Most small and mid-sized FCA-regulated firms do not need a full-time Head of Compliance and a separate full-time Money Laundering Reporting Officer. What they need is one credible, approved person covering both functions for two or three days a month, with the experience to handle a supervisory call without the firm having to scramble. That is the dual SMF16/SMF17 appointment, and it is the single most common senior manager structure we are asked to fill.
FD Capital places fractional, part-time and interim holders of SMF16 Compliance Oversight and SMF17 Money Laundering Reporting Officer across payments, consumer credit, wealth management, insurance distribution and cryptoasset firms. We place them separately where that is right, and together in one person where the firm is small enough that splitting them would be artificial.
What a dual SMF16/17 appointment actually is
SMF16 and SMF17 are two distinct senior management functions under the Senior Managers and Certification Regime. SMF16 carries responsibility for the firm’s compliance function and its compliance monitoring programme. SMF17 is the Money Laundering Reporting Officer, the individual the firm’s staff report suspicions to and the person who decides whether a Suspicious Activity Report goes to the National Crime Agency.
They are different jobs with different legal underpinnings. SMF16 sits within the FCA Handbook, principally SYSC 6. SMF17 derives from the Money Laundering Regulations 2017 as well as the Handbook. One is about whether the firm follows its rules; the other is about whether the firm is being used to launder money.
Holding both is not a shortcut. It means one individual is personally accountable for both sets of obligations, has a Statement of Responsibilities covering both, and will be asked about both if the FCA comes calling. The FCA permits it, routinely, for firms where the scale and complexity make it proportionate. What it does not permit is one person nominally holding both while doing the work of neither.
When one person holding both functions works
In our experience the structure holds up well where the firm has a straightforward business model, a manageable transaction volume, and a compliance workload that genuinely fits into the days being bought. A directly authorised mortgage or insurance broker, a small discretionary wealth manager, an EMI or API in its first two years, a consumer credit lender with a single product line — these are firms where a competent dual holder with two or three days a month can do the job properly.
It works best when the person is senior enough to say no. The most common failure we see is not a lack of technical knowledge; it is a compliance officer who is too junior, or too commercially dependent on the engagement, to tell a founder that something cannot be done. A fractional holder with twenty years behind them and several other clients is structurally better placed to give that answer than an employee whose entire income depends on the firm.
When it does not work
There are firms where we will advise against it, and we would rather say so at the quote stage than place someone into a role that will not survive its first supervisory visit.
High transaction volumes are the clearest signal. Once a payments firm is processing meaningful volume, the SMF17 workload alone — transaction monitoring alerts, escalations, SAR decisions, source of funds enquiries — becomes a full-time job before anyone has looked at the compliance monitoring programme. Firms in or approaching an FCA review, firms with a remediation plan, firms that have just had a Section 166 skilled person appointed, and firms whose business model involves higher-risk jurisdictions or politically exposed persons all need the functions separated.
Growth is the quiet one. A structure that was proportionate at authorisation stops being proportionate somewhere around the point the firm doubles. Very few firms notice the moment it happens. We build a review point into the engagement for exactly this reason.
What it costs and how much time it takes
Fractional SMF16/17 engagements are usually priced on a day rate with an agreed minimum number of days a month, rather than as a retainer for unlimited availability. That matters, because the two most common sources of friction in these arrangements are a firm that assumed the day rate covered everything and a holder who is being called at all hours without it being reflected anywhere.
For a small directly authorised firm, two to three days a month is a realistic baseline for the combined role: time for the compliance monitoring programme, the MLRO annual report, board reporting, staff training, policy review, and the inevitable ad hoc questions. Firms in authorisation, or in their first year after it, should budget for more. We will tell you candidly if the days you have in mind do not match the work you have described, because an underfunded compliance function is worse than an honest conversation about cost.
What good looks like in a dual holder
The person you want has held both functions at a firm of roughly your size and in roughly your sector, has been through at least one FCA interaction they can talk about in detail, and can explain the reasoning behind a decision rather than citing a rule number. They should be able to tell you about a time they were overruled and what they did next.
Credentials matter but they are not the whole picture. Most strong candidates will hold a relevant qualification, often ICA or CISI, and the fit and proper assessment is non-negotiable. But the differentiator in this market is judgement under commercial pressure, and that only shows up in references and in how someone answers a difficult hypothetical in interview.
We also look hard at capacity. A fractional holder with eleven other clients is not going to give you the attention you are paying for, and the FCA has shown increasing interest in how many senior management functions one individual holds across firms. We ask the question during the search rather than leaving you to discover the answer later.
