AML Dictionary

Anti-Money Laundering (AML) Explanatory Glossary




A


Adverse Media

Adverse Media is negative information about the customer or business discovered in various sources. This information can also expose someone to be involved in crime. Adverse Media Check can reveal the complexity of a person or organization in money laundering, terrorist financing, financial fraud, organized crime, and much more.

 

AML Compliance

Anti-Money Laundering Compliance is the process of screening and ongoing monitoring of customers to identify and eliminate any money laundering applications. Customers are screened from global watchlists, sanctions, and PEPs lists. It is mandatory for financial industries.

 

AML Compliance Officer

An anti-money laundering compliance officer is the person who manages preventing money laundering programs and processes of companies under the obligation. The AML officer manages the company's internal and external control processes and works to ensure the company's compliance. Every company under obligation has to employ an AML compliance officer.

 

AML Risk Assessment

Anti Money laundering Risk Assessment is an analytical process applied to a business to measure the possibility of money laundering or terrorist financing. The AML Risk Assessment carries out this process by identifying places where money laundering is the easiest in business and those who want to finance terrorist activities.

 

Anti-Money Laundering

Money laundering, is the legalization of money obtained illegally. Money laundering is also a method used to hide the nature, source, and act of a crime or give a legal image. Anti-money laundering, refers to the laws, regulations and procedures intended to prevent criminals from disguising illegally obtained funds as legitimate income.

 





B


Bank Secrecy Act (BSA)

The Bank Secrecy Act (BSA) is the United States of America's most crucial anti-money laundering regulation. BSA is an authoritative body that aims to ensure that money banks and financial institutions are not used as tools to facilitate this. Under the BSA, institutions must detect and monitor potential money laundering activities and report them to authorities to enforce activities.

 

Bank Stress Test

Bank stress test refers to the measurement of the losses that banks will experience in possible adverse scenarios. The analysis under hypothetical scenarios designed to determine whether a bank has enough capital to withstand a negative economic shock. An example of these negative scenarios is a deep recession or a financial market crash.

 

Black Market Peso

Black Market Peso Exchange is the most extensive money laundering methodologies in the Western Hemisphere. BMPE is a money laundering method in which money earned through its trade is embezzled using international trade and blocked currency accounts. It is also the process of cashing in and laundering the profits generated by the illegal drug trade.

 





C


CAMS Certification

Certified Anti-Money Laundering Specialist (CAMS) stands for advanced understanding and knowledge of international AML / CFT principles. Candidates who want to become an expert in anti-money laundering need this certificate. AML certificates are accepted globally by financial institutions, governments, and regulators to secure the financial system against money laundering.

 

Client Screening

Client Screening is one of the methods used for risk assessment of existing or potential customers of organizations under the AML obligation. With the AML Screening process, businesses control their current and potential customers in sanctions, PEP, banned lists, wanted lists, and adverse media data.

 

Crowdfunding Fraud

Crowdfunding is the funding of a project or initiative by a group of people via the internet. Crowdfunding, one of the new investment trends in the world, has been introduced as a way to help small businesses and entrepreneurs looking for investment capital to remove their business ventures from scratch.

 

Cuckoo Smurfing

Cuckoo Smurfing is a money launderer that steals or launders money from the government by splitting large transactions into small transactions. This can also be called a kind of illegal tax avoidance. In the Cuckoo Smurfing, criminals are saving money in bank accounts that seem innocent and ordinary.

 

Customer Due Diligence

Customer Due Diligence (CDD) is the control procedure that companies apply while making risk assessments. CDD provides the detection of potential customer risks.CDD procedures aim financial institutions to detect financial crime risks and protect themselves from financial crimes.

 

Customer Risk Assestment

Customer risk assessment is a relationship-based risk assessment that considers a number of factors, including risks emanating from the customer type, the manner in which the organisation engages with the customer (interface), products, services, transactions and geographical locations with which the customer is linked.

 





D


De-Risking

De-Risking is a strategy that can be implemented by those organizations that cannot manage their money laundering risks. In this process, financial institutions can increase their expenditures for the compliance program they implement, take new measures, and cut off relations with institutions or customers they see as risky

 

Domestic PEP

Domestic PEPs is a high-risk individuals located in the same country as the financial institution of which it is a client and has a domestically located position. These domestic high-risk individuals are defined as officials of a local political party, senior politicians, heads of state companies, or senior military officials.

