MLROs change jobs like anyone else. Sometimes the departure is planned, with months of notice and an orderly transition. More often it is sudden: a resignation with a short notice period, a long-term absence, or a falling-out with the board. Either way, the firm faces a problem that most other senior departures do not create. The money laundering reporting role cannot sit empty, even for a few days, and a poor handover can leave the incoming MLRO personally exposed for decisions they never saw.
This article sets out what a firm needs to do when its MLRO leaves, and what a new MLRO should insist on inheriting.
Why MLRO handovers are different
Three features of the role make the handover unusually important.
The role is continuous. Under the Money Laundering Regulations 2017, the firm must have a nominated officer at all times to receive internal reports. If staff have nobody to report suspicions to, the firm is in breach, and so potentially are the individuals who could not report.
Decisions are personal. The nominated officer’s decision whether to make a suspicious activity report is theirs. A new MLRO who inherits half-finished cases needs to understand the reasoning behind them, because they may have to defend it.
Open matters have deadlines. Requests to the National Crime Agency for a defence against money laundering run to statutory time limits. Miss one in the confusion of a handover and the firm can find itself unable to act on a customer’s instructions, or acting without a defence. FD Capital’s article on DAML requests in practice explains the timings.
At firms within the Senior Managers regime there is a fourth point. The MLRO usually holds SMF17, and the replacement needs FCA approval. SMF Capital’s guide to MLRO recruitment (SMF17) covers that process.
Step one: secure cover immediately
The first job when an MLRO leaves is to make sure someone can receive reports from day one. That might be a deputy MLRO, a suitably experienced member of the compliance team, or an interim MLRO brought in for the purpose.
At SMCR firms, the 12-week rule allows someone to perform a Senior Manager Function temporarily when the holder leaves unexpectedly. Following the April 2026 reforms, the firm must submit an approval application within those 12 weeks if the person covering is to continue. The cover arrangement should be documented, the FCA notified where required, and the person covering made aware of their personal responsibilities.
If you have no deputy, SMF Capital’s urgent SMF replacement and interim MLRO services exist for exactly this situation. Its article on whether you need a deputy MLRO is worth reading once the immediate pressure has passed.
The handover checklist
Whether the outgoing MLRO is still in the building or has already gone, the incoming MLRO should receive the following. Where the outgoing MLRO is unavailable, the firm should reconstruct as much as it can from its own records.
1. Open internal reports and SARs
- A register of all internal suspicion reports received, with their status
- Any reports still under review, with the evidence gathered and the outgoing MLRO’s current view
- Suspicious activity reports submitted in the last year, with the reasoning for each
- Decisions not to report, with the documented rationale
SMF Capital’s guide to suspicious activity reports and the nominated officer sets out what good documentation looks like.
2. Live DAML requests and restrictions
- Every open request for a defence against money laundering, with submission dates and deadlines
- Accounts or transactions currently restricted, and why
- Any correspondence with the NCA or law enforcement, including production orders and information requests
3. The risk framework
- The current business-wide risk assessment and when it was last approved. See SMF Capital’s guide to the business-wide risk assessment.
- Customer risk assessment methodology and any recent changes
- Policies and procedures, with their approval history
- Any known gaps, open findings or remediation work
4. Monitoring and screening
- Transaction monitoring rules or scenarios, recent tuning decisions and alert backlogs
- Sanctions and PEP screening arrangements, including how false positives are handled. FD Capital’s article on PEP screening at scale is a useful reference.
- Outstanding periodic reviews and enhanced due diligence cases
5. Governance and reporting
- The most recent annual MLRO report and the board’s response to it. FD Capital’s guide to what the board should expect from the MLRO annual report sets the standard.
