Of all the senior roles in a regulated firm, the Money Laundering Reporting Officer is the one that most obviously resists a part-time arrangement. Suspicious activity does not keep office hours. A member of staff with a concern needs someone to report it to today, not on the MLRO’s next scheduled day. And when the firm needs a defence against money laundering from the National Crime Agency, the clock is already running.
Yet fractional MLROs are increasingly common, particularly at small investment firms, advice firms, early-stage lenders and newly authorised businesses. They work because, for the right firm and with the right structure around them, the MLRO’s judgement is needed far more often than their daily presence.
This article explains how a fractional MLRO works in practice, what has to be in place for the model to be credible, and the points at which it stops being the right answer.
What the MLRO is actually responsible for
Under the Money Laundering Regulations 2017, a regulated firm must appoint a nominated officer to receive internal reports of knowledge or suspicion of money laundering or terrorist financing, and to decide whether to report externally to the National Crime Agency. At FSMA-authorised firms within the Senior Managers and Certification Regime, the MLRO usually holds the SMF17 Money Laundering Reporting function and carries personal accountability for it.
In practice, the MLRO’s responsibilities usually include:
- receiving and assessing internal suspicious activity reports
- deciding whether to submit external reports and requests for a defence against money laundering
- owning the firm-wide money laundering and terrorist financing risk assessment
- overseeing the firm’s policies, controls and procedures
- overseeing customer due diligence, especially enhanced due diligence on high-risk customers and politically exposed persons
- overseeing sanctions screening and transaction monitoring, where relevant
- training staff
- reporting to senior management and the board, including an annual report
The FCA’s Financial Crime Guide expects the MLRO to have sufficient resources, experience, access and seniority, and to report to senior management at least annually. None of those expectations is reduced because the MLRO works part-time.
How a fractional MLRO makes it work
A deputy inside the business
The single most important element is a deputy or alternate nominated officer who works in the business every day. Staff must always have someone to report a suspicion to, and the deputy must be trained to receive reports, preserve information, recognise urgency and escalate to the fractional MLRO immediately where needed. Without a deputy, a fractional MLRO arrangement is very hard to defend.
Clear escalation routes
The fractional MLRO should be reachable between scheduled days for anything urgent, with agreed response times. The firm’s procedures should say plainly what counts as urgent: a suspicion involving a pending transaction, a customer seeking to move funds quickly, a production order or a law enforcement request.
A realistic approach to DAMLs
Where a firm suspects that a transaction involves criminal property and wants to proceed, it can request a defence against money laundering under the Proceeds of Crime Act 2002. The statutory framework gives the NCA a notice period of seven working days to respond, and if consent is refused a moratorium period of 31 days follows, which can be extended by the courts. While a request is pending, the firm must not proceed with the transaction. A fractional MLRO must be able to prepare a request promptly when one is needed, which is another reason the escalation routes matter.
Scheduled work for the scheduled days
Much of the MLRO’s work is predictable: reviewing high-risk customer files, testing controls, updating the risk assessment, reviewing monitoring output, delivering training and preparing board reports. A good fractional MLRO plans this work across their days so that the reactive elements always have room.
Good management information
Because the fractional MLRO is not in the building every day, they need reliable information when they are: internal report logs, alert volumes, overdue reviews, high-risk customer lists and screening results. Firms that cannot produce this information will find it hard to make the model work.
What a fractional MLRO typically costs the firm in time
Time commitments vary widely. A small advice firm or boutique corporate finance firm with low suspicious activity volumes may need only a few days a month. A newly authorised lender or e-money firm may need two or three days a week, at least while its controls are being built. Firms with heavy transaction volumes, complex customer bases or significant cross-border activity usually need a full-time MLRO with a team.
The right commitment should be set by reference to the firm’s risk assessment, not the other way round. A fractional MLRO who agrees to one day a month at a firm whose risk profile plainly demands more is storing up problems for both of them.
