In a world of increased financial crime, the responsibilities of the money laundering reporting officer are changing. But are these changes for the better or for the worse?
This blog will look at the potential new civil penalty regime in Jersey and what that could mean for the Isle of Man MLRO community.
What lies ahead for the role of the MLRO?
The civil penalties guidance is a topic which is going to become increasingly important when considering the desirability of the MLRO / DMLRO or Money Laundering Compliance Officer roles. It has been the topic of discussions at the AICP MLRO forum and we know we’re not alone in recognising there are some challenging times ahead.
Those of us who have been in the industry for a while have the benefit of experience and rationalising. Those coming into the industry may have understandable concerns.
And there may be more change ahead. We have been watching the development of the consultations in Jersey with interest. You know as well as we, that often where one Crown Dependency leads, the others follow.
The JFSC issued a consultation back in July 2021. It details changes to their civil penalties regime, proposing the imposition of civil financial penalties in respect of failures to meet AML/CFT requirements on key persons (individuals), including anyone within the senior management definition.
You can read more about it here 👉 https://www.jerseyfsc.org/news-and-events/proposed-changes-to-our-decision-making-process-for-imposing-regulatory-sanctions/
With Jersey currently looking at a huge shift from businesses being responsible to individual responsibility it’s understandable that a level of alarm may start to creep through our compliance community.
With the Manx State of The Nation fast approaching we’re looking forward to discussing the implications and future in more detail.
Shortage of MLRO / DMLRO / ML Compliance Officer’s on the way?
Are we in danger of these officer roles evolving into the jobs that no-one wants?
Experienced officers are in high demand, and with good reason. Financial crime is on the rise, and regulators are expecting organisations to have robust AML/CFT procedures in place to identify and stall any attempts by criminals to use companies and their products for illicit gains.
Often in small businesses, the responsibilities of such officers can be an unwanted addition to an existing role, in an effort to ‘tick the box’.
Those of us who have been around the block a couple of times know there is more to being an officer than internal and external disclosures. And with civil penalties, the potential for personal risk – monetary and reputational – is increasing.
It is important we as a community can offer support to those new to the role.
As a quick aside, we are here to support and can offer you two great solutions:
- We can undertake the role of MLRO, deputy MLRO or compliance money laundering officer for your company
- We can support you in your role as an officer by providing independent support, training and advice.
You can learn more here.
If there is potential change in the Isle of Man civil penalty regime, being ready is the best cause of action.
Are you prepared for changes ahead? Whether a board member or MLRO, being prepared now can help prevent nasty surprises down the road.
Here are some questions we should start to consider:
- What can companies put in place to protect employees?
- Should we be looking at personal business insurance?
- What does existing insurance cover – any personal liability?
- Professional indemnity for the business – time for individual professional indemnity?
- Personal reputational risk is huge here. What mitigations can we have in place as individuals to protect ourselves?
- How prepared are start ups?
We recently chatted to a local IOM based Insurance specialist regarding Insurance cover.
Generally personal business policies are available only for the ‘self employed’. Insurers do not offer policies for employees but for individuals ‘in business’. Insurers do not wish to pick up liabilities which are technically controlled by and the responsibility of an employer.
D&O or Management Liability insurance policies will normally include MLROs within the definition of ‘insured’ so they will be covered to the extent of the cover in force. In addition to defence costs and claims, fines may be covered if legally allowable.
Nick Watterson at Aon (IOM) Ltd advises that “a review of your current policy wording is advisable.”
Similarly with Professional Indemnity insurance, employees are usually noted within the definition of ‘insured’. As ‘PI’ insurance is purchased to protect the business against claims from third parties resulting from the services supplied it is difficult to see where this may give any protection to MLROs against purely regulatory issues.
Update from the Authority regarding funding model.
Whilst we have you here…!
The Authority have confirmed their intention to move to phase one of the new industry funding model in 2022. The first phase will be an increase in fees from April by 20%.
The Authority have also confirmed they will be inviting further feedback from industry in the second quarter of 2022 as part of their commitment to openness and transparency.
Bettina Roth, Chief Executive Officer of the Authority, said: ‘While next April’s increase in fees may be viewed as significant in percentage terms, the amount in pounds sterling will be relatively modest for most regulated entities and designated businesses. Looking further ahead, we see a more dynamic fee structure as an essential element in moving towards a predominantly industry-funded model where the fees charged are more proportionate to the regulatory work being carried out.
She added: ‘This transition represents a step change for the regulatory environment in the Isle of Man. The process will be carefully managed over the coming years, including full consultation and engagement with industry.’
We highly recommend that all licence holders commit to responding to the Authority in order for voices big and small to be heard.
We should take this opportunity to raise concerns and questions, helping to steer the outcome in a way which feels right for all.
There’s a lot going on at the moment. But you don’t need to face it on your own. A chat with us costs nothing. Book your meeting today to be better prepared for tomorrow.
