JMLSG stands for the Joint Money Laundering Steering Group. It’s a multi-disciplinary committee which was created to provide assistance in interpreting UK Money Laundering Regulations. The private-sector body regularly publishes guidance notes, known as JMLSG guidance, on the UK money laundering regulations.
The JMLSG guidance plays an important role in helping financial institutions and other key industries to ensure that they comply with the UK’s anti-money laundering and counter terrorist financing (AML/CTF) regulations. In this article, we will discuss JMLSG, the JMLSG guidance and its role in the UK AML regime.
JMLSG consists of members from leading UK trade associations who are part of the financial service industry. It also includes representatives from the Building Societies Association, the British Bankers’ Association, and the Association of British Insurers. The following are the current members of JMLSG, according to their official website.
The JMLSG aims to assist financial institutions in the UK to adopt better practices in the prevention of money laundering and terrorist financing. Its guidance notes are to clarify the country’s AML regulations and to guide financial institutions on the implementation of proper AML processes and procedures.
The JMLSG has set forth AML guidelines to help assist the financial sector. These guidelines are neither legally binding nor punishable at an offence. However, they have HM Treasury’s approval. The JMLSG guidance helps financial institutions (FIs) to develop a compliance programme with policies and procedures that are fit to the organisation’s needs.
The guidance by JMLSG determines the necessary requirements that the financial entities need in order to detect, investigate, and prevent money laundering and terrorist financing. It allows the FIs to apply the required regulations based on their personal experience, products and services, clients and transactions.
Although it’s not compulsory for FIs to follow the JMLSG guidance, the adoption, however, is a sign of having good AML compliance measures. The guidance is not over-prescriptive but provides a base from which an FI’s management can develop tailored policies and procedures that are appropriate for their business. It remains the responsibility of an FI to make its own judgement on individual cases, on a risk-based approach.
The purpose of the JMLSG guidance is to:
The current JMLSG guidance is available in three parts:
We give a quick rundown of the general guidance's content here.
According to the JMLSG, senior management in an FI has a responsibility to ensure that its policies, controls and procedures are appropriately designed, implemented and effectively operated.
The senior management needs to ensure that the Financial Conduct Authority makes written policies and procedures available to the FI’s employees. It is also the responsibility of management to consider any risk factors relating to clients, jurisdictions, the geographic location of the institute, transactions, products, and services, and so on.
The senior management should be engaged at every step of the decision-making processes while taking ownership of the risk-based approach. The management will be responsible in case the risk-based approach is inadequate.
The JMLSG provides guidance on the internal controls that will help FIs meet their obligations in respect to the prevention of money laundering and terrorist financing.
It is recommended that FIs appoint a member of their board (or comparable management body) or senior management as the officer in charge of the firm's money laundering compliance.They also need to carry out screening of relevant employees and agents appointed by the firm, both before they are recruited, and at regular intervals during the course of their employment and establish an independent internal audit function.
FIs must appoint a Nominated Officer or Money Laundering Reporting Officer (MLRO) to ensure that the firm maintains compliance with the Financial Conduct Authority’s (FCA) regulatory systems.
The firm’s nominated officer will monitor the routine functions and money laundering policies. They will also give more information on any questioning related to the FCA or help in understanding the UK’s legislation better.
The risk-based approach is endorsed by the FATF recommendations 1 and 10 and the Basel Paper among others.
The JMLSG suggests the following actions to ensure a risk-based approach.
The group lists out the following Customer Due Diligence (CDD) measures for FIs in its guidance.
The JMLSG suggests the following actions:
The JMLSG suggests the following actions:
According to the JMLSG, FIs have the following core obligations:
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