Key takeaways
- Prior regulatory approval is now required for MLRO appointments – previously it was a notification requirement that had to be submitted within 14 days of the MLRO appointment.
- Firms in scope will now need to factor in sufficient time for prior regulatory approval of initial appointments and replacements of MLROs.
- New introduced business guidance has been published and firms in scope should revisit their AML policies and procedures to determine whether any changes need to be made as a result.
How has the BVI AML regime changed?
The Anti-Money Laundering (Amendment) Regulations 2024 and the Anti-Money Laundering and Terrorist Financing (Amendment) Code of Practice, 2024 were gazetted respectively on 6 and 10 September 2024 and came into force on 15 October 2024.
The amendments made to the Anti-Money Laundering Regulations, Revised Edition 2020 (the "AML Regulations") and the Anti-Money Laundering and Terrorist Financing Code of Practice, Revised Edition 2020 (the "Code") are summarised below and are primarily focused on the duty to appoint a money laundering reporting officer (a "MLRO").
A MLRO acts as the liaison between the relevant person and the Financial Investigation Agency ("FIA") or the Financial Services Commission ("FSC") (as applicable) and is responsible for ensuring compliance by staff of the relevant person with:
- the provisions of the Proceeds of Criminal Conduct Act, the AML Regulations, the Code and any other enactment relating to money laundering, terrorist financing and proliferation financing ("ML, TF and PF") ("Other Relevant Legislation");
- the provisions of any internal reporting and manual of compliance procedures relating to ML, TF and PF; and
- any additional reporting and related obligations provided in any Other Relevant Legislation.
On 28 October 2024, the FSC and FIA also jointly issued Guidance on Mitigating Risks with Introduced Business Relationships (the "Introduced Business Guidance").
Amendments to the AML Regulations
Requirement for approval to appoint a MLRO
The most significant amendment to the AML Regulations is the introduction of the requirement for a relevant person to obtain the approval of the relevant regulator for the appointment of a MLRO. This is a notable departure from the previous position where a relevant person was only required to notify the regulator(s) of the appointment of a MLRO within 14 days of such appointment.
The approval of the FIA is required for the appointment of a MLRO by:
- a relevant person qualifying as a Designated Non-Financial Business and Profession ("DNFBP") in respect of which the FIA exercises supervisory responsibility for ML, TF and PF purposes; or
- a Non-Profit Organisation identified by the FIA as engaging primarily in raising and disbursing funds and in respect of which the FIA exercises supervisory responsibility.
The approval of the FSC is required for the appointment of a MLRO by an entity regulated by the FSC.
Grant (or denial) of approval by the regulator
Regulation 13 of the AML Regulations sets out the requirements of an individual to be appointed as a MLRO (the "MLRO Requirements"). The AML Regulations as amended (the "Amended AML Regulations") provide that for the purposes of establishing whether the MLRO Requirements are met in respect of a proposed MLRO, the FIA or the FSC (as applicable) may:
- require the proposed MLRO or the relevant person to provide additional documents and information;
- invite the proposed MLRO to an interview; or
- subject the proposed MLRO to such specific or general test as considered necessary.
Pursuant to the Amended AML Regulations, where the FIA or the FSC (as applicable) is satisfied that:
- the proposed MLRO meets the MLRO Requirements and will, after their appointment, be able to perform the functions of a MLRO; and
- it is not against the public interest to appoint the proposed MLRO as a MLRO,
it shall grant approval for such person to be appointed by the relevant person as a MLRO.
The Amended AML Regulations provide that if the FIA or the FSC (as applicable) forms the opinion that the proposed MLRO does not meet the MLRO Requirements or that the appointment of such person as a MLRO will not, or is not likely to, be in the public interest, it shall not grant its approval and shall notify the relevant person of its decision.
Suspension or withdrawal of approval by the regulator
Once a MLRO has been approved by the FIA or the FSC (as applicable) and appointed by the relevant person, pursuant to the Amended AML Regulations, if the FIA or the FSC (as applicable):
- forms the opinion that the MLRO no longer satisfies the MLRO Requirements, its approval of the MLRO's appointment was founded on fraud or misrepresentation or the MLRO has otherwise contravened or failed to comply with a provision of the ML, TF and PF legislation;
- is satisfied that enforcement action has been taken against the MLRO in accordance with the FIA Act or the FSC Act; or
- considers, for any other good reason, that the continued approval of the MLRO is no longer in the public interest,
the FIA or the FSC (as applicable) may issue a warning to, or suspend or withdraw its approval for the appointment of, the MLRO.
