What “Outsourced Compliance Officer” Really Means

Under the SMCR, the compliance oversight function, SMF16, must be held by an individual approved by the FCA. Accountability stays with that person and with the firm’s board; it can’t be transferred to a company. So when firms talk about an outsourced compliance officer, they usually mean one of three things:

The second and third are what most firms mean by an outsourced compliance officer. The first can be valuable, but it doesn’t give you an approved compliance officer. Our guide to what you can and can’t outsource explains the rules behind this, including the FCA’s outsourcing requirements in SYSC 8.

Who Uses an Outsourced Compliance Officer

• Small directly authorised firms: IFAs, mortgage brokers, insurance brokers and consumer credit firms
• Firms applying for authorisation, which need a named SMF16 before submission
• Payments, e-money and crypto firms in their first years
• Investment managers and family offices with a small regulated footprint
• Firms covering a gap while they recruit a permanent compliance officer

Often the same person also holds SMF17 as MLRO where the firm needs one; see combined compliance officer and MLRO.

What to Check Before You Appoint

• Approval history: have they held SMF16 before, at firms like yours? Check the FCA Register.
• Sector knowledge: an insurance broker needs someone who knows ICOBS and CASS 5; a payments firm needs safeguarding and financial crime experience.
• Time: how many days a month, and how many other firms they serve. Regulators will ask. See how many days a week.
• Availability: how quickly they respond between scheduled days, for complaints, incidents or regulator contact.
• Authority: direct access to the board and the right to see any information they need.
• Cover: who steps in if they are ill or leave, and how quickly.
• Insurance: directors’ and officers’ cover from the firm, and professional indemnity cover where they work through a consultancy.
• Contract: a written agreement covering the role, time, access, confidentiality, conflicts and exit; see fractional SMF agreements.

What a Good Outsourced Compliance Officer Does Each Month

• Runs the compliance monitoring programme and follows up findings; see what the board should see
• Reviews complaints, breaches and incidents, and decides what needs reporting to the FCA
• Approves financial promotions and checks customer communications
• Keeps policies current as rules change, such as the 2026 SMCR reforms
• Reviews management information on customer outcomes for the Consumer Duty
• Reports to the board, in writing, at least quarterly, and attends key meetings
• Prepares the annual compliance report and the board’s Consumer Duty assessment
• Acts as the firm’s contact with the FCA, or supports the director who is

If an arrangement doesn’t produce this kind of evidence, the firm will struggle to show the FCA that its compliance oversight is real.

Questions to Ask a Candidate or Provider

• Which firms like ours have you been approved for, and for how long?
• How many other firms do you serve, and how many days does each take?
• How quickly will you respond to an urgent issue on a day you aren’t scheduled?
• Who covers you when you are away, and are they approved or approvable?
• What will you report to the board, and how often?

What It Costs

See what a combined compliance officer and MLRO costs and our salary guide.

Common Mistakes

• Signing a consultancy contract and assuming it covers SMF16, when nobody has been approved
• Naming a director as compliance officer on top of a full-time commercial role; see when the managing director is also the compliance officer
• Choosing on price, then finding the individual has too many other firms to give yours real attention
• No plan for cover, so a holiday or resignation leaves the firm exposed
• Staying fractional after the firm has outgrown it; see fractional or full-time

Outsourced Compliance Officers by Sector

The right person depends heavily on sector. An insurance broker needs ICOBS and CASS 5 experience; a payments firm needs safeguarding and financial crime depth; an IFA needs advice suitability and Consumer Duty experience; a consumer credit firm needs affordability and arrears handling. We match on sector first, then on time and approval history.

When to Bring It In-House

An outsourced compliance officer suits many firms for years. The signs it is time to change are steady growth in volumes and complaints, new permissions or products, appointed representatives, a move towards Enhanced status, or supervisory concern about resourcing. Many firms then hire a permanent compliance officer and keep a consultancy for specialist reviews. See when to split a combined role.

How We Find an Outsourced Compliance Officer

We start with your firm: sector, permissions, risks, plans and how much time the role really needs. We then shortlist approved compliance officers with experience of firms like yours, check their other commitments and availability, and help agree terms. For fractional roles we usually shortlist within 72 hours. Our part-time compliance officer and fractional and interim SMF cover services explain the models, and our fractional MLRO service covers financial crime.

Frequently Asked Questions

Can a compliance consultancy be our compliance officer?

A consultancy can provide support, and can provide a named individual, but SMF16 must be held by an approved individual. Accountability can’t be outsourced to a company.

How much does an outsourced compliance officer cost?

Typically £650 to £1,000 a day for one to four days a month, often agreed as a monthly retainer.

Does the FCA accept part-time compliance officers?

Yes, where the time and experience are enough for the firm’s size and risks.

Can the same person be our MLRO?

Often, at smaller firms, if they have the experience and time for both roles. Each function needs approval.

How quickly can an outsourced compliance officer start?

Fractional candidates can often start within weeks, though they can’t perform SMF16 until approved, except under the 12-week rule for unexpected vacancies.