions about the conduct of the MLRO, to help determine whether the MLRO's conduct complies with Statement of Principle 7 concerning the conduct expected of the MLRO as an approved person.

Duty to appoint MLRO when position vacant

ML 7.1.13 R 01/12/2001

If the position of MLRO falls vacant, the relevant firm must appoint another individual as its MLRO.

ML 7.1.14 G 01/12/2001

The obligation on a relevant firm to appoint an MLRO is in ML 2.1.1 R. That provision is limited to relevant firms and does not apply:

(1)
if the relevant firm is a sole trader with no employees; or
(2)
if the relevant firm is an incoming firm which is only providing cross border services (as opposed to operating through an established branch) in the United Kingdom.

ML 7.2 Compliance monitoring

ML 7.2.1 G 01/03/2004

SYSC 3.2.6 R (Compliance) requires a relevant firm to take reasonable care to establish and maintain appropriate systems and controls for compliance with its regulatory obligations and to counter the risk that it might be used to further financial crime. This section amplifies particular aspects of the rule in SYSC. It does not, however, limit the application of the rule, the effect of which is that, where financial crime is concerned, firms must also comply with other Handbook requirements (in particular, ML) and their legal obligations under the Money Laundering Regulations and the Proceeds of Crime Act 2002.1

ML 7.2.2 E 01/12/2001

(1)
A relevant firm should establish and maintain arrangements under SYSC 3.2.6 R which include requirements that:
1. (a)
  at least once in each calendar year, the relevant firm commission a report from its MLRO which:
  1. (i)
    assesses the relevant firm's compliance with this sourcebook;
  2. (ii)
    indicates, in particular, the way in which new findings under ML 5 (Using national and international findings) have been used during the year; and
  3. (iii)
    gives the number of reports made in accordance with ML 4.1 (Internal reporting) by staff of the relevant firm, dealing separately, if appropriate, with different parts of the relevant firm's business;
2. (b)
  the relevant firm's senior management consider the report; and
3. (c)
  they take any necessary action to remedy deficiencies identified by the report.
(2)
Contravention of (1) may be relied on as tending to establish contravention of SYSC 3.2.6 R.

ML 7.2.3 G 01/12/2001

Figures for internal reports should be broken down, if appropriate, in the MLRO's report. The purpose of the report is to enable a relevant firm's senior management to assess whether internal reports are being made whenever required by ML 4.1.2 R, and that an overall figure which seems satisfactory does not conceal inadequate reporting in a particular part of the relevant firm's business. Relevant firms will need to use their judgement how the MLRO should be required to break down the figures in order to achieve this aim.

ML 7.3 Record keeping arrangements

ML 7.3.1 G 01/12/2001

SYSC 3.2.20 R (Records) requires a relevant firm to take reasonable care to make and retain adequate records (including accounting records). This section amplifies this requirement.

ML 7.3.2 R 01/03/2004

(1)
A relevant firm must make and retain, for the periods specified in (2), the following records:
1. (a)
  in relation to evidence of identity:
  1. (i)
    a copy of the evidence of identity obtained under ML 3; or
  2. (ii)
    a record of where a copy of the evidence of identity can be obtained; or
  3. (iii)
    when it is not reasonably practicable to comply with (i) or (ii), a record of how the details of the evidence of identity can be obtained; and when it has concluded it should treat a client as financially excluded ML 3.1.5 G to ML 3.1.7 G (Financial exclusion), a record of the reasons for doing so;
2. (b)
  a record containing details of every transaction carried out by the relevant firm with or for the client in the course of regulated activity;
3. (c)
  [deleted]1
4. (d)
  records of action taken under ML 4.1 (Internal reporting) and ML 4.3 (External reporting); and
5. (e)
  when an MLRO has considered information or other matter concerning knowledge or suspicion that another person has engaged in money laundering, but has not made a report to NCIS under ML 4.3, a record of that information or other matter.
(2)
The specified periods are:
1. (a)
  in relation to evidence of identity, five years from the end of the relevant firm's relationship with the client;
2. (b)
  in relation to transactions within (1)(b), five years from the date when the transaction was completed; and1
3. (c)
  [deleted]1
4. (d)
  in any other case, five years from the obtaining of the information or the creation of the record.
(3)
"Transaction" in (2) does not include advice given to a client unless such advice is followed by a transaction with monetary value.

ML 7.3.3 G 01/12/2001

Records kept under SYSC 3.2.20 R should include the dates when anti-money laundering training was given, the nature of the training, and the names of the staff who received training; and (in relation to anti-money laundering monitoring) reports by the MLRO made in accordance with ML 4.3, and records of consideration of those reports and of any action taken as a consequence.