Why Combined Roles Outgrow Themselves

A combined SMF16 and SMF17 appointment is built on three assumptions: that the firm’s conduct risk is moderate, that its financial crime risk is moderate, and that one person has enough time to oversee both properly. When the firm was authorised, or when the role was last reviewed, all three were probably true. Growth tends to erode them gradually. Each new product, customer segment or distribution channel adds a little to one side or the other, and a role sized for the firm of two years ago quietly becomes too much for one person.

The regulator’s expectations don’t change with the firm’s growth. The FCA still expects an adequately resourced compliance function under SYSC 6.1 and an MLRO with sufficient resources and independence under SYSC 6.3. A combined holder who is stretched across both functions is a risk to the firm and a personal risk to the individual, who carries Senior Manager accountability for each.

If you are still deciding whether to combine the roles in the first place, our page on combined compliance officer and MLRO recruitment sets out a practical test. This article is for firms that already have a combined holder and are wondering whether it still works.

The Warning Signs

The signs that a combined role has outgrown one person tend to show up in the same places. Boards should watch for them in management information, in board reports and in conversations with the holder.

One sign on its own isn’t necessarily a reason to split the role. Two or three together, persisting over several months, usually are.

The Lopsided Holder Problem

One warning sign deserves particular attention because it is so common and so easy to miss. Most compliance professionals lean one way. Some are conduct specialists who are comfortable with the monitoring plan, financial promotions and the Consumer Duty, and less comfortable making suspicious activity decisions. Others are financial crime specialists who know customer due diligence, transaction monitoring and sanctions inside out, but have never run a compliance monitoring programme.

When the combined role is under pressure, the holder naturally spends their limited time on the side they know best. Their board reports start to reflect it: detailed and confident on one function, thin on the other. Over time, the weaker side drifts. This isn’t a failing of the individual. It’s the predictable result of asking one person to cover more than the time allows. But it is exactly the pattern a supervisor or skilled person will spot, so boards should ask directly whether both functions are getting the attention they need.

Business Changes That Usually Trigger a Split

Some changes are so likely to push a combined role past its limit that they should prompt a review in their own right:

• A step change in customer numbers or transaction volumes. More customers means more onboarding, more alerts and more complaints, all at once.
• Higher-risk customers or markets. International clients, politically exposed persons, cross-border payments or exposure to fast-changing sanctions regimes raise the financial crime load sharply.
• New regulated activities or permissions. A new permission brings new conduct rules, new reporting and often new financial crime risks.
• Moving from Core to Enhanced status. Enhanced firms face wider Senior Manager requirements and a more demanding supervisory relationship. Our guide to becoming an Enhanced firm covers the hires that come with it.
• Appointed representatives. Taking on ARs adds a substantial oversight burden that falls mainly on the compliance side.
• Acquisitions. Integrating another regulated business can double the work overnight.
• A remediation programme or skilled person review. Remediation work rarely fits around a day job, combined or not.

Split or Support? Three Options

A stretched combined holder doesn’t always mean the roles must be split immediately. There are three realistic options, and the right one depends on how far the firm has outgrown the current arrangement.

Adding analysts, outsourcing routine file checks or screening, or bringing in a deputy MLRO are all ways to extend the life of a combined role. Our guide to who supports your SMF16 and SMF17 covers the support roles in more detail. But support only delays the decision if the underlying risk keeps growing.

Which Function Should the Current Holder Keep?

When the firm decides to split the roles, the obvious question is which one the current holder keeps. The usual answer is the one that matches their strengths and experience. A holder with a deep financial crime background usually keeps SMF17 and the firm recruits a compliance officer. A conduct specialist usually keeps SMF16 and the firm recruits an MLRO.

Three other factors also matter:

• Where the firm’s risk is growing. If the growth is in financial crime risk, the firm may want a new, specialist MLRO, even if the current holder could keep the role.
• What the market can supply. Experienced MLROs in some sectors, such as payments and crypto, are scarce. The firm may be better off keeping a strong existing MLRO and recruiting on the compliance side.
• What the holder wants. A combined holder who has been carrying both roles under pressure often has a clear view of which one they would rather keep. That view is worth hearing early.

Once the decision is made, the firm recruits for the other function. Our pages on compliance officer recruitment (SMF16) and MLRO recruitment (SMF17) set out how we run each search.

Managing the Transition

Splitting a combined role involves a recruitment, an FCA approval and a change to the firm’s responsibilities documents. Handled well, it strengthens the firm’s position. Handled badly, it creates exactly the gap it was meant to close. A practical sequence:

• Agree the decision at board level and minute the reasons. The rationale matters if the FCA asks later.
• Confirm which function the current holder keeps. Update their Statement of Responsibilities once the new appointment is approved.
• Recruit the new Senior Manager. Allow for notice periods of three months or more, plus the regulator’s decision time.
• Apply for approval. The new holder needs FCA approval before they start performing the function. Our guide to managing the gap between offer and start covers this period.
• Keep the combined holder in place until the new person is approved. The current holder continues to hold both functions, ideally with extra support, until the handover.
• Plan a proper handover. Open cases, the risk assessment, regulatory correspondence and the monitoring plan should be documented. Our guide to Senior Manager handovers sets out what to include.
• Update the firm’s records. Revise the responsibilities map, notify the FCA of the change to the existing holder’s functions, and update policies that name the MLRO or compliance officer.

If the pressure on the combined holder is acute, an interim MLRO or compliance officer can take on one function while the permanent search runs. The interim needs FCA approval too, unless the firm can rely on the 12-week rule for temporary cover.

What Not to Do

A few mistakes come up repeatedly when firms split a combined role:

Frequently Asked Questions

Does the FCA say when a combined role must be split?

No. There is no size threshold in the rules. The FCA expects each function to be adequately resourced for the firm’s size, risks and activities, and the firm should be able to explain why its structure works.

Can the current holder keep both roles while we recruit?

Yes. They remain approved for both functions until the new appointment is approved and the firm notifies the change. Extra support during that period is sensible.

Do we need to tell the FCA we are splitting the role?

Yes. The new holder needs approval, and the existing holder’s functions and Statement of Responsibilities change, which must be notified using the appropriate forms.

Is a deputy MLRO enough instead of a split?

Sometimes. A deputy can extend the life of a combined role where the holder has the expertise but not the time. If the financial crime risk keeps growing, a dedicated MLRO usually follows.

How long does the whole process take?

Typically four to six months from decision to the new Senior Manager starting, depending on notice periods and the regulator’s decision time.