Joint Money Laundering Steering Group (JMLSG) Guidance

Table of Contents

  • What is the Joint Money Laundering Steering Group (JMLSG)?
  • About the JMLSG Guidance
  • Purpose of the Guidance  
  • The Content of the Guidance 
  • JMLSG Guidance Notes

What is the Joint Money Laundering Steering Group (JMLSG)?

JMLSG is short for Joint Money Laundering Steering Group. It is a private-sector body that consists of the leading UK Trade Associations in the financial services industry. The members of the body include representatives from the Building Societies Association, the British Bankers’ Association, and the Association of British Insurers. They, along with representatives from other trade associations and representative bodies, form the members of the JMLSG. JMLSG Guidance, which is created by JMLSG itself, is used to assist financial industry sectors represented by their trade member bodies, to comply in the terms of anti-money laundering and counter-terrorist financing laws and the regulations prescribed by the UK, pursuant to legislation.

JMLSG Guidance sets the regulations expected from financial institutions and its staff members to prevent money laundering and terrorist financing, which is practised using various money laundering techniques. However, some discretion is granted as to how financial institutions apply the requirements of the anti-money laundering regime in specific circumstances in institutions and firms for their products, services, transactions, and customers.

About the JMLSG Guidance

JMLSG Guidance – There has been a long-standing obligation to have effective procedures and processes in the United Kingdom in order to detect and prevent money laundering. The UK Money Laundering Regulations were made in 1993 and came into force in 1994.

Recent changes were made on 10th January 2020 to the Government’s Money Laundering Regulations. This allowed the incorporation of international standards set by the Financial Action Task Force (FATF) in the UK’s AML regime and to transpose the EU’s 5th Money Laundering Directive and some specific new areas that financial institutes must comply with. Various acts of parliament, such as the Criminal Justice Act 1988 and the Drug Trafficking Offences Act 1986, also incorporated the offense of money laundering. In 2002, POCA, which stands for the Proceeds of Crime Act, consolidated, updated, and reformed the money laundering law to include any dealing in criminal property. Obligations to combat terrorist financing were made in the Terrorism Act of 2000. The procedures to address these obligations are similar, and financial institutes often employ the same systems and controls to meet them.

Purpose of the JMLSG Guidance  

The purpose of JMLSG Guidance is to:

  1. Figure out the legal and regulatory framework for AML/CTF requirements and systems across the financial services sector
  2. Translate the requirements of relevant laws and regulations, and how to implement them into practice
  3. Suggest good industry practice in AML/CTF procedures with a proportionate, risk-based approach
  4. Help assist with the design of financial institutions and implement the necessary systems and controls to mitigate the risks of FIs in relation to money laundering and the financing of terrorism

Content of the JMLSG Guidance 

The JMLSG Guidance enunciates the importance of senior management’s responsibilities and how they should manage the ML/TF risks for the firm, plus how it should be carried out on a risk-based approach. The guidance sets a standard approach for customer identification and verification, separating the basic identity from other aspects of customer due diligence measures, in addition to giving guidance on the obligation to monitor the customer’s transaction activity. The Guidance is distributed into 3 parts: Part I, Part II, and Part III.

Part I of the guidance comprises eight separate chapters, followed by a glossary and an appendix of the applicable material. The individual chapters are followed by annexes specific to the material in the chapter. For Parts II and III of the guidance, sector-specific additional material is included, which is prepared by practitioners in those relevant sectors. It is incomplete on its own and should be read in reference to Part I of the guidance.

Senior Management Responsibility

Senior Management’s responsibility is to ensure that the financial institution’s policies, controls, and procedures are designed and implemented appropriately. The policies and procedures should be operated effectively in the firm to mitigate the risks of money laundering or terrorist financing. Money Laundering Regulations require that FIs take preventative steps to identify and assess the risks of money laundering and terrorist financing to which their business is subject, taking the following into account:

  • Information on money laundering and terrorist financing made available to them by the Financial Conduct Authority (FCA)
  • Risk factors – related to FI’s customers, countries, or geographic locations where they operate, FI products, services, customer transactions, and delivery channels.

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 proves to be inadequate.

Internal Controls

Firms are supposed to establish and maintain policies, controls, and procedures to mitigate the risks related to money laundering and terrorist financing. They are to manage the ML/TF risks effectively, which are identified in its risk assessment. Financial Conduct Authority (FCA) regulated firms have similar regulatory obligations under SYSC. The financial institution should also maintain a written record of its policies, controls and procedures, and processes.

