Why Compliance Officers and MLROs Are So Hard to Hire
Ask any recruiter working in UK financial services which senior roles are hardest to fill, and two come up again and again: the compliance officer and the money laundering reporting officer. Under the Senior Managers and Certification Regime, these are the SMF16 and SMF17 functions, and almost every FCA-regulated firm within the regime needs someone approved to hold them. Demand has risen steadily, the pool of experienced, approvable candidates has not kept pace, and firms of every size are feeling it.
This article looks at what is driving the shortage, how firms are adapting, and what separates the hires that go well from the ones that stall.
Demand Keeps Rising
Several forces are pushing demand for compliance and financial crime leadership up at the same time.
New firms need credible people from day one
Payments, e-money and cryptoasset businesses applying to the FCA must name credible individuals in their applications. The regulator scrutinises these roles closely, so new entrants compete for experienced compliance officers and MLROs before they have revenue to pay for them.
The regulatory workload keeps growing
The Consumer Duty, operational resilience, stricter expectations on financial promotions, safeguarding requirements for payments firms and an ever-expanding sanctions regime have all added to the workload of compliance and financial crime functions. Roles that were once manageable part-time can now justify more senior attention.
Supervision is more demanding
Supervisors increasingly test whether controls work in practice, not just whether policies exist. That rewards compliance officers and MLROs with hands-on experience of running functions, and it exposes firms whose arrangements rely on someone without that depth.
Senior people move
Compliance officers and MLROs are among the most frequently recruited Senior Managers, and they change firms regularly. Every move creates a vacancy elsewhere, often at short notice, and the firm left behind has to arrange cover while it searches.
Supply Is Tight
On the other side of the market, the pool of suitable candidates is smaller than it looks. Plenty of people work in compliance and financial crime, but far fewer have held, or formally deputised for, a Senior Manager Function. Fewer still have the sector-specific experience firms want: a payments MLRO who understands authorised push payment fraud, a crypto MLRO who understands blockchain analytics and the travel rule, or a compliance officer who has embedded the Consumer Duty at a retail lender.
Approval adds another filter. Every candidate must be assessed by the regulator against the fit and proper standards before they can start, and firms reasonably want candidates whose approval is likely to be straightforward. That narrows the field further, and it means the best candidates often receive several approaches at once.
Three Ways Firms Are Responding
| Approach | Why firms use it | What to watch |
|---|---|---|
| Combining SMF16 and SMF17 in one person | One experienced individual covers both functions at smaller firms, at lower cost than two senior hires | The person must be genuinely strong in both disciplines, with enough time for each |
| Fractional appointments | Approved, experienced people working one to three days a week give smaller firms access to senior expertise | The time commitment must be realistic, with cover for urgent matters |
| Developing internal successors | Formal deputies build the track record the regulator looks for | Takes time; deputies need real responsibility, not just administrative support |
The Compliance Officer: What Firms Are Looking For
The SMF16 holder oversees the firm’s compliance with the FCA’s rules. In practice that means owning a risk-based compliance monitoring plan, keeping policies current, overseeing financial promotions and complaints, leading the firm’s response to regulatory change and reporting clearly to the board. Firms increasingly want compliance officers who can show the board evidence of good customer outcomes, not just a clean monitoring log.
The candidates in shortest supply combine three things: previous SMF16 approval or substantial formal deputising, real experience in the firm’s sector, and the confidence to challenge senior colleagues. SMF Capital’s page on SMF16 compliance officer recruitment sets out what the regulator expects of the role and how searches for it are run.
The MLRO: What Firms Are Looking For
The SMF17 holder is responsible for the firm’s anti-money laundering systems and controls, and usually acts as the nominated officer who decides whether suspicions must be reported to the National Crime Agency. The role carries specific legal duties as well as Senior Manager accountability, and it demands sound judgement under pressure.
Firms look for MLROs who have owned a business-wide risk assessment, made and defended suspicious activity decisions, worked with supervisors and, increasingly, led a team. Sector experience matters even more here than for compliance officers, because money laundering and fraud typologies differ so widely between payments, crypto, wealth management and lending. SMF Capital’s page on recruiting an MLRO covers the SMF17 function and the experience firms prioritise in each sector.
When One Person Holds Both
At many smaller firms, the most practical answer is a single person who is both compliance officer and MLRO. It’s a common and accepted structure, but it is also where hiring goes wrong most often. Most compliance professionals lean one way: some are conduct specialists with limited hands-on financial crime experience, others are financial crime specialists who have never run a compliance monitoring programme. A combined holder needs genuine depth in both, and the regulator will assess them against both functions.
Firms considering a combined role should ask whether their conduct and financial crime risks are moderate enough for one person to manage, whether that person will have enough time, and who will cover urgent decisions when they are away. SMF Capital’s page on joint SMF16 and SMF17 recruitment sets out how to decide whether to combine the roles and what to look for in a candidate who will hold both.
Hiring Well in a Tight Market
The firms that recruit compliance officers and MLROs successfully tend to do the same things:
- Decide the structure first. Separate roles, one combined holder, full-time or fractional. The answer shapes the whole search.
- Write the responsibilities down early. A draft Statement of Responsibilities clarifies what the person will be accountable for and is needed for the approval application anyway.
- Check approvability before the offer. Previous approvals, regulatory references and anything that might surface in background checks should be discussed early, in confidence.
- Move quickly. Strong candidates rarely stay available for long. A slow process loses them to firms that decide faster.
- Plan for the gap. Notice periods of three months or more, plus the regulator’s decision time, mean the time from offer to start can be long. Keep the candidate engaged and consider interim cover.
- Be realistic about pay. Approved, experienced compliance officers and MLROs know their value. Offers that ignore the market tend to be turned down.
What It Means for Compliance and Financial Crime Professionals
For people working towards a first Senior Manager role, the shortage is an opportunity, but only for those who can show the regulator the right evidence. The gap between a capable compliance manager and an approvable compliance officer is usually experience of carrying responsibility, not ability. Formal deputising for the current SMF16 or SMF17 holder, attending the board or its committees, owning a defined part of the function and dealing directly with the FCA all help build that record. So does breadth: compliance professionals who gain hands-on financial crime experience, and financial crime specialists who learn to run a compliance monitoring programme, become candidates for the combined roles that smaller firms find hardest to fill.
Experienced holders, meanwhile, have more choice than ever, including fractional portfolios across several smaller firms. That flexibility comes with responsibility. Each firm’s regulator will expect the holder to give it enough time and attention, so portfolio professionals need to be realistic about how many firms they can serve well.
The FCA’s guidance on the Senior Managers and Certification Regime and on the Consumer Duty is the best starting point for anyone preparing for one of these roles.
Looking Ahead
There is little sign of the pressure easing. New entrants continue to seek authorisation, regulatory expectations continue to rise, and the most experienced compliance officers and MLROs remain in high demand. For firms, the lesson is to treat these appointments as strategic rather than administrative: plan them early, decide the structure carefully and invest in the people who could step up next. For professionals in compliance and financial crime, it is a good time to build the experience that leads to approval, because the market for approved Senior Managers in these roles shows no sign of cooling.
About the author: Adrian Lawrence FCA is a Chartered Accountant and Fellow of the ICAEW, a former listed-company Finance Director, and the founder of SMF Capital, which recruits compliance officers, MLROs and other Senior Managers for FCA and PRA-regulated firms.
