Outsourced Compliance
Officer UK

An outsourced compliance officer is a regulatory compliance professional who provides compliance oversight to organisations on a part-time, retained, or contract basis rather than as a full-time employee. Also known as a fractional compliance officer, they perform the same critical functions as in-house compliance staff—but work across multiple client organisations.

In the UK regulatory environment, outsourced compliance officers play an increasingly vital role, particularly for FCA-authorised firms that require senior compliance oversight but lack the scale, budget, or need for a full-time appointment. The Senior Managers and Certification Regime (SM&CR) explicitly permits outsourcing of key compliance functions, including the SMF16 (Compliance Oversight) and SMF17 (Money Laundering Reporting Officer) roles.

Core Responsibilities

An outsourced compliance officer typically handles:

• Regulatory oversight — Ensuring the firm meets its FCA/regulatory obligations
• Compliance monitoring — Testing and reviewing business activities for compliance
• Policy and procedures — Developing and maintaining compliance policies
• Regulatory change management — Tracking and implementing regulatory changes
• Staff training — Compliance awareness and specific training programmes
• Regulatory liaison — Managing FCA relationships, s166 reviews, and regulatory enquiries
• Board and committee reporting — Compliance MI and risk reporting to governance bodies

The UK Market Context

The UK market for outsourced compliance has grown significantly since 2020, driven by several factors:

• FinTech proliferation — Hundreds of newly authorised EMIs, payment institutions, and consumer credit firms need compliance expertise
• Regulatory complexity — Consumer Duty, operational resilience, and ESG requirements demand specialist knowledge
• Crypto regulation — The FCA crypto registration regime created demand for AML-focused compliance officers
• Cost pressures — Economic uncertainty makes fractional models attractive versus £100k+ full-time hires
• Talent scarcity — Shortage of experienced compliance professionals, particularly with FCA approval history

Choosing between an outsourced compliance officer and an in-house hire is one of the most significant decisions for regulated UK firms. Each model has distinct advantages depending on your firm's size, complexity, and growth stage.

When Outsourced Compliance Works Best

• Firms with fewer than 50 employees
• Early-stage startups seeking FCA authorisation
• Companies needing specialist compliance skills (crypto, Consumer Duty)
• Firms requiring SMF cover during recruitment or transitions
• Businesses with straightforward regulatory footprints

When In-House Makes More Sense

• Firms with complex multi-entity structures
• Organisations requiring daily compliance presence
• Companies with 100+ staff and significant compliance workload
• Firms where compliance is strategically embedded in product development

SMF vs Non-SMF: What's the Difference?

Under the FCA's Senior Managers Regime, certain compliance functions require FCA pre-approval:

• SMF16 (Compliance Oversight) — The person responsible for the firm's compliance function. Required for most FCA-authorised firms.
• SMF17 (MLRO) — The Money Laundering Reporting Officer. Required for firms within scope of the Money Laundering Regulations.

Outsourced professionals can hold these SMF roles, but they are personally accountable to the FCA and subject to the Conduct Rules. The regulated firm retains overall responsibility for compliance—outsourcing doesn't transfer regulatory accountability.

The Fractional CCO Role

A fractional CCO (Chief Compliance Officer) provides executive-level compliance leadership on a part-time basis. This is the most common outsourced arrangement for regulated firms, typically involving:

• 1-2 days per week of scheduled time
• SMF16 accountability with the FCA
• Board and committee attendance
• Regulatory relationship management
• Strategic compliance direction

For UK firms regulated by the Financial Conduct Authority, compliance officer appointments must meet specific regulatory requirements—whether the role is in-house or outsourced.

SMF16: Compliance Oversight Function

The SMF16 holder has responsibility for the firm's compliance with FCA rules. Under SYSC 6.1, all FCA-authorised firms must allocate this function (with limited exemptions for very small firms).

Key requirements for SMF16:

• FCA pre-approval through Form A submission
• Fitness and propriety assessment (competence, honesty, financial soundness)
• Criminal records check (DBS)
• Regulatory references from previous employers
• Statement of Responsibilities defining accountability

SMF17: Money Laundering Reporting Officer

Firms within scope of the Money Laundering Regulations 2017 must appoint an MLRO with SMF17 approval. The MLRO is responsible for:

• Acting as the firm's nominated officer for SAR submissions to the NCA
• Overseeing the AML/CTF framework and policies
• Annual MLRO reporting to the board
• Staff AML training and awareness

Outsourcing and the FCA

The FCA permits outsourcing of compliance functions under SYSC 8 (outsourcing requirements), provided the firm:

• Maintains oversight of the outsourced function
• Has appropriate service level agreements in place
• Ensures the outsourced provider meets FCA requirements
• Retains ultimate responsibility for compliance (cannot "outsource" accountability)

Certain business situations make outsourced compliance particularly valuable. Here are the most common scenarios where firms engage fractional compliance support.

