Why the Answer Depends on What You Sell

The Money Laundering Regulations 2017, and the “regulated sector” in the Proceeds of Crime Act 2002, bring insurance firms into scope only in respect of contracts of long-term insurance: life cover, pensions and investment-type insurance. General insurance, such as commercial property, liability, motor, home and travel, is outside that definition.

Under the SMCR, the money laundering reporting function, SMF17, applies to firms that are subject to the Money Laundering Regulations. So a broker that only arranges general insurance usually doesn’t need an approved MLRO. A broker that also arranges life, protection with an investment element or other long-term business usually does.

Confirm your position with your regulatory adviser before you finalise your application or structure. Products change over time, and adding a single long-term line can bring the firm into scope.

What a Broker Outside the Regulations Still Has to Do

Being outside the Money Laundering Regulations doesn’t mean financial crime stops being your problem:

• Sanctions: UK financial sanctions apply to everyone. Brokers must not deal with designated persons, and must report to OFSI where they know or suspect a breach. See sanctions screening explained.
• The principal money laundering offences: the offences of concealing, arranging and acquiring criminal property apply to all businesses. A broker that suspects a premium or claim involves criminal property should report it to the National Crime Agency and may need a defence before proceeding. See suspicious activity reports explained.
• Insurance fraud: application fraud, ghost broking and claims fraud are real risks for brokers, and insurers will expect controls.
• Financial crime systems: the FCA’s systems and controls rules require firms to counter the risk of being used to further financial crime, whether or not they are within the regulations.
• The failure to prevent fraud offence: since September 2025, large organisations can be liable for fraud by associated persons; most small brokers are below the size thresholds, but larger ones should check. See the failure to prevent fraud offence.

In practice, at a general insurance broker these responsibilities usually sit with the compliance officer, the SMF16. That is why the experience of your compliance officer matters: they need to understand sanctions, fraud and suspicious activity reporting, not only conduct rules. See compliance officer for insurance brokers.

When You Do Need an MLRO

If your broker is within the regulations, you need a nominated officer to receive internal reports and decide whether to report to the NCA, and at an SMCR firm that person is approved as SMF17. They will own the business-wide risk assessment, customer due diligence, ongoing monitoring and training. At a small broker the compliance officer often holds both functions, and a fractional appointment can work well. See MLRO recruitment, fractional MLRO recruitment and the business-wide risk assessment.

Getting It Right in an Application

For a broker applying for authorisation, the FCA will want to see that the firm has thought about this rather than defaulted either way. A strong application:

• states clearly which products the firm will arrange and whether it is within the Money Laundering Regulations;
• names the compliance officer and, if needed, the MLRO;
• explains who owns sanctions screening, fraud controls and suspicious activity reporting;
• includes a financial crime policy proportionate to the firm’s actual risks; and
• shows how this will be reviewed if the product range changes.

Our guide to becoming a directly authorised insurance broker covers the rest of the application.

Common Mistakes

• Appointing an MLRO you don’t need: the cost of an extra Senior Manager, a Form A and more paperwork, for no regulatory benefit. Some brokers do it because a template application asked for one.
• Assuming “no MLRO” means “no financial crime work”: leaving sanctions, fraud and suspicious activity reporting with nobody.
• Not revisiting the position: adding a life or investment-linked product without realising it brings the firm into scope.
• Choosing a compliance officer with no financial crime experience: at a general insurance broker, they will be the person handling it.

What Insurers and Capacity Providers Will Expect

Even where the FCA doesn’t require an MLRO, the insurers and MGAs you place business with will ask about financial crime. Agency agreements and TOBAs commonly require sanctions screening of clients, prompt notification of suspected fraud and cooperation with investigations. Lloyd’s coverholders face their own sanctions and financial crime requirements. In due diligence questionnaires, a broker that can name who owns financial crime, show its screening process and produce a short policy will get through much faster than one that says “we don’t need an MLRO” and stops there.

Questions to Ask a Compliance Officer Candidate

If your compliance officer will own financial crime at a general insurance broker, test it at interview:

• How would you set up sanctions screening for new and renewing clients, and how often would you rescreen?
• Talk me through what you would do if an account handler suspected a premium was paid with criminal funds.
• What signs of ghost broking or application fraud would you train staff to look for?
• How would you decide whether a new product brings the firm within the Money Laundering Regulations?
• What would you report to the board each quarter on financial crime?

Good answers are specific and proportionate. Be wary of a candidate who wants to import a full bank-style AML framework into a ten-person commercial broker, and equally of one who thinks financial crime isn’t their job.

The Bottom Line

Most general insurance brokers need a capable compliance officer, not an MLRO. But that compliance officer must be able to handle financial crime risks the firm still faces. If your product range includes long-term insurance, or might in future, plan for an MLRO too. If you are recruiting for either role, our outsourced compliance officer and part-time compliance officer services cover the options for smaller brokers.

Frequently Asked Questions

Does a general insurance broker need an MLRO?

Usually not, because the Money Laundering Regulations cover insurance only in respect of long-term insurance. Brokers that also arrange life or investment-related insurance usually do.

Do sanctions rules still apply to general insurance brokers?

Yes. UK financial sanctions apply to everyone, regardless of the Money Laundering Regulations.

Can a general insurance broker still report suspicious activity?

Yes. The principal money laundering offences apply to all businesses, and brokers can report suspicions to the NCA.

Who handles financial crime at a broker without an MLRO?

Usually the compliance officer (SMF16), who should have sanctions, fraud and reporting experience.

What if we add a life product later?

The firm may come within the Money Laundering Regulations and need an approved MLRO. Review the position before launching the product.