Getting the appointment approved
Both SMF16 and SMF17 are pre-approval functions. The individual cannot start until the FCA has approved them, which means a Form A submitted through Connect, a Statement of Responsibilities, and evidence supporting the fit and proper assessment. Where one person is taking both functions, the Statement of Responsibilities needs to show clearly how both sets of responsibilities are discharged and what happens when they conflict.
Timing is the thing firms consistently underestimate. Straightforward applications are often determined inside a couple of months, but the statutory window is longer and applications with any complexity routinely take it. Our guide to how long FCA SMF approval takes sets out what drives the variance, and if the appointment is part of an authorisation application rather than a change at an existing firm, SMF appointments during FCA authorisation covers how the two processes interact.
Candidates increasingly face an FCA interview, particularly at firms the regulator is paying attention to. We prepare ours for it; our guide on what to expect in an FCA SMF interview is the same material we talk candidates through.
The key person risk nobody budgets for
Combining the functions concentrates risk. If your dual SMF16/17 holder resigns, you have not lost one approved person — you have lost two senior management functions on the same day, and the firm is immediately carrying two gaps it must notify the FCA about.
The twelve-week rule gives you temporary breathing space, but it is narrower than most firms assume and it is not a plan. We have written up how it works, and what to do in the first fortnight, in SMF16 or SMF17 resigned? Temporary cover and the 12-week rule. Firms that have thought about succession before they need it — a named deputy, a standing relationship with a recruiter who knows the market, a second approved individual who could step across — recover from this in weeks. Firms that have not can spend months exposed.
The other side of the same coin is personal: the individual taking both functions is accepting accountability for both. Good candidates understand this and price it in. Our note on what senior managers actually risk is worth reading before you make an offer, because a candidate who has not thought about it is a candidate who may withdraw late.
Sectors we cover
Payments and e-money firms are the largest part of our dual SMF16/17 work, followed by consumer credit, wealth and investment management, insurance distribution and cryptoasset firms. Cryptoasset businesses bring their own complications around registration, travel rule obligations and the expectations of banking partners, and we have set those out separately in SMF16 and SMF17 for cryptoasset firms.
Where a firm needs the functions split rather than combined, we recruit each individually: fractional compliance officers and chief compliance officers on the SMF16 side, and MLROs and deputy MLROs on the SMF17 side. Where the finance function is also regulated, SMF2 regulated CFO recruitment is handled by the same team.
How we run the search
We start with a conversation about what the firm actually does, not a job specification. The brief that arrives is frequently not the brief that is needed — a firm asking for a full-time Head of Compliance often needs a fractional dual holder, and occasionally the reverse. We will say so.
From there we work our own network rather than advertising, because the strongest dual holders are already engaged and are not reading job boards. On fractional and interim mandates we aim to have a shortlist with you inside 72 hours, which is what this market demands; permanent searches take longer and should. Every candidate is referenced on judgement and capacity, not just competence, and we will tell you where someone is a stretch rather than presenting a shortlist of equals when they are not.
Frequently asked questions
Can one person really hold both SMF16 and SMF17?
Yes, and many smaller firms do. The FCA accepts the arrangement where it is proportionate to the firm’s size, nature and complexity. What matters is that the work is genuinely done and that the Statement of Responsibilities reflects both functions properly.
Does a fractional holder need to be an employee?
No. Senior management functions can be held by individuals engaged on a consultancy basis, and a great many are. The firm still owns the obligations, and the individual still carries personal accountability, regardless of the contractual wrapper.
How many days a month should we budget?
Two to three days a month is a reasonable starting point for a small directly authorised firm with a single product line. Firms in authorisation, growing quickly, or carrying a remediation plan should expect more. We will give you an honest view against your actual activity rather than quoting the number you were hoping for.
What happens if our firm outgrows the arrangement?
You split the functions. That is a normal and healthy progression, not a failure. We build a review point into engagements so the conversation happens on a planned basis rather than during a supervisory visit.
How quickly can you find someone?
For fractional and interim appointments we generally have a shortlist with you within 72 hours. The constraint afterwards is FCA approval rather than candidate availability, which is why firms facing a resignation should start the search immediately rather than waiting for the notice period to run.
Talk to us
Need an SMF16, an SMF17, or one person for both?
Tell us what the firm does and where it is going, and we will tell you honestly whether a dual appointment is the right structure. If it is not, we will say so before you spend anything.
Related SMF16 and SMF17 services and guides
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About the author
Adrian Lawrence FCA
Adrian is the founder and Managing Director of FD Capital. A Chartered Accountant and ICAEW Fellow, he became a finance director at 28 and has spent more than 25 years at C-suite level, including as finance director of a listed company and of a private equity backed management buy-out. Every search is run by our specialist team, with Adrian overseeing each mandate.
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