1. Seeking FCA Authorisation

Firms applying for FCA authorisation need to demonstrate robust compliance arrangements from day one. An experienced outsourced compliance officer can:

• Draft the compliance monitoring programme for the application
• Develop policies and procedures to FCA standards
• Be named as the proposed SMF16/SMF17 (often faster to approve than unknown candidates)
• Assist with regulatory business plan and financial projections

2. Early-Stage After Authorisation

Newly authorised firms often lack budget for a full-time compliance hire but need SMF coverage. Outsourced compliance bridges this gap, typically for 12-24 months until the firm scales sufficiently.

3. Compliance Officer Resignation or Leave

When your existing compliance officer resigns, takes extended leave, or is dismissed, you need immediate SMF cover. Outsourced compliance officers can step in within days—critical given FCA requirements to notify of SMF vacancies and maintain continuous oversight.

4. Regulatory Concerns or Enforcement

Firms facing FCA scrutiny—s166 skilled person reviews, enforcement investigations, or elevated supervision—often engage experienced outsourced compliance to:

• Remediate identified deficiencies
• Manage regulatory relationships professionally
• Implement enhanced monitoring and controls
• Provide credibility with regulators through experienced personnel

5. Specialist Compliance Needs

Some compliance requirements need specialist expertise your team lacks:

• Consumer Duty implementation — Complex outcomes-focused regulation
• Crypto AML — FCA registration requirements for cryptoasset businesses
• CASS compliance — Client money and assets rules for investment firms
• Operational resilience — Business continuity and third-party risk

FinTech & Payments

The largest market for outsourced compliance. FinTech firms—EMIs, payment institutions, and consumer credit providers—frequently use fractional CCOs. These firms typically have 10-50 employees, significant technology spend, but limited compliance budget. See our guide on fractional compliance for FinTech.

Crypto & Digital Assets

The FCA's crypto registration regime created massive demand for compliance expertise. Crypto firms need outsourced MLROs with specific knowledge of crypto AML requirements, Travel Rule implementation, and custody arrangements. The JMLSG guidance provides the industry standard for AML compliance in financial services.

Investment & Wealth Management

Boutique investment managers, family offices, and wealth managers use outsourced compliance for MiFID II requirements, CASS compliance, and best execution monitoring. These firms often have high assets under management but small headcounts.

Engaging an outsourced compliance officer requires careful consideration of qualifications, experience, and fit with your organisation. Here's a structured approach.

Step 1: Define Your Requirements

Before searching, clarify:

• Scope: What functions do you need? SMF16, SMF17, or both? Project work or ongoing?
• Time commitment: How many days per week/month?
• Sector experience: Do you need specific industry expertise (crypto, payments, investment)?
• Seniority: CCO-level strategic input or more operational compliance monitoring?
• FCA approval: Do they need to hold an SMF role, and if so, are they already approved?

Step 2: Source Candidates

Common channels for finding outsourced compliance officers:

• Compliance consultancies — Firms like Bovill, Thistle Initiatives, and Compliancy Services provide outsourced compliance
• Specialist recruitment agencies — Agencies focusing on compliance and financial services interim roles
• Professional networks — ICA, CISI, and compliance-focused LinkedIn groups
• Direct referrals — Recommendations from lawyers, accountants, and industry peers

Step 3: Evaluate Candidates

Key areas to assess:

• FCA approval history — Have they held SMF roles before? Clean regulatory record?
• Sector experience — Have they worked with similar firms to yours?
• Technical knowledge — Do they understand your specific regulatory requirements?
• Availability — Can they commit to your required time? Do they have capacity?
• Communication style — Will they integrate well with your team and board?
• References — Speak to previous clients about their experience

Step 4: Agree Terms

Typical engagement terms include:

• Day rate or monthly retainer
• Minimum commitment period (often 6-12 months for SMF roles)
• Notice period (typically 3 months for SMF holders)
• Scope of services and deliverables
• Professional indemnity insurance requirements
• Reporting lines and governance

Step 5: FCA Notification/Approval

If the role requires SMF approval:

• Submit Form A application to FCA
• Allow 8-12 weeks for standard approval (faster if they're already approved elsewhere)
• Prepare Statement of Responsibilities
• Complete regulatory references and DBS checks

Understanding outsourced compliance officer costs helps you budget effectively and compare options. Pricing varies based on seniority, scope, and engagement model.

Day Rate Pricing

Most outsourced compliance officers charge day rates:

Retainer Pricing

Many firms prefer monthly retainers for budget predictability. Typical retainer arrangements:

• Light touch (1 day/week): £3,000-£5,000/month
• Standard (2 days/week): £5,000-£8,000/month
• Comprehensive (3 days/week): £8,000-£12,000/month

Retainers typically include a set number of days plus telephone/email support between scheduled days.

Cost Comparison: Outsourced vs Full-Time

For a mid-sized FinTech paying an outsourced CCO £6,000/month (approx. 1.5 days/week), annual cost is £72,000. Compare this to a full-time compliance officer:

• Salary: £90,000-£120,000
• Employer NI: £12,000-£15,000
• Pension: £4,500-£6,000
• Benefits, training, recruitment: £10,000-£15,000
• Total cost: £116,500-£156,000

Outsourced compliance delivers senior expertise at 50-60% of full-time cost—with greater flexibility and often more experience.