What you need to know about a BVI MLRO

Certain BVI entities must appoint an MLRO in order to comply with their obligations under the BVI AML laws (BVI AML Laws), which include the BVI Anti-Money Laundering Regulations (Revised 2020) (as amended) and the Anti-Money Laundering and Terrorist Financing Code of Practice (Revised 2020) (as amended) (the AML Code). 

Any BVI entity undertaking "relevant business" is deemed to be a "relevant person" under the BVI AML Laws and must appoint an MLRO. This includes:

• BVI Mutual Funds – meaning BVI professional funds, private funds, public funds, approved funds and incubator funds
• BVI private investment funds (PIFs)
• BVI Approved Managers
• BVI entities that are licensed under the Banks and Trust Companies Act 1990 (as amended) (BTCA), the Securities and Investment Business Act 2010 (as amended) (SIBA) or the Financing and Money Services Act 2009 (as amended) (FMSA)

An MLRO must be a natural person who meets the qualifications and requirements under the BVI AML Laws (Statutory Requirements) to perform the functions of an MLRO, which include:

• at the minimum hold a diploma with a post qualification experience of no less than three years
• being "fit and proper"
• having a broad knowledge of anti-money laundering, terrorist financing and proliferation financing matters, including knowledge of regional and international treaties (including United Nations Security Council Resolutions) relating to combating money laundering, terrorist financing and proliferation financing
• having a good appreciation and understanding of BVI laws relating to money laundering, terrorist financing and proliferation financing
• possessing the ability to make independent and analytical decisions
• not being easily susceptible to undue influence

An MLRO must be of sufficient seniority (that is, an appointment at a senior management level) to perform the functions imposed on them under BVI AML Laws.

When carrying out their duties, an MLRO must understand the business of the relevant BVI entity and be well versed in the different types of transaction and products which the BVI entity handles and which may give rise to opportunities for money laundering, terrorist financing or proliferation financing.

An MLRO does not need to be an employee of the BVI entity, as long as the person meets the Statutory Requirements. While the role can be outsourced, in practice we often see the MLRO role for a BVI entity undertaken by a suitably qualified director or senior officer of the entity, particularly for Approved Managers. This is permitted where the BVI entity has three or fewer employees, subject to approval by the BVI Financial Services Commission (FSC) / BVI Financial Investigation Agency (FIA), if required. 

For investment funds an individual in the investment manager's compliance team or one of the directors will typically take the role. Alternatively, an individual from within the fund's administrator may take the role, although not all fund administrators offer MLRO services.

Mutual funds, PIFs and Approved Managers do not need to obtain FSC consent prior to appointing an MLRO. However, details of the first MLRO have to be provided to the FSC as part of the initial licensing application and any new appointments must be notified to the FSC within 14 days of the appointment. 

Following the introduction of The Anti-Money Laundering (Amendment) Regulations, 2024 (AML Amendment Regulations), all other "relevant persons" under the BVI AML Laws are now required to apply for and obtain the prior consent of either the FIA or the FSC before appointing an MLRO. An application is made to:

• the FIA, if the relevant person is a Designated Non-Financial Business and Profession which the FIA exercises supervisory power over in respect of money laundering, terrorist financing and proliferation financing purposes
• the FIA, if a non-profit organisation is identified by the FIA as engaging primarily in raising and distributing funds which the FIA exercises supervisory responsibility over
• the FSC, if the relevant person is regulated by the FSC (for example, BVI entities that are licensed under the BTCA, SIBA or FMSA), save where under any enactment the approval of the FSC is not required (such as Mutual Funds, PIFs and Approved Managers)

The AML Amendment Regulations provide that the FIA / FSC use various methods for establishing if an MLRO meets the Statutory Requirements. This includes requiring supporting documents to be provided, conducting an interview in person or subjecting the person to such specific or general tests as considered necessary.

The FIA / FSC will grant approval for the appointment when they are satisfied that:

• the person to be appointed as an MLRO meets the Statutory Requirements
• the person will, after appointment, be able to perform the functions of an MLRO
• it is not against the public interest to appoint the person as an MLRO 

An MLRO has a critical role to play in monitoring and implementing a BVI entity's anti-money laundering regime.

Guidance notes in the AML Code explain that the role includes monitoring adherence to the BVI entity's internal controls and systems to ensure full compliance with all enactments relating to anti-money laundering and countering terrorist financing and proliferation financing (AML / CFT / CPF). The MLRO must be central to the reporting process and nothing should be withheld from them by the BVI entity in terms of compliance measures relative to AML /CFT / CPF matters.

