Funds of all shapes and sizes are susceptible to fraud committed internally by employees or external criminal groups – hactivists, terrorist groups – which can have a potentially devastating impact on shareholders, oblivious to the risks. This could lead to investors losing part or all of their investment while ongoing criminal investigations and court procedures play out. As such, the Money Laundering Reporting Officer (MLRO) is becoming a vital role in the operations of investment funds.
"Criminal activity and money laundering directly affect the confidence of the marketplace and restricts fair competition, which ultimately affects investors. MLROs are one of the key crime fighters in the chain with special skills and responsibilities to protect investors, mitigate losses and bring about confidence to the market," says Rayal Bodden, Director, Apex Fund Services.
MLROs should have in-depth training on all aspects of money laundering, legislation and how to detect criminal activity and money laundering efforts.
"Criminal activity and money laundering never sleeps so there is no room for complacency. Vigilance on ongoing training in the determination and reporting of suspicious activities and on new trends of criminal activity is a must and is often mandated by law or by the organisation's requirements," says Bodden.
From a regulatory perspective, the Cayman AML regime has been in place for over 15 years and includes the provision to appoint an MLRO to Cayman mutual funds. Funds may, however, meet the MLRO requirement through the appointment of a regulated third party such as their fund administrator.