 





E


Enhanced Due Diligence (EDD)

Enhanced Due Diligence means an advanced KYC due diligence process that provides further risk investigation. EDD is designed to handle high-risk customers and large transactions. Risky customers and transactions pose a greater risk to the financial sector and cannot be detected by CDD procedures. EDD procedures have been used that try to create a higher identity assurance by taking the customer identity and addressing and evaluating.

 

European Banking Authority

The European Banking Authority (EBA) aims to preserve financial stability, integrity, efficiency, and regular functioning of the banking sector in the EU. EBA is an independent EU authority that provides supervision and regulation in the banking sector in Europe. The European banking authority has been tasked with assessing risks and vulnerabilities in the EU banking sector.

 





F


False Negative Alarms

False Positive Alarms are called real non-risk alarms among all suspicious warnings created by Transaction Monitoring. While false-positive alerts are a huge waste of time for AML specialists, false negative alerts have far worse consequences such as reputation and large fines. Experts must also deal with false-negative warnings when trying to deal with false-positive warnings because when you solve one, the risk posed by the other may increase.

 

FATF Travel Rule

FATF Travel Rule, officially accepted by FATF, is the AML / CFT compliance obligation that financial institutions in 37 member countries worldwide must apply. Travel Rule is an update to existing FATF Recommendation 16 on cross-border and domestic bank transfers.

 

Financial Action Task Force (FATF)

FATF is an organization that prevents the global crime of money laundering and terrorist financing. This institution, agreed by the governments, sets rules to prevent illegal activities and the damage they cause. FATF makes legal regulations in these areas.

 

Financial Conduct Authority (FCA)

The Financial Conduct Authority (FCA) is under the responsibility of conduct and related precautionary regulation from the Financial Services Authority. It regulates 58,000 financial firms and markets in the UK and acts as an alert regulator for more than 18,000 organizations. Its purpose is that markets work well for large and small businesses. Banks, independent financial advisors, and mutual communities are businesses under The Financial Conduct Authority's supervision.

 

Financial Crime

Financial crime is a charge against property involving the unlawful conversion of property ownership to one's personal use and benefit. Financial crime types are; fraud, market manipulation, theft, tax evasion, bribery, sedition, embezzlement, identity theft, money laundering, and forgery and counterfeiting.

 

Financial Crimes Enforcement Network (FinCEN)

Financial Crimes Enforcement Network (FinCEN) serves as the Financial Intelligence Unit of the United States of America at home and abroad. FinCEN collects and examines financial transactions to prevent money laundering, terrorist financing, and other financial crimes.

 

Financial Intelligence Center Act (FICA)

The Financial Intelligence Center Act (FICA) entered into force on July 1, 2003, to combat financial crimes in South Africa. This act aims to make it compliant with similar legislation of other countries and prevent criminal activities from preventing and revealing the revenues from illegal activities in South Africa.

 

Foreign Accounts Tax Compliance Act (Fatca)

Foreign Accounts Tax Compliance Act is the law that requires American citizens to provide details of their financial accounts outside the U.S. to the IRS. FATCA aims to determine the financial accounts of taxpayers residing in the USA outside the USA.

 

Foreign PEP

Foreign Political Exposed Persons are defined as persons holding an important public position on behalf of a government that differs from the government's public position in which the financial institution is located.

 

Fraud and Money Laundering

Fraud is a deliberately deceptive act used in online commerce to make illegal or unethically gains or deny victims' rights depending on developing technology and internet usage. In these rapidly increasing online payment channels, most fraud occurs.

 





G


General Data Protection Regulation (GDPR)

The General Data Protection Regulation or GDPR is a regulation that will ensure that the rights on all personal and professional data of the citizens of the European Union member countries are taken from internet companies and terminated. If organizations that use personal data of individuals do not comply with this regulation, fines are imposed.

 

Geo-Targeting Orders (GTO)

Geo-targeting orders (GTO) are rules applied to detect illegal activities through money laundering and real estate purchase. The GTO, aka the Bank Secrecy Act (BSA), can dictate all activities done in these ways..

 





H


HM Revenue & Customs (HMRC)

HMRC in the UK collect taxes in general and helps families and individuals with targeted financial support. But besides these responsibilities, another important responsibility is to work with the Financial Conduct Authority (FCA) to investigate money laundering crimes. HM Revenue & Customs have some legislation put forward to combating financial crimes. HMRC's aim in these regulations is to reduce AML threats in the UK.

