Please find below our most frequently asked questions.
How should the Guidance be used?
What is the status of the Guidance?
What is the scope of the Guidance?
Who is the Guidance addressed to?
What is the difference between the FCA’s Financial Crime Guide (FCG) and JMLSG Guidance?
How should the Guidance be used?
The Guidance gives firms a degree of discretion in how they comply with AML/CTF legislation and regulation, and on the procedures that they put in place for this purpose.
It is not intended that the Guidance be applied unthinkingly, as a checklist of steps to take. Firms should encourage their staff to ‘think risk’ as they carry out their duties within the legal and regulatory framework governing AML/CTF.
The FCA has made clear its expectation that FCA-regulated firms address their management of risk in a thoughtful and considered way, and establish and maintain systems and procedures that are appropriate, and proportionate to the risks identified. The Guidance assists firms to do this.
When provisions of the statutory requirements and of FCA’s regulatory requirements are directly described in the text of the Guidance, it uses the term must, indicating that these provisions are mandatory.
In other cases, the Guidance uses the term should to indicate ways in which the statutory and regulatory requirements may be satisfied, but allowing for alternative means of meeting the requirements. References to ‘must’ and ‘should’ in the text should therefore be construed accordingly.
What is the status of the Guidance?
POCA requires a court to take account of industry guidance that has been approved by a Treasury minister when considering whether a person within the regulated sector has committed the offence of failing to report where that person knows, suspects, or has reasonable grounds for knowing or suspecting, that another person is engaged in money laundering.
Similarly, the Terrorism Act requires a court to take account of such approved industry guidance when considering whether a person within the financial sector has failed to report under that Act.
The ML Regulations also provide that a court must take account of similar industry guidance in determining whether a person or institution within the regulated sector has complied with any of the requirements of the ML Regulations.
When considering whether to take disciplinary action against an FCA-regulated firm in respect of a breach of the relevant provisions of SYSC, the FCA will have regard to whether a firm has followed relevant provisions in this guidance.
When considering whether to bring a criminal prosecution in relation to a breach of the ML Regulations, the FCA may also have regard to whether the person concerned has followed this guidance. The guidance will therefore be significant for individuals being prosecuted, or subject to regulatory action, in relation to their responsibility for firms’ systems and controls and/or in relation to their personal actions: for example, why did they fail to disclose?
The guidance provides a sound basis for firms to meet their legislative and regulatory obligations when tailored by firms to their particular business risk profile. Departures from good industry practice, and the rationale for so doing, should be documented, and may have to be justified, for example to the FCA.
What is the scope of the Guidance?
The Guidance sets out what is expected of firms and their staff in relation to the prevention of money laundering and terrorist financing, but allows them some discretion as to how they apply the requirements of the UK AML/CTF regime in the particular circumstances of the firm, and its products, services, transactions and customers.
The Guidance relates solely to how firms should fulfill their obligations under the AML/CTF law and regulations. It is important that customers understand that production of the required evidence of identity does not automatically qualify them for access to the product or service they may be seeking; firms bring to bear other, commercial considerations in deciding whether particular customers should be taken on.
The Guidance covers the prevention of money laundering and terrorist financing. Money laundering and terrorist financing risks are closely related to the risks of other financial crime, such as fraud. Fraud and market abuse, as separate offences, are not dealt with in the Guidance. The Guidance does, however, apply to dealing with any proceeds of crime that arise from these activities.
Who is the Guidance addressed to?
The Guidance prepared by JMLSG is addressed to firms in the industry sectors represented by its member bodies, and to those firms regulated by the FCA. All such firms – which, for the avoidance of doubt, include those which are members of JMLSG trade associations but not regulated by the FCA, and those regulated by the FCA which are not members of JMLSG trade associations – should have regard to the contents of the guidance.
Financial services firms which are neither members of JMLSG trade associations nor regulated by the FCA are encouraged to have regard to this guidance as industry good practice. Firms which are outside the financial sector, but subject to the ML Regulations, particularly where no specific guidance is issued to them by a body representing their industry, may also find this guidance helpful.
The guidance will be of direct relevance to senior management, nominated officers and MLROs in the financial services industry. The purpose is to give guidance to those who set the firm’s risk management policies and its procedures for preventing money laundering and terrorist financing. Although the guidance will be relevant to operational areas, it is expected that these areas will be guided by the firm’s own, often more detailed and more specific, internal arrangements, tailored by senior management, nominated officers and MLROs to reflect the risk profile of the firm.
What is the difference between the FCA’s Financial Crime Guide (FCG) and JMLSG Guidance?
The FCA’s FCG and the JMLSG Guidance are complimentary documents. The FCG sets out the FCA’s supervisory expectations and is not seen as relevant guidance, whereas the JMLSG Guidance sets out regulatory expectations and is “relevant guidance”.