An alphabetical list of terms in common usage for AML Compliance and Due Diligence
- AML (Anti-Money Laundering): The laws, regulations, policies, and procedures designed to prevent the illegal generation of income through activities commonly known as money laundering.
- AML Compliance Officer: An individual within an organisation responsible for ensuring adherence to AML laws and regulations, implementing policies, and conducting training.
- Beneficial Owner: The natural person(s) who ultimately owns or controls a customer and/or the natural person on whose behalf a transaction is being conducted.
- CDD (Customer Due Diligence): The process of verifying the identity of customers, assessing their risk, and understanding the nature of their activities to prevent money laundering and terrorist financing.
- CTR (Currency Transaction Report): A report submitted by financial institutions to regulatory authorities for transactions exceeding a defined threshold, typically involving cash.
- EDD (Enhanced Due Diligence): A more thorough and detailed level of scrutiny applied by financial institutions during the customer onboarding process or ongoing monitoring. This approach is typically implemented when dealing with higher-risk customers or transactions.
- FATF (Financial Action Task Force): An intergovernmental body that sets international standards for combating money laundering, terrorist financing, and other threats to the integrity of the international financial system.
- KYC (Know Your Customer): Procedures that financial institutions implement to verify the identity of their customers to prevent fraud, money laundering, and other illicit activities.
- Licence holder – an authorised person or entity licensed to conduct regulated activities and required to comply with AML laws, including customer due diligence, record-keeping, reporting suspicious transactions, and implementing effective AML controls to mitigate financial crime risks.
- MLRO (Money Laundering Reporting Officer): An individual designated within a financial institution responsible for overseeing and reporting suspicious activities to the relevant authorities.
- PEP (Politically Exposed Person): An individual who is or has been entrusted with a prominent public function, along with their immediate family members and close associates.
- Risk Assessment: An evaluation of potential risks associated with a customer, product, or transaction, used to determine the appropriate level of due diligence required.
- Risk-Based Approach: A methodology that allows institutions to allocate resources more efficiently by focusing on higher-risk areas and applying a proportional level of scrutiny.
- Risk Scoring: A methodology that assigns quantitative or qualitative scores to risk factors (e.g. customer type, geography, product, behaviour), allowing firms to categorise overall risk levels and calibrate due diligence and monitoring accordingly.
- Sanctions Screening: The process of checking customers and transactions against government-issued lists of individuals, entities, and countries subject to economic or trade sanctions.
- Source of Funds (SOF): The origin or provenance of the financial assets or resources that are involved in a particular transaction.
- Source of Wealth (SOW): The origin of the funds or assets involved in a financial transaction, requiring verification to ensure legitimacy and compliance with AML regulations.
- STR (Suspicious Transaction Report): A formal report submitted to the FIU (Financial Intelligence Unit) or other competent authority when there are reasonable grounds to suspect that funds, transactions, or attempted transactions are linked to money laundering, terrorist financing, or other criminal activity.
- Transaction record keeping: The practice of maintaining accurate and complete records of customer transactions for a specified period to facilitate audits and investigations.
- Transaction Monitoring: Continuous scrutiny of customer transactions to identify unusual patterns or activities that may indicate money laundering or other financial crimes.
- Ultimate Beneficial Ownership (UBO): The natural person(s) who ultimately own or control a legal entity, such as a company or trust.
- Virtual Assets: Digital representations of value that can be digitally traded, including cryptocurrencies and other digital tokens.
- Wire Transfer: Electronic transfer of funds from one financial institution to another, often subject to AML regulations, especially for international transaction.
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