The role includes:

• being the person to whom all internal reports of suspicious activities or transactions (or attempted activities or transactions) relevant to money laundering, terrorist financing or proliferation financing that are to be reported under the BVI entity's internal reporting procedures are to be made
• determining whether or not a suspicious activity report (SAR) should be made to the FIA and, where relevant, filing SARs with the FIA
• being responsible for ensuring compliance by the staff of the relevant person with:
  • the provisions of the BVI AML Laws, the Proceeds of Criminal Conduct Act (Revised 2020) (as amended) and any other enactment relating to money laundering, terrorist financing and proliferation financing
  • the provisions of any internal reporting and manual of compliance procedures relating to money laundering, terrorist financing and proliferation financing 
  • any additional reporting and related obligations provided in any other enactment relating to money laundering, terrorist financing and proliferation financing
• acting as the liaison between the BVI entity and the FSC / FIA in matters relating to compliance with the provisions of the BVI AML Laws and any other enactment relating to money laundering, terrorist financing and proliferation financing

An MLRO must be given sufficient time and resources to enable them to perform their duties as MLRO, including having direct access to senior management with respect to matters concerning the prevention of money laundering, terrorist financing and proliferation financing. The MLRO should also have access to all relevant information and material regarding the relevant person to enable the MLRO to perform their functions.

On receipt of an internal report concerning a suspicious activity or transaction, an MLRO must investigate the details of the report and determine whether the information contained in the report supports the suspicion and if there is a need under the circumstances to submit a report to the FIA. 

If the MLRO determines that a SAR should be filed with the FIA, the report should be promptly made using the FIA's standard reporting form and the BVI entity's directors notified accordingly.

If the MLRO decides that the information does not substantiate a suspicion of money laundering, terrorist financing or proliferation financing, the MLRO is required to:

• record that decision, outlining the nature of the information relating to the suspicious activity, the date they received the information, the full name of the person who provided the MLRO with the information and the date they took the decision that the information did not substantiate a suspicion of money laundering or terrorist financing
• state the reason (or reasons) for the decision
• make the record for the decision available to the FIA or FSC in an inspection or whenever requested 

Where an MLRO is uncertain as to whether the details of the report they received substantiate the suspicion, the MLRO should make a report of the suspicion to the FIA.

The BVI entity must maintain a register of money laundering reports and inquiries made to the FIA. In practice, this register is usually maintained by the MLRO. 

For Mutual Funds, PIFs and Approved Managers (that is entities that do not require prior consent for the MLRO appointment), where an MLRO ceases to hold such office, the FSC should be notified in writing within 14 days. As noted above, any new appointments must also be notified to the FSC within 14 days of the appointment.

For all other relevant persons, where an MLRO ceases to hold such office:

• the FSC / FIA (as relevant) should be notified in writing within 14 days
• an application for the appointment of a new MLRO shall be submitted to the FSC / FIA within 21 days after the date the person ceased to hold such office

The approval for an MLRO can be withdrawn by the FIA or FSC where they:

• believe that an MLRO no longer satisfies the Statutory Requirements
• believe that the approval of appointment of an MLRO was founded on fraud or misrepresentation
• believe that an MLRO has otherwise contravened or failed to comply with a provision of BVI AML Laws or any other enactment relating to money laundering, terrorist financing and proliferation financing
• are satisfied that enforcement action has been taken against an MLRO in accordance with relevant BVI laws
• consider, for any other good reason, that the continued approval of a person as an MLRO is no longer in the public interest 

In these circumstances, the FSC / FIA may issue a warning to, or suspend or withdraw the approval of appointment of the MLRO.

Before suspending or withdrawing approval for an MLRO, the FIA / FSC will give the relevant person at least 14 days' written notice of its intention to do so, inviting the relevant person to make written representations. At the end of such period, the FSC / FIA will either proceed to issue a warning to, suspend or withdraw the approval of appointment of the MLRO or rescind its intention to do so.

Where the FIA / FSC suspends the approval of an MLRO, it shall be for an initial maximum period of 30 days, which can be renewed for a further period of up to 30 days.

Anti-money laundering procedures are taken very seriously in the BVI and there are severe penalties for failure to comply with BVI AML Laws. 

Penalties for contravention of BVI AML Laws can apply both to individuals and entities under the AML Code. Penalties range from US$60,000 to US$150,000 per offence including each failure to comply with specific requirements. Proceedings can also be taken under the Proceeds of Criminal Conduct Act (Revised 2020) (as amended). Offences under the AML Code include failure by an employee to report a suspicious activity or transaction. 

In proceedings against a person for an offence under the AML Regulations, it is a defence for the person to prove that they took all reasonable steps and exercised due diligence to comply with the requirements under the applicable BVI AML Laws. Therefore, it is important that the relevant person, its directors, employees and MLRO understand and comply with their respective obligations under the BVI AML Laws.