Before the FIA or the FSC (as applicable) suspends or withdraws its approval for the appointment of a MLRO, it must indicate its intention to do so by giving the relevant person that appointed the MLRO not less than 14 days written notice and inviting the relevant person to make such written representations as it considers necessary. At the end of the 14 day period and following review of any representations submitted by the relevant person, the FIA or the FSC (as applicable) shall:
- issue a warning to, or suspend or withdraw the approval of appointment of, the MLRO; or
- rescind its intention to issue a warning to, or suspend or withdraw the approval of appointment of, the MLRO.
Where the FIA or the FSC (as applicable) suspends the approval of appointment of a MLRO, the suspension shall be for an initial period not exceeding 30 days, which may be renewed for such further period not exceeding another 30 days.
Changes to MLROs
The Amended AML Regulations provide that when a MLRO approved by the FIA or the FSC (as applicable) ceases to hold such office, the relevant person who appointed the MLRO must, no later than 14 days after the MLRO ceased to hold office, notify the FIA or the FSC (as applicable) of this fact. Pursuant to the Amended AML Regulations, within 21 days of the MLRO ceasing to hold office, the relevant person must submit an application to the FIA or the FSC (as applicable) seeking approval for the appointment of a new MLRO. The amendments to the Code also reflect these requirements.
Existing MLROs
The Amended AML Regulations state that any MLRO who was appointed prior to 15 October 2024 shall continue to hold office as a MLRO as if their appointment was approved by the FIA or the FSC (as applicable). However, it is worth noting, that the FIA or the FSC (as applicable) will have the right to issue a warning to, or suspend or withdraw its approval for the appointment of, such an MLRO.
Amendments to the Code
Individual directors, other senior officers and professionals as MLROs
The amendments to the Code introduce a new explanatory note in respect of section 16 of the Code which relates to "Reporting Officers", being the Code's term for MLROs. This new explanatory note gives guidance on the appointment of individual directors or other senior officers as MLROs and also, where the relevant person is a professional, guidance on the appointment of the professional as the MLRO. The amendments remove the previous explanatory note in the Code pursuant to which, where the relevant person is a professional and does not appoint a MLRO, the professional is assumed to perform this role.
Updates to group wide policies, procedures and controls
The Code amendments also expand on the requirement in section 53A of the Code for financial groups to implement group wide policies, procedures and controls against ML, TF and PF which are applicable to all branches and subsidiaries of the financial group. The Code now specifies that such policies, procedures and controls must include those relating to:
- the compliance function and review programme and designation of an individual at senior management level for managing compliance;
- assessment of the competency and probity of employees at the time of recruitment and on an on-going basis;
- providing appropriate and periodic training and ongoing employee training; and
- an independent audit function that is adequately resourced to test compliance.
Introduced Business Guidance
The Introduced Business Guidance is intended to serve as a reference for both Financial Institutions and DNFBPs to assist in mitigating the risks associated with the engagement of third-party introducers.
It stems from the requirements set out in the Financial Action Task Force's Recommendation 17 – Reliance on Third Parties, and calls for the application of a risk-based approach when applying measures to mitigate the risks associated with engaging with third-party introducers.
Actions that should be taken where it is necessary to terminate a third-party introducer relationship are also outlined.
Conclusion and next steps
These updates bring additional clarity as to the regulatory assessment of MLROs on appointment and outline clear procedures for their replacement. Please contact us if you have any questions on the new process for appointment or replacement of a MLRO.
Firms in scope of the Introduced Business Guidance should revisit their anti-money laundering policies and procedures to determine whether any changes need to be made as a result.
Walkers' Regulatory & Risk Advisory practice group comprises a team of dedicated specialist lawyers who will be happy to advise on all aspects of compliance with the AML Regulations, the Code and the Introduced Business Guidance.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