The firm should adhere to the following:

  • Appoint a member of their board, an equivalent management body, or their senior management as the chief officer responsible for the firm’s compliance with the Money Laundering Regulations
  • Carry out screening of relevant employees and agents appointed by the institute, before they are appointed and at regular intervals during their appointment
  • Establish an independent internal audit function responsible for:
    1. Examination and evaluation of the adequacy and effectiveness of policies, controls, and procedures adopted by the financial institution to comply with the requirements of the money laundering regulations
    2. Making recommendations related to select policies, controls, and procedures
    3. Monitoring the institute’s compliance with these recommendations

Nominated Officer/MLRO

The Money Laundering Reporting Officer (MLRO) is responsible for keeping an oversight on the financial institution’s compliance with the FCA’s rules on systems and controls against money laundering. The responsibilities of an MLRO are to monitor the daily operations of the institute’s AML/CTF policies. The officer needs to respond to any inquiry for information on the FCA or law enforcement. The FCA designates the role of MLRO at a controlled/Senior Management function. This means that any person who is selected to perform the duties of an MLRO must be approved first by the FCA, on the application of the firm, before they are appointed. It is also expected that the candidate will be based within the country. The candidate appointed as MLRO should be given a sufficient level of seniority within the financial institution. As they are an approved person/SMF Manager, their job role clearly sets out the extent of the responsibilities and objectives given to them. The officer needs to be involved in establishing the risk-based approach to prevent ML/TF when put into practice.

Risk-based Approach

A number of discrete steps need to be taken in order to assess and find the most cost-effective and proportionate way to manage and mitigate the risks related to money laundering and terrorist financing faced by the firm. These steps include:

  • Identifying the risks related to money laundering and terrorist financing that are relevant to the financial institute
  • Assessing these risks presented by the institute’s particular:
    • customers or any underlying beneficial owners
    • services and products
    • financial transactions
    • delivery channels
    • geographical locations of operation
  • Designing and implementing controls to manage these assessed risks in the context of the financial institution’s risk appetite
  • Improving and monitoring the effective operation of these controls
  • Recording what has been done appropriately and the reason behind it

No matter the approach considered most appropriate to the financial institution’s ML/TF risk, the main objective is that the institute should know, at the outset of the relationship, who its customers and beneficial owners are, the location of their operation, what they do, and their level of activity with the institute. The FIs should then consider how the customer’s financial behavior builds over time, allowing the institute to identify their transactions or activities that may seem suspicious.

JMLSG Guidance Notes

JMLSG Guidance Notes: The JMLSG has been producing ML Guidance Notes for the financial sector since 1990. These notes are updated regularly to reflect the changing circumstances and the development of good practices. The version that is currently in use was published in June 1997 and updated in August 1998 and April 1999. A new, revised edition has been published this year, in 2020.

The JMLSG Guidance Notes are supposed to:

  • Outline the requirements of the UK ML Legislation
  • Provide a practical interpretation of the UK ML Regulations
  • Provide an indication of good industry practice
  • Provide a base from which management can develop select procedures and policies which are appropriate to their business

It should be taken into notice that because the JMLSG Guidance Notes are issued by the trade associations and not by regulators, their application cannot be compulsory. Any failure to comply with the JMLSG Guidance Notes does not mean that a financial sector institute has breached the Regulations or the FSA Rules.

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Tookitaki AMLS Wins SBR Technology Excellence Award 2019

Tookitaki’s Anti-Money Laundering Suite (AMLS), an end-to-end machine learning-powered transaction monitoring and names screening solution, has bagged the inaugural Singapore Business Review Tec...

Watchdogs Grow Optimistic about AI Prospects at Banks

Proper regulation of banking operations is important as any failure in the banking system would affect the wider economy. Therefore, banking is one of the most regulated industries across the globe. F...

Pitfall of Black Box AI at Banks: Explaining Your Models to Regulators

The use cases of artificial intelligence (AI) and machine learning in front-office, middle-office and back-office activities at banks are growing slowly but steadily. The major areas of AI play includ...

AI for Regulatory Compliance at Banks: 4 Assessments Before You Okay the Solution Proposal

Banking is one of the industries where artificial intelligence and machine learning find their applications at a rapid pace. Regulatory compliance within banking is an area which has become a costly a...

We Believe in Innovation, the Key to Survival and Growth

“Innovation distinguishes between a leader and a follower.” -Steve Jobs What comes on the top of your screen when you google the meaning of the word innovation is – the introduction of somet...

Compliance Functions in Need of a Technological Overhaul. Can Machine Learning be the Game-Changer?

