By Bion Behdin, CRO at First AML
From the royal family to the hit HBO show, the notion of succession brings images of drama, power, family, scandal and scheming. While these are qualities you probably don’t associate with the world of anti-money laundering (AML) compliance (it probably triggers the opposite impression), knowing who will step in to take control of a company’s AML responsibilities is of integral importance.
Succession is also about stability, continuity, knowledge transfer and skill. For firms who require a Money Laundering Reporting Officer (MLRO) to oversee their compliance operations, these values are highly sought after when considering succession planning.
For business, not having a successor or ‘understudy’ MLRO is both a risk and a pain. What happens when the MLRO is away on holiday? And from a regulatory point of view, if no one else can perform the role then what happens if the auditor comes knocking? We have seen situations where the MLRO has gone on maternity leave and the company partner has taken on the role and then tapped out because of how painful it was to cover so quickly.
On a personal level, for employees having to wear multiple hats – performing their own duties as well as being the MLRO – it’s a dreaded and lonely role that would be far better if shared with someone else.
The necessity for MLRO succession planning is one thing. You then need to get buy-in from the c-suite, appoint a successor(s) and train them into the role.
Getting management buy-in
Half the battle is making the case for MLRO succession planning to the c-suite. Not having management buy-in will be very restrictive in creating a strategy that gives the role the support it needs. But with evolving compliance threats and heavy fines, there are clear factors that can strongly incentivise buy-in.
The worlds of compliance, fraud and cyber are all converging. Each department needs to complement the other to form a strong AML defence, otherwise gaps in compliance will appear. The other two departments have redundancy strategies, so why not compliance? A three legged stool without one leg is a very dangerous business strategy.
Then, the case for finding successors in house has several benefits. One, it ensures business continuity and seamless knowledge transfer. Two, it’s cheaper to retain than hire. Three, it’s an HR and fiscal concern that the role is well supported. There is high burnout in the compliance space, so having more than one person who can perform the role allows a company to interchange when needed.
Regulators are also getting more strict, not less, so the succession planning process is only going to become more important. Therefore, leaders need to make time, space and budget for delivering MLRO continuity.
Finding/appointing your successor(s)
Once buy-in is secured, then the search begins. Who in the company is made to be a successor? An MLRO requires a unique set of recruitment requirements. There is a need to assess personality, attitude and alignment with the greater good of the role alongside skills, knowledge and ability.
More than many other roles, a person’s social values and traits are of integral value. There may be the incentive of more money to be an MLRO. But without a willingness to perform the role effectively, juggling its responsibilities with other day-to-day tasks, it is possible the person will let jobs slide – and that brings a greater problem of leaving the company in danger of being non-compliant.
Most importantly, they have to be passionate about the social good of their work and protecting the integrity of the firm and its customers.
This desire must be joined by a strong capability to bring quality to the position. There is of course a need to gain an in-depth knowledge of regulations, assess AML risks in the company and oversee tools such as transaction monitoring systems.
But top communication skills are just as necessary. An MLRO needs to convey the importance of AML across the business and to all relevant stakeholders. They need to deliver training sessions for employees, report recommendations to the c-suite and build relationships with regulators.
Planning the succession
If we take the assumption that it won’t be a full-time equivalent substituting into the role, how do you train and upskill the existing employee(s) without massive disruption to their normal job? Does the business need to allocate a proportion of time per week to give the person time for MLRO training?
For this to work, other staff need to be in a position to spread the load of that person’s general responsibilities. MLRO tasks could also be portioned and delivered incrementally, so there’s minimal disruption to their daily working routine.
It’s worth noting that succession planning is not only a time commitment for the trainee but also for the existing MLRO, who will most likely facilitate a large chunk of the training/handover. Therefore, the MLRO will also require more support for their other responsibilities while training is occurring.
If direct training is not possible, there are several outsourcing firms who can perform the task. Online training platforms also offer a way for the successor to train in their own time. But before any succession plan is put in place, it’s imperative to check there is no conflict of interest between the person’s ‘day job’ and the MLRO role.
No drama
Regulators are increasing their scrutiny, cybercrime is rising and fraud is becoming more innovative. The danger of an MLRO suddenly being absent can leave a firm vulnerable to a whole range of threats and simply accentuates the need for succession planning.
It may sound like a big undertaking, but with management buy-in and a sensible training schedule it can be conducted within a company’s means. The challenge is in finding the right person(s) to step into the role.
While succession planning brings high drama in other business and family affairs, the process of finding an MLRO successor and the subsequent structure put in place will create an environment that mitigates any disruption and damaging consequences that can come from having no understudy to jump into the role.
With succession planning established, if the MLRO has to jump ship, then it’s no drama.
