AML Glossary of Terms
A
ABC
Anti-bribery and corruption.
ACAMS
Association of Certified Anti-Money Laundering Specialists.
ACIP
Applicable Customer Identification Program - part B of an AML Program where reporting entities details their CDD obligations and methods.
ADI
Authorised depository institution (banks, credit unions, building societies).
Adverse Media Screening aka Negative News Screening,
A process to detect and prevent sanction and reputation risk of dealing with persons or entities with associations with financial crime or other relevant negative news.
AIM
Alternative investment market.
AML
Anti-money laundering.
AML Compliance Officer
Responsible for the implementation and maintenance of an organisation’s AML/CTF compliance program.
AML/CTF
Anti-money laundering/counter terrorist financing (abbreviated as CFT elsewhere).
AML / CTF program
A document that sets out how a reporting entity meets their AML/CTF compliance obligations.
AMLID
Anti-Money Laundering International Database - A compendium of analyses of anti-money laundering laws and regulations (NOT PUBLIC, only for FIUs).
APG
Asia Pacific Group for Money Laundering - our regional body for enforcing the FATF 40 Recommendations, with secretariet in Sydney.
ARS
Alternative Remittance System - Any system used for transferring money from one location to another while operating outside of traditional banking channels.
AST
Automated Screening Tool - A sanctions, PEP, and adverse media screening tool powered by AI, natural language processing and machine learning with automated search functionality.
ATF
Anti-Terrorist Financing - same as Counter Terrorist Financing (CTF) and is often used interchangeably.
AUSTRAC
Australia's AML/CTF regulator and financial intelligence unit (FIU).
B
Batch Processing
A type of data processing where related transactions or entries are grouped together and transmitted for structuring and analysis.
Batch Screening
The process of screening an institution’s customer base and other associated entities on a periodic basis.
Bearer negotiable instrument (BNI)
A non-cash form of money such as a cheque, bill of exchange, promissory note, traveller’s cheque, bearer bond, money order or postal order.
Beneficial owner
An individual who owns 25% or more of, or otherwise controls the business of, an entity (such as a trust, an association or a company).
C
CAMS
Certified Anti-Money Laundering Specialist Certification designation from ACAMS.
Cash-Intensive Business
Any business in which customers usually pay with cash for the products or services provided, such as food delivery services and coin-operated machines.
CDD
Customer Due Diligence - The process of assessing customers’ background to determine their identity and the level of risk they possess.
Certified copy
A document certified as a true copy of an original document by someone authorised to do so CTF counter terrorism financing (used interchangeably with CFT) Control having the ability to determine decisions about the entity’s financial and operating policies.
Corporate group
A group of two or more related bodies corporate.
CRO
Chief Risk Officer - An executive in charge of managing risks to the company that can be categorized into three groups: technical, regulatory, and competitive.
CRS
Common Reporting Standard - The global standard for the automatic exchange of financial account information (except the USA).
Currency Smuggling
The illicit movement of large quantities of cash across borders, often into countries without strict banking secrecy, poor exchange controls or poor anti-money laundering legislation.
D
Delisting
When a sanctions target is removed from a sanctions list after the restrictions imposed on them have been lifted.
Designated business group (DBG)
Two or more reporting entities that have agreed to form a group (the designated business group) to share the administration of some or all of their AML/CTF obligations (such as an AML/CTF program or record-keeping).
Designated Categories of Offense
Crimes the FATF considers to be money-laundering predicate offenses.
Designated service
A service that is listed in section 6 of the AML/CTF Act (because it has been identified as posing a risk for money laundering and terrorism financing) and which meets the geographical link.
Digital currency (or cryptocurrency)
A type of currency that only exists in digital rather than physical form.
Digital currency exchange provider
A reporting entity that exchanges: money (Australian or foreign currency) for digital currency digital currency for money (Australian or foreign currency) as part of operating a digital currency exchange business.
DNFBP
Designated Non-Financial Businesses & Professions - non-financial businesses and professions designated by the FATF that require extra vigilance, including: casinos, real estate agents, dealers in precious metals, dealers in precious stones, lawyers, notaries, other independent legal professionals and accountants, trusts and company service providers.
E
EDD
Enhanced Due Diligence - A KYC process that involves the enhanced review of high-risk individuals or companies.
EIDV
Electronic Identification and Verification - The verification of a person’s identity remotely through digital means EIV electronic identity verification.
eKYC
electronic know your customer.
Embezzlement
The act of taking or misappropriating funds entrusted by an employer or organization for illegal personal use.