McKinsey in its latest compliance benchmarking survey found that compliance function at financial institutions has reached “an inflection point” and current compliance standards are in an “incho...

Tookitaki Raises US$7.5 mn Series A from Global VCs to Transform Regulatory Compliance

Tookitaki, a regulatory technology company that aims to enable financial institutions to develop sustainable compliance programs, has raised US$7.5 million in Series A round. The round was co-led by L...

From Wachovia to Danske Bank: Biggest Money Laundering Cases in Recent Times

Money laundering – the criminal activity of processing criminal proceeds to disguise their origin – is one of the gravest problems faced by the global economy, and its size is growing rapidly. It ...

A Modern Approach to Address the Reconciliation Challenges of Financial Services

Reconciliation of transactions is deemed critical for the smooth running of every financial institution. The speed and accuracy of data reconciliation can distinguish a successful institution from its...

Busting a Myth: Compliance Officer’s Job is All About Risk

Regulatory compliance has become a dreadful task for banks after regulators across the globe set stricter norms in the aftermath of the 2008 financial crisis in an effort to prevent financial crimes s...

SocGen Goes Next-Gen with Tookitaki Reconciliation Suite

Société Générale leveraged Tookitaki’s Reconciliation Suite to automate the bank’s existing break reconciliation system. Key Challenges Addressed The bank’s finance department was unable to ...

Attending ACAMS Conference in Singapore? Tookitaki Awaits You with Its Disruptive AML Solution

“In today’s era of volatility, there is no other way but to re-invent. The only sustainable advantage you can have over others is agility, that’s it.”- Jeff Bezos Singapore is hosting ACAMS’...

MAS’ Stress on Transaction Monitoring for Effective AML/CFT Compliance and Machine Learning is the Answer

Singapore is known for its top-notch AML/CFT regime created through up-to-date legislation, stringent policy and uncompromising supervision to safeguard against the abuse of the city state’s financi...

Mifid II and the Pressing Need for a New Reconciliation Approach

The financial services industry in the EU has been confused with the introduction of a revamped version of the Markets in Financial Instruments Directive (Mifid II). The ambitious regulatory reforms t...

Is Automated Reconciliation Next to Impossible in Today’s Complex Financial World?

The 2008 global financial crisis and fairly new regulatory requirements like Basel III asked financial institutions (FIs) to cut operating costs and adopt a lean operations structure, pushing FIs to r...

Modern Tech to Reshape US AML Compliance with Regulators’ Recent Handshake

George Bernard Shaw once said: “Those who cannot change their minds cannot change anything.” The past week has seen a significant change of mind from financial regulators in the US in their ardent...

Skills Development: We Have Talents and We Strive to Multiply Them

“Mastery lies on an infinite continuum, and as a result, we will never reach the end. We can, however, see to it that we are as far along that continuum as our circumstance allows.” ― Chris Mat...

It’s Our Fourth Founding Day; Taking a Pause to Cherish Our Simple but Awesome Journey

Today, as we step into our 4th year of foundation, I feel proud and honored to be leading Tookitaki that has been successful in creating added value to all its stakeholders. I was never a CEO and Took...

Tookitaki Expands into the US with New Office in Charlotte

SINGAPORE, Sept. 24, 2018: Tookitaki Holding Pte Ltd, a leading regulatory technology company, is pleased to announce the official opening of its North American office in Charlotte, NC, in the Unite...

We Tame Machines but We Unleash Human Spirits

We are well aware of the fact that our progress as an organization is in the hands of our employees. The more energy, time and attention we invest in them, the more yield we receive. So, we always mak...

5 Methods That Modern Money Launderers Use To Beat Detection

Society prepares the crime, the criminal commits it. DID YOU KNOW? Every year, an estimated amount in the range of US$800 billion-US$2 trillion (2-5% of global GDP) is being laundered globally Regulat...

Risk Management Conference: Positive Vibes from All Corners

The Risk Management Association’s (RMA) premier annual event, the Risk Management Conference, came to an end on 6 November, and Tookitaki had the privilege to attend the event which we believe was ...

Singapore Fintech Festival: Tookitaki to showcase advanced machine learning solutions in financial services

Singapore is assured of the Fintech world’s unwavering attention next week, as the city state, is hosting this year’s Fintech Festival during 12-16 November. Touted as the world’s largest platfo...

The RMA Clarion Call to Address Risks and the Tookitaki Way

Risk officers, doing your best today is good while preparing hard for tomorrow is extraordinary. Risk management at banks has become difficult due to operational and regulatory changes. The Risk Manag...