 

Human Trafficking

Human trafficking is trafficking for sexual slavery, labor exploitation, or sexual exploitation for traffickers or others. Forced marriage, removal of organs or tissues, and surrogacy are among the most common examples of human trafficking.

 





I


Identity Verification

Identity Verification is to check the accuracy of the information provided by a public or private. The first step starts with verifying the identity of the user. Once the business has confirmed the customer's identity, they will check to see if it poses a threat. In this way, companies can prevent money laundering, bribery, and terrorist financing.

 





K


Know Your Business (KYB)

Know Your Business is the verification process that banks and financial service providers do with their supply chain, stakeholder and companies with whom they can establish a similar relationship to reduce the risk of money laundering. Each financial institution deals with money transfers must check the KYB of companies they do business with.

 

Know Your Customer (KYC)

Know Your Customer is a control procedure that financial institutions offer to exist and new customers to identify and avoid risks. KYC Check plays a crucial role in eliminating the risks associated with money laundering, terrorist financing, corruption, fraud, bribery, and other illegal financial activities.

 

Know Your Employee (KYE)

Know Your Employee fundamentally means the whole relationship that the management has established with the employee. The manager should be aware that an employee has legal work rights. KYE includes factors such as the manager's frequent communication with his employee, increasing his work motivation by providing him with a comfortable work environment.

 





M


Money Laundering Reporting Officer (MLRO)

MRLO is the person who decides on AML reporting that may affect a company's relationship with its customer and exposure to criminal, legal, regulatory, and disciplinary action. MRLO is responsible for reporting money laundering information or doubt to the relevant authorities as it should be.

 

Money Mules

A money mule is a person who transfers money acquired illegally in person, through a courier service, or electronically on behalf of others and receives a fee in return. Money mules are not directly involved with the crimes, but they are accomplices as they launder the proceeds of such crimes.

 

Money Services Business (MSB)

The Money Services Business (MSB) is usually a currency exchange and money transfer transaction. MSB, which has many forms, from individuals to global businesses, from payment companies to investments, are check, foreign exchange transactions, or money order transactions.

 





N


Non-Fungible Token

A Non-Fungible Token is a single token that is encrypted on the blockchain network. As it is known, bitcoin is a changeable coin, but NFTs cannot be changed. The most important feature of NFT is that it is a unique and proprietary asset. In the simplest terms, tokens are different from normal coins because they are produced in different values and originality that cannot be interchanged.

 





O


Office of Foreign Assets Control (OFAC)

The Office of Foreign Assets Control (OFAC) is a US Department of Treasury agency that implements commercial and economic sanctions to support US security and foreign policy objectives. OFAC publishes sanctions lists of individuals, institutions, or countries that threaten national security. These lists are called OFAC Sanctions Lists.

 

Ongoing Monitoring

High-risk customers should be checked periodically due to the threat of crime. Ongoing Monitoring is applied to check regularly high-risk customers on Sanction and PEP lists. The Ongoing Monitoring Process protects businesses from risks such as non-compliance and loss of reputation.

 





P


Patriot Act

The Patriot Act was enacted in the aftermath of the September 11, 2001 attacks in the United States to protect US national security about terrorism significantly (especially foreign terrorism). The USA Patriot Act's primary purpose is to deter and punish terrorist acts in the United States and worldwide.

 

Political Exposed Person (PEP)

Politically Exposed Persons (PEP) meaning are high-risk clients with more opportunities than ordinary nationals to gain assets through illegal means like bribe-taking and money laundering. Any close business associate or family member of such a person will also be deemed a risk and added to the PEP list.

 

Prevention of Money Laundering Act, 2002

Prevention of Money Laundering Act, 2002 is a law aimed at combating money laundering in India. It was enacted in 2003 and entered into force in 2005. It has been changed three times in total, in 2005, 2009, and 2012. This law is aimed at banking companies, financial institutions, and intermediaries. It obliges relevant institutions to be transparent about client’s information.

 





R


Regulatory Technology (RegTech)

RegTech is a platform that combines regulations with technology. These are technologies created to facilitate compliance with increasingly complex regulations and serve users in-process monitoring. RegTech provides points that do not comply with regulations and makes these points compatible.