Event-Triggered Monitoring
An internal control used to mitigate sanctions risks. Whenever relevant information about an existing customer changes, an interim review of information is conducted prior to a full scheduled review.
Exclusions List
A list of names or entries that are to be excluded from the sanctions screening process.
Exemption
A right that is granted by AUSTRAC to reporting entities to exempt them from parts or all of the obligations under the AML/CTF Act or Rules.
F
False Negative
A hit that is flagged during the screening process as a possible alert, but is subsequently dismissed, yet there is actually a missed match on a sanctions list, or screening activity that is inappropriately calibrated in such a way that the suspicious activity itself is missed.
False Positive
A hit flagged during the screening process as a possible alert, but upon review is found to not be a match to a target named on a sanctions list.
FATCA
Foreign Account Tax Compliance Act (CRS but USA's own standard).
FATF
Financial Action Task Force - the global financial crime watchdog for AML/CTF and the proliferation of weapons of mass destruction.
FinTech
Financial technology.
FIU
Financial Intelligence Unit - a country's agency responsible for analysing intelligence gathered through reporting entity reports (e.g. SMRs, IFTIs, TTRs).
FX
foreign exchange.
G
Gatekeepers
Professionals such as lawyers, notaries, accountants, investment advisors, and trust and company service providers who assist in transactions involving the movement of money, and are deemed to have a particular role in identifying, preventing and reporting money laundering.
GDPR
General Data Protection Regulation - EU data privacy regulations.
GRC
Governance, Risk & Compliance.
Greylist
Jurisdictions under Increased Monitoring - A list of countries created by the FATF that present a higher risk for facilitating money laundering due to ineffective regulation and a lack of cooperation etc.
I
IBC
International Business Company - An offshore company that is registered in a tax neutral setting.
ID&V
Identification and verification.
Inherent Risk
Risks brought by customers, products and services, countries, and delivery channels before the implementation of any internal controls (e.g. AML/CDD measures) intended nature the expected purpose of the business relationship.
Internal Evasion
When an organisation’s employee commit or facilitate a sanctions violation.
IVTS
Informal Value Transfer System - Any system, mechanism, or network of individuals that receives money for the purpose of making the funds or an equivalent value payable to a third party in another geographic location.
Independent review (IR)
an impartial assessment of Part A of your AML/CTF program. It checks that you’re complying with your program and that it: properly addresses your money laundering and terrorism financing risks; complies with your legal obligations; and is working as it should.
J
K
KYB
Know your Business - non-individual KYC processes.
KYC
Know Your Customer - AML policies and procedures a financial services institution or MSB must act on to verify the identity, suitability, and risks involved with maintaining a business relationship with a particular customer.
KYE
Know Your Employee - AML policies and procedures for acquiring a better knowledge and understanding of an organization’s employees for the purpose of detecting conflicts of interests, money laundering, past criminal activity and suspicious activity.
L
Layering
The second stage of money laundering. A process of creating complex transactions to obscure the origin and trail of illicit funds with the intention of creating a maze of transactions, and make it extremely challenging to identify the initial source of funds.
M
ML
Money laundering - The process of taking money obtained by committing a crime and disguising the source to make it appear legitimate.
ML/TF
Money laundering/terrorist financing.
MLCO
Money laundering compliance officer.
MLRO
Money laundering reporting officer.
Money Mule
A person who transfers money acquired illegally on behalf of others.
MSB
Money Service Business - A business that transmits or converts money, foreign exchange, remittance and/or that issues or redeems monetary instruments.
MTO
Money transfer operator.
MVTS
Money value transfer services.
O
OFC
Offshore Financial Centre - A country or jurisdiction that provides financial services to nonresidents on a scale that is incommensurate with the size and the financing of its domestic economy.
Ongoing Monitoring
An AML control process that involves monitoring high-risk customers on a periodic basis based on their risk profile.
Operational Risk
The risk of direct or indirect loss of operations due to inadequate or failed internal processes, people or systems, or as a result of external events.
P
Partial Match
When an entity being screened is similar to a sanctioned entity and potentially shares identifying factors, such as date of birth. Partial matches require further human intervention to determine whether the match is a true match.
PCP
Policies, control, procedure.
PEP
Politically Exposed Person - an individual who, through their prominent position or influence, is more susceptible to bribery or corruption and thus presents a higher risk as a customer.
PSC
Person of significant control
Q
R
Risk-Based Approach (RBA)
The process of assessing of the various risks associated with different types of businesses, clients, accounts and transactions in order to maximize the effectiveness of an AML/CFT regime.
