Concise Report for MLROs and DMLROs: Key Learnings from JFSC Financial Crime Examination Feedback 2023-2024

1. As a Money Laundering Reporting Officer (MLRO) or Deputy MLRO (DMLRO), the Jersey Financial Services Commission’s (JFSC) Financial Crime Examination Feedback 2023-2024 highlights critical findings and good practices to strengthen your role in preventing and detecting financial crime.
2. The Financial Crime Examination Feedback 2023-2024 is here:

• https://www.jerseyfsc.org/news-and-events/read-our-financial-crime-examination-feedback-q4-2023-2024/
• https://www.jerseyfsc.org/industry/examinations/examination-findings-and-questionnaires/financial-crime-examination-feedback-2023-2024/

Below are the key takeaways for MLROs and DMLROs:

Key Findings

1. Inadequate Resourcing of Compliance Function (Section 2.2):
   • Some businesses failed to demonstrate adequate resourcing for the compliance function, risking ineffective execution of key financial crime prevention tasks. This can weaken the overall efficacy of financial crime controls.
   • Action: Ensure your compliance team is sufficiently staffed and resourced to handle MLRO/DMLRO duties effectively.
2. Lack of Independence (Section 2.2):
   • Instances were noted where MLCO/MLRO independence was compromised due to involvement in customer-facing, business development, or operational roles without robust mitigating measures.
   • Action: Review your role to ensure no conflicts of interest exist. Implement and document clear mitigating measures if potential conflicts are identified.
3. Inadequate Oversight of DMLRO Performance (Section 2.2):
   • Some supervised persons could not evidence sufficient oversight by the MLRO over DMLRO's handling of Suspicious Activity Reports (SARs), increasing the risk of inconsistent or unreported financial crime.
   • Action: Establish regular oversight mechanisms, such as documented meetings with DMLROs, to ensure consistent and appropriate SAR handling.

Good Practices

1. Conflict Management (Section 2.2):
   • Conflicts or impediments to MLRO/DMLRO independence should be risk-rated, recorded, and reviewed annually (especially for high-risk conflicts) to assess ongoing sufficiency of mitigants.
   • Implementation: Develop a process to document and regularly review potential conflicts, ensuring robust mitigants are in place.
2. Regular Oversight Meetings (Section 2.2):
   • MLROs should hold regular meetings with DMLROs to discuss SAR progress, interactions with the Financial Intelligence Unit (FIU), and workload management.
   • Implementation: Schedule periodic oversight meetings and maintain records of discussions and outcomes.
3. Board Reporting (Section 2.2):
   • Include standing agenda items for MLROs and MLCOs to present key information to the board, ensuring visibility of financial crime risks and controls.
   • Implementation: Work with senior management to establish regular reporting to the board on SARs, compliance issues, and risk management.
4. Guidance for Employees (Section 2.5, Page 16):
   • MLROs/DMLROs should provide comprehensive guidance to employees on interacting with customers following a SAR to ensure consistent and compliant handling.
   • Implementation: Develop clear, practical guidance or training materials for staff on post-SAR customer interactions.

Self-Assessment Questions

1. Are you confident that your compliance function is adequately resourced to meet regulatory expectations?
2. Have you identified and mitigated any potential conflicts of interest that could affect your independence as an MLRO/DMLRO?
3. Do you have a documented process for overseeing DMLRO performance, particularly regarding SAR handling?
4. Are you regularly reporting to the board on financial crime risks and SAR activities?
5. Do your policies provide clear guidance to employees on handling customer interactions post-SAR?

Recommendations

1. Review Resources: Assess whether your compliance team has sufficient resources to perform MLRO/DMLRO duties effectively. Address any gaps promptly.
2. Strengthen Independence: Ensure your role remains independent by avoiding conflicting responsibilities and documenting mitigants for any potential conflicts.
3. Enhance Oversight: Implement regular, documented oversight of DMLRO activities, focusing on SAR consistency and compliance.
4. Engage with the Board: Establish routine reporting to the board to maintain oversight of financial crime risks and demonstrate proactive management.
5. Update Guidance: Provide clear, practical employee guidance on SAR-related customer interactions, ensuring alignment with regulatory requirements.

Additional Guidance

1. Refer to the JFSC Handbook (sections 2.2 and 8) for detailed guidance on MLRO/DMLRO roles and SAR reporting.
2. Review past JFSC feedback papers (2019 and 2022) for additional insights on common findings and good practices.

By addressing these findings and adopting the recommended practices, you can strengthen your role as an MLRO/DMLRO, enhance compliance with Jersey’s regulatory framework, and reduce financial crime risks.

Source

https://www.jerseyfsc.org/news-and-events/read-our-financial-crime-examination-feedback-q4-2023-2024/

https://www.jerseyfsc.org/industry/examinations/examination-findings-and-questionnaires/financial-crime-examination-feedback-2023-2024/