 

Relatives And Close Associates (RCA)

RCAs or Relatives And Close Associates are individuals who have a close connection with or accompany PEPs. Within the scope of RCA; may include family members, business partners, children, parents, cousins, close friends, siblings of PEPs.

 

Risk-Based Approach (RBA)

The simplest definition of the risk-based Approach is that the organization performs AML controls based on the organization's risk perception and the risk level of customers. There are two basic steps for organizations to follow a risk-based approach. The first one is risk assessment. The second is the implementation of control processes suitable for risk levels.

 





S


Sanction List

Governments and international authorities publish sanctions lists to combat persons engaged in illegal activities. Sanction lists include sanctioned people, organizations, or governments. Firms control individuals, organizations, or governments on these lists as they may pose a high risk.

 

Special Interest Person (SIP)

Persons who are considered to have participated in at least one of the six crime categories are called Special Interest Persons. These categories are Corruption, Financial Crime, Trafficking, Organized Crime, Terror, and Tax Crime. SIPs are mostly noticed in Adverse Media and PEP Sanction screening.

 

Suspicious Activity Report (SAR)

Suspicious Activity Report (SAR) is a tool to track suspicious activities that would not be normally stated in other reports. SARs alert law enforcement agencies to potential cases such as money laundering or terrorist financing.

 

SWIFT Message

SWIFT is a cooperative society owned by member financial institutions. SWIFT has created a safer and faster communication mechanism between financial institutions. It contains about 200 kinds of SWIFT messages. For example, the standard payment order from one organization to another is known as MT103. In addition, in many countries, AML / CFT regulations express MT103 as the main method of international payments in particular.

 





T


Terrorist Financing

Terrorist Financing has been a widespread financial crime. Terrorists need money for their activities and at this point, terrorist financing provides individual terrorists or non-state actors with training, accommodation, funds to buy weapons, or financial support.

 

Trade-Based Money Laundering (TBML)

Trade-Based Money Laundering mainly involves the export and import of goods and the exploitation of various cross-border financial instruments of trade. One of the most common global money-laundering strategies exploiting the weak sides of cross-border trade with Trade-Based Money Laundering.

 

Transaction Laundering

Transaction laundering is the digital evolution of money laundering. Transaction Laundering involves one merchant processing card payments for illegal goods they sell using another merchant's legitimate payment services account, masking the criminal source of the funds in this transaction.

 

Transaction Monitoring

Transaction monitoring monitors transactions, including assessing historical/current customer information and interactions to provide a complete picture of customer activity. This can include transfers, deposits, and withdrawals. Most financial firms will use software to analyze this data automatically.

 





U


Ultimate Beneficial Owner (UBO)

Ultimate Beneficial Owner (UBO), meaning is the person or entity that is the ultimate beneficiary when an institution initiates a transaction. The beneficial owner is the natural person who, ultimately, the person on whose behalf a transaction is conducted. It also includes those persons who exercise ultimate effective control over a legal person or arrangement.

 

UN Sanction List

UN sanctions are diplomatic decisions enforced by the United Nations organizations and states against other states, entities, or individuals. These sanctions are measures of safety to preserve national safety interests, peace, and international law.

 

United Nations Office on Drugs and Crime (UNODC)

The UNODC undertakes research and analysis, offers guidance and technical/financial support to countries in the adoption and implementation of different criminal, drug, terrorist, and corruption-related conventions, and writes necessary legislation to achieve these aims.

 





V


Vessel Screening

Vessel screening is the action taken to avoid and detect business relationships with sanctioned ships. Failures in due diligence processes at the time of these transactions result in businesses losing their reputation and being penalized by regulatory agencies.

 





W


White-Collor Crime

White-collar crime is a crime committed for financial gain and consequently non-violent. The main purpose of these crimes is to obtain money, property, avoid losing existing property, or gain a personal or commercial advantage. It can cite many crimes as examples of white-collar crimes, including subordinate money laundering.

 

Wolfsberg Group

The Wolfsberg Group aims to develop guidance for the management of financial crime risks related to Anti-Money Laundering (AML), Counter-Terrorist Financing (CTF), and Know Your Customer (KYC) policies. Wolfsberg Group consists of thirteen global banks. The Group holds regular meetings with highly competent authorities in the financial sector, where actions and policies that may be against financial crime are discussed in detail.

 

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