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.
- 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.
- 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-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.
- 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 report submitted by financial institutions to report any transactions that could be related to money laundering or other illicit activities.
- 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 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.
- Transaction record keeping: The practice of maintaining accurate and complete records of customer transactions for a specified period to facilitate audits and investigations.
- Risk Assessment: An evaluation of potential risks associated with a customer, product, or transaction, used to determine the appropriate level of due diligence required.
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