RCA
Relative or Close Associate - Sometimes referred to as “PEPs by association,” RCAs are individuals related to or who have a close connection to a PEP, such as spouses, friends and business partners.
Reasonable Measures
Steps reporting entities must take to collect certain information but it is not mandatory, such as, asking the client, conducting open source searches, or consulting commercially available information.
Record keeping
Reporting entities need to keep records on everything collected and verified for CDD for at least 7 years. This could be requested by law enforcement or AUSTRAC at any time for use in an investigation, so not holding this could be serious.
Red Flag
A warning signal that should bring attention to a potentially suspicious situation, transaction or activity.
RegTech
Regulatory technology.
Reliance (s 38)
A provision under the AML/CTF Act and Rules that enables a reporting entity to rely on customer identification procedures undertaken by another reporting entity or a AML/CTF-regulated foreign third party. This can be done under a customer due diligence (CDD) arrangement or on a case-by-case basis, taking into account the customer relationship and ML/TF risks faced.
Reporting Entity
An entity that provides any designated services listed in the AML/CTF Act. All reporting entities must meet obligations under the AML/CTF Act.
Reputational Risk
The potential that adverse publicity involving a financial institution’s business practices and associations, whether accurate or not, will cause a loss of confidence in the integrity of the institution.
Risk Appetite
The amount of risk that an organisation is comfortable accepting in the pursuit of value or opportunity.
Risk Assessment
A tool that allows an organisation to identify and assess its potential risks and vulnerabilities.
Risk Profile
A image created through the completion of CDD procedures, used to apply a risk rating and determine a satisfactory level of customer due diligence/ongoing monitoring RiskTech Risk technology.
S
Safe Harbour
A legal provision to reduce or eliminate legal or regulatory liability for reporting entities when they reasonably suspect a customer is of low risk.
Sanctions List
A document or database listing individuals, legal entities, and countries with whom it is illegal to do business.
Sanctions Screening
Sanctions screening is a process employed within financial institutions to detect, prevent and manage sanctions risk. It is conducted via automated screening tools and manual processes.
Sanctions Restrictive
Measures taken by individual countries, regimes, or coalitions with the goal of provoking a change in behavior or policy, used to restrict trade, financial transactions, diplomatic relations, and movement.
SAR
Suspicious Activity Report - A report made by a financial institution about suspicious activity. Senior managing official An individual who makes, or participates in making decisions that affect the whole, or a substantial part, of the business of a reporting entity or who has the capacity to significantly affect the financial standing of a customer.
Shell Bank
A foreign financial institution that does not have a physical presence in a foreign country.
SIP
Special Interest Person - High risk individuals similar to PEPs, who have a history of involvement or alleged involvement in crime.
SMR
Suspicious matters report - a report a reporting entity must submit under AML/CTF Act if they have reasonable grounds to suspect that a transaction may be related to money laundering, terrorism financing, tax evasion, proceeds of crime or any other serious crimes under Australian law.
Smurfing
A common money laundering method involving multiple individuals and/or multiple transactions for making cash deposits, buying monetary instruments or bank drafts in amounts under the reporting threshold.
SoF
Source of funds.
SoW
Source of wealth.
Structuring
Where a person deliberately: splits cash transactions to avoid a single large transaction being reported in threshold transaction reports; travels with cash amounts in a way that avoids declaring cross border movements of the cash.
Suspicious Activity
Unusual or questionable customer activity that may be related to a money laundering or other criminal offense, or to the financing of a terrorist activity.
T
Target Match
Identification of an individual or entity as matching one named on a sanctions list, also referred to as a true match.
Tax Haven
Countries that offer special tax incentives or tax avoidance to foreign investors and depositors.
TBML
Trade-Based Money Laundering - A financial crime that involves hiding the proceeds of a crime by moving the funds to a specific destination via trade transactions.
TCSP
Trust or company service provider.
Terrorist Financing (TF)
The manner by which terrorists fund their operations in order to perform acts of terrorism.
Threshold transaction report (TTR)
A report submitted to AUSTRAC about a designated service provided to a customer by a reporting entity that involves a transfer of physical currency of AUD10,000 or more (or the foreign currency equivalent).
Tranche 2
The proposed implementation of AML/CTF obligations on designated non-financial businesses and professions, including lawyers, accountants, trust and company service providers, real estate agents, and dealers in precious metals and stones.
U
UBO
Ultimate Beneficial Owner - The person or entity that is the ultimate beneficiary when an institution initiates a transaction.
V
VASPs
Virtual asset service providers.
W
Willful Blindness
A legal principle defined as the deliberate avoidance of knowledge of the facts or purposeful indifference to a money laundering transaction.