- Management information packs and the committee they go to
- Internal audit and compliance monitoring findings on financial crime
- The MLRO’s Statement of Responsibilities, where the firm is within the Senior Managers regime
6. Regulators and third parties
- Open correspondence with the FCA on financial crime matters
- Any skilled person review, Dear CEO letter actions or supervisory commitments
- Outsourced providers, screening vendors and their contracts
- Agents, distributors or partners whose financial crime controls the firm oversees
What a new MLRO should ask before accepting
Experienced MLRO candidates increasingly ask about the handover before they accept an offer, and good firms welcome the questions. If you are the incoming MLRO, ask:
- Why did my predecessor leave, and can I speak to them?
- Are there any open SARs, DAML requests or law enforcement matters I will inherit?
- When was the business-wide risk assessment last refreshed, and does the board agree with it?
- What did the last internal audit or skilled person review find, and what is outstanding?
- What resources will I have, and who covers when I am absent?
- Who will I report to, and do I have direct access to the board?
The answers tell a candidate a great deal about the firm’s culture. A firm that cannot answer them is a firm where the new MLRO will spend their first months uncovering problems someone else created.
The first 90 days
A sensible new MLRO uses the first three months to understand the firm before changing it. In practice that usually means:
- Weeks one and two: take control of open reports and DAML requests, confirm reporting lines, and make sure staff know who to report to.
- Weeks three to six: review the business-wide risk assessment, policies and monitoring, and meet the people who run them.
- Weeks seven to twelve: report to the board on what they have found, including any gaps, and agree a plan and the resources to deliver it.
That first board report matters. It sets a baseline the new MLRO can be measured against, and it protects them if problems they inherited surface later. Under the Duty of Responsibility at SMCR firms, being able to show that you took reasonable steps once you were in role is important. SMF Capital’s guide to the Duty of Responsibility and reasonable steps explains why.
When the MLRO leaves on difficult terms
Not every departure is amicable. An MLRO who resigns after a disagreement with the board, or who is asked to leave, may be unwilling to help with the handover, and in some cases the reasons for their departure are themselves relevant to the regulator.
In that situation, the firm should secure the MLRO’s records before access is removed, including email, case files and any notes held outside the firm’s systems. It should review whether the departure needs to be notified to the FCA, and whether the outgoing MLRO raised concerns that the firm has not resolved. If they did, the incoming MLRO needs to know about them on day one, and the board should expect the regulator to ask. A regulatory reference for the departing MLRO must also be accurate and complete; SMF Capital’s guide to regulatory references and the six-year rule sets out the firm’s obligations.
A contentious departure is also a signal worth reading. If two MLROs have left in quick succession, the problem is rarely the individuals. Before hiring a third, it is worth asking whether the role has the authority and resources it needs, and whether the board is hearing what its MLRO tells it. Our sister practice Exec Capital and NED Capital are often involved at this point, when the fix sits with the executive team or the board rather than the MLRO seat.
Common handover failures
No register of open matters. The outgoing MLRO kept cases in their inbox. The firm only discovers a live DAML request when a customer complains that a payment has not been made.
A cover arrangement nobody told staff about. The firm appointed an interim MLRO, but front-line staff still email the old address. Reports go unread.
Inheriting a stale risk assessment. The business-wide risk assessment has not been refreshed since a new product launched. The new MLRO is accountable for a framework that no longer matches the business.
Rushing the permanent hire. Under pressure to fill the gap, the firm appoints the first available candidate. A short interim appointment while the permanent search runs properly is usually the better choice.
Planning ahead
The best time to plan an MLRO handover is before anyone resigns. Firms that maintain a register of open matters, keep the risk assessment current, document reporting decisions properly and have a named deputy can absorb an MLRO departure with very little disruption. SMF Capital’s governance and SMF structure review can test whether your arrangements would survive one.
When the time comes to replace an MLRO, MLRO Capital’s searches are delivered by SMF Capital and led personally by Adrian Lawrence FCA. For combined roles at smaller firms, see SMF Capital’s compliance officer and MLRO recruitment; for brokers specifically, our sister site Broker Recruit covers compliance and MLRO hiring for FCA-regulated broking firms.
