On 28 February 2022, the FCA published a new webpage to assist in firms’ assessment of candidates for the roles of head of compliance or money laundering reporting officer (MLRO). Each of these roles is a Required Senior Management Function under the SMCR. The Compliance Oversight role (CF 10/SMF 16) is mandatory for all Core and Enhanced firms as well as sole traders, authorised professional firms and oil market participants. The role of Money Laundering Reporting Officer (CF 11/SMF 17) is of similarly broad application. Given both the requirement for FCA approval and the pivotal nature of each of these senior roles, any and all enhancement to existing guidance is to be welcomed.
The guidance, derived from an FCA review of applications, includes the following:
Training
Most successful applicants will have already completed relevant training courses prior to application for FCA approval. Their training will be recent, up-to-date and relevant to their prospective employer’s business. Training courses will be of a sufficient length and depth appropriate for the role.
Experience
Unsurprisingly, applicants do not need to have previously held head of compliance and MLRO positions. They may have held more junior compliance roles in the past, such as compliance manager or deputy MLRO. Application from the same or similar approved positions is a good demonstration of suitability, but does not automatically confer approval.
Support from third parties
Applicant firms will be assisted by external advisors (e.g. law firms or compliance consultants), in respect of their application or the ongoing running of their compliance function. In cases where firms rely exclusively on outside support, applications have tended to be unsuccessful. Equally, third-party support is unlikely to reduce any competency concern(s) the FCA may have in respect of an applicant firm’s proposed head of compliance or MLRO.
Capacity
The FCA recognises that smaller firms may propose an individual who carries out the role on a part-time basis. However, the time committed must be sufficient and proportionate; applications by those who only intend to fulfil the role for just a few hours per week have tended to be unsuccessful. Additionally, if the proposed head of compliance or MLRO has another role within the firm or externally, the FCA will consider if there are any conflicts of interest. It should also be noted that, applicants who are not senior leaders within the firm, i.e. external compliance consultants, are often unsuccessful.
The approval process is not via self-certification, where an applicant believes they have sufficient experience and/or training, the FCA may still request an interview to examine this and will also consider responses to questions asked as part of the application.
