Explore 66 key AML and KYC terms every compliance professional should know. Boost your anti-financial crime knowledge with this comprehensive glossary.
Anti-Money Laundering and Know Your Customer are crucial components of modern financial regulation. Organisations worldwide rely on these standards to safeguard the integrity of economic systems and prevent illicit activities. Whether you’re new to the world of regulatory compliance or looking to refresh your knowledge, this guide details 66 important terminologies with succinct, digestible explanations.
Introduction to AML & KYC
Before we unpack each term, here’s a brief primer:
- AML (Anti-Money Laundering): Measures, laws, and regulations put in place to prevent criminals from disguising proceeds of crime as legitimate income.
- KYC (Know Your Customer): The process financial institutions and other regulated entities use to verify the identity of their clients and assess associated risks.
Understanding these practices is vital, not only for institutional compliance but also for maintaining overall financial transparency and contributing to a stable global economy.
Detailed Terminologies
Below is a list of key AML and KYC terms with explanations to guide your understanding:
- AML - Anti Money Laundering
A set of policies and procedures designed to prevent funds obtained from illicit activities from entering the financial system.
- ARS - Alternative Remittance System
Non-conventional channels for transferring money, often used in regions where traditional banking networks are limited.
- AMLID - Anti Money Laundering International Database
A global database that assists financial institutions in cross-validating information to ensure compliance with international AML standards.
- APG - Asia/Pacific Group Of Money Laundering
A regional cooperative body focused on sharing expertise and strategies to combat money laundering in the Asia-Pacific region.
- APTs - Asset Protection Trusts
Trust structures used for safeguarding assets against legal claims or creditors; understanding these helps reveal the true ownership behind financial entities.
- ACH - Automated Clearing House
An electronic network that facilitates the processing of bulk transactions like direct deposits and bill payments among financial institutions.
- AST - Automated Screening Tool
Software that automatically scans customer and transaction data against various watch lists (sanctions, PEP lists, etc.) for potential risks.
- ABAC - Anti-Bribery and Corruption
Policies and practices aimed at preventing bribery and corruption within business operations, integral in maintaining ethical finance.
- ACFCS - Association Of Certified Financial Crime Specialists
A professional institution that certifies experts who specialise in detecting and preventing financial crimes, including money laundering.
- BSA - Bank Secrecy Act (Compliance Program)
U.S. legislation mandates banks and financial institutions to assist government agencies in detecting money laundering through structured record-keeping and reporting.
- BMPE - Black Market Peso Exchange
An informal financial mechanism used predominantly in Latin America to convert drug money into locally accepted currency.
- BCBS - Basel Committee On Banking Supervision
A global regulatory forum that sets banking standards, including risk management and AML practices, to promote financial stability.
- CFATF - Caribbean Financial Action Task Force
A regional organisation that collaborates with Caribbean nations to implement AML strategies and fight financial crimes.
- CFE - Certified Fraud Examiner
A professional designation for experts who investigate fraudulent activities and help organisations prevent financial misconduct.
- CCII - Certified Cyber Intelligence Investigator
A certification for professionals specialising in cyber investigations, including those aspects linked to financial crime and money laundering.
- CTR - Currency Transaction Report
A mandatory report that details large-value cash transactions, used by authorities to flag and trace potential money laundering activities.
- CAMS - Certified Anti-Money Laundering Specialist
A globally recognised certification for professionals who deal with AML compliance, ensuring they are up-to-date on the latest detection and prevention methods.
- CFCS - Certified Financial Crime Specialist
An authority designation that demonstrates the holder’s comprehensive expertise in combating various financial crimes.
- CDD - Customer Due Diligence
The process of verifying a customer's identity and assessing risks forms the foundation of effective AML and KYC programs.
- DPL - Denied Persons List
A compilation of individuals or entities deemed high risk or sanctioned, used to prevent prohibited persons from accessing financial services.
- ESAAMLG - Eastern and Southern African Anti-Money Laundering Group
A regional consortium aimed at enhancing cooperation and uniformity in AML practices across Eastern and Southern Africa.
- EDD - Enhanced Due Diligence
A deeper, more thorough investigation is applied to high-risk customers or transactions to ensure additional security and compliance.
- EAG - Eurasian Group On Combating Money Laundering And Financing Of Terrorism
A collaborative body among Eurasian countries, dedicated to improving regional standards in fighting money laundering and terrorism financing.
- FATF - Financial Action Task Force
An international standard-setting body for AML and counter-terrorism financing, which issues recommendations to guide global practices.
- FSRB - Financial Action Task Force-Style Regional Body
Regional agencies operating under frameworks similar to FATF, tailored to local or regional challenges in AML regulation.
- FIU - Financial Intelligence Unit
A government agency that receives, analyses, and disseminates financial information related to suspicious or unusual transactions.
- FSE - Foreign Sanctions Evader
An individual or entity that attempts to bypass international sanctions, often a red flag during AML/KYC screenings.
- FCA - Financial Conduct Authority
The regulatory body (primarily in the UK) that ensures the integrity of financial markets and upholds compliance and consumer protection.
- FinCEN - Financial Crimes Enforcement Network
A U.S. bureau responsible for collecting and analysing information about financial transactions to counter money laundering and illicit finance.
- GCC - Gulf Cooperation Council
A political and economic alliance of Middle Eastern countries that also collaborates on financial crime prevention measures.
