In the case of anti-money laundering, the UK regulation, first introduced in 1993, was never meant to stand alone. But when its regulatory body, the Financial Services Authority (now known as the FCA) did not wish to issue extra guidance, a third-party committee was set up to support financial firms in their application of the various rules and practices – the JMLSG. Trustpair adds a security layer to protect your business from money laundering criminals on all fronts.
What is the JMLSG?
The JMLSG stands for the Joint Money Laundering Steering Group. It’s a UK-based advisory panel for banks, credit unions, insurance companies and others in the financial services industry. The group serves to translate regulatory and legal frameworks on money laundering (AML) and terrorist financing (ATF) into customised guidance, leading to the implementation of good practices.
Although JMLSG guidance is not legally binding, they are approved by HM Treasury. It’s made up of members from trade associations, bankers and top compliance professionals. The group’s purpose is to support industry professionals by providing a baseline for guidance – instead of over-prescribing exact policies and processes. The committee outlines the enforceable regulations, and then interprets the requirements, applying industry best practices to assist firms with their own implementation and financial controls.
Learn all about the FATF (financial action task force)’s recommendation about money laundering in this article!
What is the JMLSG guidance?
The JMLSG guidance has three parts. The first one focuses on the industry rules and best practices, the second part two splits up advice by sector and the third hones in on very specialised guidance.
Part one covers a huge range of guidance, including:
- Senior managers obligations and expectations
- Internal controls: requirements in the context
- Recommendations for the money laundering reporting officer (MLRO)
- Designing a risk-based approach
- Applying Customer Due Diligence (CDD) measures
- Suspicious Activity Reporting (SARs)
- Staff training
- Record-keeping
Part two looks at sectorial guidance, including:
- Retail banking
- Credit cards
- E-money
- General insurers
- Private equity
- Invoice finance
- Cryptoasset exchange
- And much more.
Clearly, parts one and two cover a lot of ground. If you need a full breakdown on the guidance, it’s worth reading it yourself. However, for a better picture on the types of recommendations, here are a few examples directly from the rulebooks:
|
Category |
Guidance |
Intended Impact |
|
MLRO |
Appoint a nominated officer Senior management to ensure the MLRO has:
|
Meet the appointment requirements, ensure role responsibilities are clear and officer has support to perform their duties |
|
CDD for retail banks |
Firms will need to consider making more penetrating initial enquiries, over and above that usually carried out before taking on businesses whose turnover is likely to exceed certain thresholds, or where the nature of the business is higher risk, or involves large cash transactions. |
Cash businesses are more vulnerable to money laundering practices, and recognising that (among other high-risk practices) is key. For example: casinos, taxi firms, currency exchanges and takeaways |
|
The firm’s obligation is to verify the identity of the customer using evidence from a reliable source, independent of the customer. Where partnerships or unincorporated businesses are well known, reputable organisations, with long histories in their industries, and with substantial public information about them and their principals and controllers, confirmation of the customer’s membership of a relevant professional or trade association is likely to be able to provide such reliable and independent evidence. This does not obviate the need to verify the identity of the partnership’s beneficial owners. |
Firms should cover their backs even when ultimate beneficial ownership is ‘obvious’, like in Tesco or Sainsbury’s cases, by confirming data with robust and credible external sources |
|
|
Purse limits for electronic money services / providers |
Simple due diligence measures can be enough when purses:
|
Non-reloadable purses are often sold as gift cards, such as for TK Maxx, Matalan and New look. The purchase of multiple such products isn’t surprising, particularly at Christmas, and the risk of money laundering arising from multiple purchases is likely to remain low, so this guidance conserves resources and focuses them where higher risks exist. |
Part three of the JMLSG guidance is very specific to wire transfer transparency and foreign jurisdictions, it doesn’t carry the same approval from HM Treasury.
Why is it important?
The guidance is an important resource for compliance managers, senior figures and appointed money laundering reporting officers. Indeed, it provides tailored advice beyond the regulatory requirements. In some cases, the regulation is fairly basic, and doesn’t include details on how to actually implement the changes.
The JMLSG also goes through review cycles, ensuring that when it becomes outdated, it is quickly edited to meet new requirements.
Because it’s approved by the Treasury, compliance professionals know that this is a quality source of information, and can trust the guidance to provide a pointer in the right direction. It encourages firms to approach their operations conservatively ‘think risk’, and when that is not enough, seek further legal guidance.
How can you implement the JMLSG guidance in your business?
The JMLSG is quite clear in users not applying their guidance as a ‘checkbox exercise’. Instead, they recommend two implementation approaches:
- When provisions are mandatory (using the term ‘must’): indicates actions that are directly required or outcomes to be met directly.
- When provisions are recommended (using the term ‘should’): indicates ways in which the statutory and regulatory requirements may be satisfied, but allow for alternative means of meeting the requirements.
If the JMLSG guidance is completely new to you, we recommend finely combing through the documentation. By performing an audit, you’ll see:
- Which parts are relevant for your firm.
- How you may be currently meeting expectations, policies and process standards.
- How you may be falling short.
Once this audit is complete, you can begin to address shortcomings, revamp systems that don’t meet the necessary outcomes and promote better controls.
Remember that respecting the JMLSG guidance provides another layer of evidence to show that your firm doesn’t fund illegal activities . It’s worth following these recommendations as best as you can.
And for extra layers of security against the money laundering threat, opt for a payment fraud prevention software like Trustpair. By validating third-party data on an ongoing basis thanks to automated account validation, you can eliminate the risk of payment fraudsters without the manual, time-consuming, and highly fallible process.
Learn more about payment fraud in the UK with our latest study!
Following JMLSG guidance cements AML controls
The JMLSG provides guidance on AML and ATF practices that go above and beyond the regulations. This enables financial institutions in all sectors to create stronger policies and processes. Pair this with your current security practices, like Trustpair, for continuously monitoring your third-party data, to add extra layers of security.
Learn about the UK’s 2017 Money Laundering Regulation here.