Combining the MLRO and Head of Compliance roles
At smaller firms, a single fractional professional often holds both SMF16 Compliance Oversight and SMF17 Money Laundering Reporting. That can be efficient, but it concentrates two required functions in one part-time individual. If that person is unavailable, both functions are affected at once. It also means the person who designs the firm’s anti-money laundering controls is the same person who monitors them, so the firm needs another source of independent review, such as an external assessment or internal audit.
When the fractional model breaks
- Volumes grow. When internal reports and alerts become a daily occurrence, the MLRO role becomes a full-time job.
- The risk profile changes. New products, new customer types, cross-border business or a move into payments or cryptoassets can quickly outstrip a part-time arrangement.
- The FCA raises concerns. Supervisory feedback on financial crime is often the clearest signal that the firm needs more senior time.
- The deputy is overloaded. If the deputy is effectively doing the MLRO’s job between visits, the structure is no longer working as intended.
- Backlogs build. Overdue customer reviews, unworked alerts or recommendations carried forward from year to year are signs the arrangement needs more capacity.
What payments and e-money firms should know
Payment institutions and e-money institutions authorised only under the payments regulations sit outside the Senior Managers and Certification Regime, so their MLRO is not an SMF17. They are still within the Money Laundering Regulations, however, and still need a nominated officer whom the FCA will expect to be experienced and adequately resourced. Fractional MLROs can work for smaller payments firms on the same principles, provided transaction volumes and safeguarded balances are modest and the firm has strong monitoring in place.
The MLRO’s annual report under a fractional model
The annual report to senior management is one of the clearest tests of whether a fractional MLRO arrangement is working. A good report gives the board a clear opinion on whether the firm’s controls are effective, explains trends in internal and external reports, sets out any backlogs and makes specific, prioritised recommendations. It should also state plainly whether the MLRO has enough time and resources. If a fractional MLRO cannot produce that report with confidence, or if the board never discusses it, the arrangement needs revisiting.
Choosing a fractional MLRO
The fractional MLROs who work best tend to share four characteristics. They have held the role before, ideally at more than one firm. They have direct experience of the firm’s sector, because financial crime risk in a payments firm looks very different from that in a wealth manager or a lender. They manage a portfolio of clients carefully, so that they genuinely have time for each. And they are candid with boards, including about when the firm needs more than they can provide.
Firms looking at this route can approach specialist recruiters who focus on part-time senior compliance appointments. FD Capital, for instance, recruits fractional MLROs and compliance officers for FCA-regulated firms, including part-time SMF16 and SMF17 holders.
A short readiness checklist
- A trained deputy or alternate nominated officer in the business
- Written escalation routes and response times for urgent matters
- An up-to-date firm-wide risk assessment that justifies the time commitment
- Reliable management information on reports, alerts and reviews
- Independent review of anti-money laundering controls where the MLRO also designs them
- A board that receives and discusses the MLRO’s annual report
- Agreed notice and handover arrangements if the engagement ends
Frequently asked questions
Can an MLRO be part-time?
Yes. There is no rule requiring the MLRO or SMF17 holder to be full-time. The firm must be satisfied, and at SM&CR firms the FCA must be satisfied, that the individual has the time, resources and support to perform the role for the firm’s size and risk.
Does a fractional MLRO need a deputy?
In practice, yes. Staff must always be able to report suspicions, and reports must be assessed promptly, including when the MLRO is not working for the firm.
Who submits suspicious activity reports when the fractional MLRO is unavailable?
That depends on the firm’s arrangements, which should be documented. Typically a trained deputy receives and preserves the report and escalates it, with the MLRO making or authorising the external reporting decision.
When should a firm move to a full-time MLRO?
When suspicious activity volumes, alert volumes or the firm’s risk profile mean the role needs daily senior attention, or when supervisory feedback indicates that the current arrangement is not sufficient.
