One of the most important roles in a registered firm is that of the Head of Compliance and MLRO. The FCA’s expectation of this role is quite strict, and demands that these individuals and money laundering reporting officers (MLROs) have a strong understanding of the competency and capability required of the role. Firms should think of how the individuals they wish to appoint to the role will be able to demonstrate these qualities.
Training
A key consideration that needs to be made for Heads of Compliance and MLRO, and a concrete part of the FCA’s expectation, will always be the training that the applicant has undertaken. They need to have attended relevant training courses, especially as the FCA is less likely to give approval to the firm if the candidate still needs to undertake courses.
The training also needs to be relevant to the type of business that they wish to work in, and must be up-to-date. Should the training have been completed several years ago, the FCA’s expectation might be that the candidate will undertake a continuous professional development course to refresh their knowledge.
Such a training course, whether it is for full or supplemental training, must be of a sufficient length and depth for the Head of Compliance and MLRO to successfully carry out their role. Any course thought to be introductory will not carry the weight of knowledge a Head of Compliance at even a very small firm would need.
Experience
Of course, the FCA’s expectation will also be that the candidate has the applicable experience to act as a Head of Compliance and/or MLRO within their firm. They do not need to have held the role previously, but should have experience of compliance from a junior level within their company. For example, someone advancing to the role of Head of Compliance and MLRO might have been a compliance manager previously.
Heads of Compliance and MLRO can be from a range of backgrounds. Lawyers, accountants, and even the owner or chief executive of a firm can all be considered for this role provided that they have the necessary knowledge and experience of compliance. Regardless of what their existing position might be, they might be eligible to move into the role of Head of Compliance if they are willing to attend and complete the necessary training needed for the role.
Capacity
Any firm needs to consider how much the Head of Compliance and MLRO will be able to dedicate to the role. The FCA’s expectation will always be that someone undertakes this role in a full-time capacity, but in smaller roles this sometimes simply isn’t feasible.
A Head of Compliance and MLRO who works in a smaller firm might have another role or further responsibilities that they fulfil within the firm. Firstly, this could result in issues of compliance only being addressed for a few hours each week. This is not sufficient and could result in mistakes and further issues with compliance arising.
In addition to this, a conflict of interest might arise between the Head of Compliance and MLRO’s role and their other responsibilities. The FCA will need to fully understand these potential conflicts of interest and how they might affect the candidate’s ability to act.
The FCA’s expectation will also be that the Head of Compliance and MLRO will be working from the principal office if the firm has multiple. If necessary, the FCA may wish to carry out an interview to assess the suitability of the candidate for themselves.
Third-party support
Finally, it is not unusual for firms to receive external support from third parties, such as lawyers or compliance consultants. This can help to boost the capacity of the firm’s in-house arrangements and can be particularly helpful if the Head of Compliance is having to serve this dual role.
It will not reduce the FCA’s competency valuation, so it is vital that any firm that does use third-party support does not wholly rely on them for compliance. The Head of Compliance and MLRO and anyone working under them should still have the relevant knowledge and experience to make decisions on their own. The third party that they choose to work with are very much to be considered a helping hand to this role, and not a replacement for it.
Meet the FCA’s expectation
When introducing a Head of Compliance and MLRO to a firm, it is vital that this firm is able to demonstrate that they have met the expectations of the FCA on every front. Any individual considering applying for the role needs to have the experience and knowledge that the role requires, and they must be able to undertake the role to a capacity that satisfies the FCA.
Remember, this can be done with the help of a third party such as Neopay. Get in touch with our team today to find out how we can support your Head of Compliance and/or MLRO and wider firm in ensuring or enhancing your compliance and regulatory framework.