- GUO - Global Ultimate Owner
The final beneficial owner of an entity, crucial for unravelling complex corporate structures to ensure transparency.
- IBC - International Business Company
A type of offshore corporation often established for asset protection or tax benefits, which requires rigorous AML checks for beneficial ownership.
- INTERPOL - International Criminal Police Organisation
An international policing body facilitating global cooperation among law enforcement agencies, including in areas of financial crime.
- IMF - International Monetary Fund
Although primarily focused on global economic stability, the IMF’s monitoring of financial systems indirectly supports AML practices.
- JCPOA - Joint Comprehensive Plan Of Action
An international agreement (notably with Iran) that includes, among other stipulations, financial restrictions that play into AML/KYC measures.
- KYC - Know Your Customer
A fundamental compliance process used to verify a customer’s identity, ensuring they are not involved in money laundering or other illegal activities.
- KYE - Know Your Employee
An internal control process that involves background checks and risk assessments on employees, especially within roles with financial responsibilities.
- LLC - Limited Liability Company
A business structure offering liability protection; in a KYC context, identifying the true owners behind an LLC is essential for compliance.
- MOU - Memorandum Of Understanding
A non-binding agreement outlining collaboration or mutual responsibilities, often used in joint AML/KYC initiatives.
- MENAFATF - Middle East And North Africa Financial Action Task Force
A regional organisation focused on harmonising AML efforts across MENA countries and improving compliance measures.
- MLRO - Money Laundering Reporting Officer
A designated compliance officer is tasked with managing and reporting suspicious transactions within an organisation.
- MSB - Money Service Business
Entities that conduct remittance services or currency exchange; their operations are closely scrutinised under AML regulations.
- MER - Mutual Evaluation Report
A detailed assessment that reviews a country’s AML framework and compliance with international standards, highlighting areas for improvement.
- MLAT - Mutual Legal Assistance Treaty
A treaty between countries facilitating cooperation in criminal investigations and prosecutions, including those involving financial crimes.
- NGO - Non-Governmental Organisation
Independent organisations that sometimes participate in scrutinising financial flows and advocating for stronger AML practices.
- NPO - Non-Profit Organisation
Though not profit-driven, NPOs must also adhere to AML regulations, especially concerning donations, to prevent misuse of funds.
- NCA - National Crime Agency
A law enforcement body that tackles organised crime, including complex financial fraud and money laundering schemes.
- NPT - Non-Proliferation Treaty
Primarily focused on preventing the spread of nuclear weapons, this treaty’s financial controls have AML implications due to associated sanctions.
- OFAC - Office Of Foreign Assets Control
A U.S. government office that administers economic sanctions; its lists are essential for screening and preventing transactions with illicit parties.
- OPBAS - Office For Professional Body Money Laundering Supervision
A speciality oversight organisation that monitors professional bodies for adherence to AML regulations.
- OSINT - Open Source Intelligence
The practice of gathering publicly available information, increasingly applied to AML investigations to uncover hidden risks.
- OSFI - Office Of The Superintendent Of Financial Institutions
A Canadian authority charged with the regulation and supervision of financial institutions, ensuring they maintain robust AML practices.
- OFC - Offshore Financial Centre
Jurisdictions known for providing financial services to non-residents, which are often subject to extra AML scrutiny due to potential opacity.
- PEP - Politically Exposed Person
Individuals in prominent public positions (or their close associates) may present higher risks of corruption and money laundering.
- PIC - Private Investment Company
Companies that make private investments, verifying their funding sources and beneficial owners, are critical in the AML process.
- RCA - Relatives and Close Associates
People connected to PEPs or other high-risk subjects, whose associations can provide essential context during due diligence.
- REP - Reputationally Exposed Person
Individuals whose public image or past actions may affect financial risk assessments necessitate additional scrutiny.
- SDD - Sanctions Due Diligence
The process of checking individuals and entities against sanction lists to ensure that no prohibited parties participate in financial transactions.
- SSI List - Sectoral Sanctions Identification List
A list categorising sectors of an economy under sanctions; used by institutions to screen transactions linked to specific industries.
- SDN List - Specially Designated Nationals and Blocked Persons List
A critical tool, especially in the U.S., for identifying persons or entities with blocked assets due to involvement in illicit activities.
- SAR - Suspicious Activity Report
A report that financial institutions file when they detect potential money laundering or fraudulent activity.
- STR - Suspicious Transaction Report
Similar to an SAR, this report focuses on specific transaction patterns that raise red flags about potential illegal activities.
- SWIFT - Society For Worldwide Interbank Financial Telecommunication
A global messaging network used by banks to send and receive secure financial transaction information, integral to global finance.
- TMPs - Transaction Monitoring And Filtering Programs
Software systems that continuously monitor financial transactions to detect unusual patterns indicative of money laundering.
- TI - Transparency International
An organisation dedicated to fighting corruption globally; its research and rankings help underline the importance of robust AML practices.
- UBO - Ultimate Beneficial Owner
The individual who ultimately owns or controls an entity. Identifying UBOs helps to dismantle opaque corporate structures and mitigate money laundering risks.
Summing it up
AML and KYC compliance isn’t just about ticking regulatory boxes; it’s about understanding the ecosystem where transparency, accountability, and financial integrity converge. Whether you’re a compliance professional, a financial analyst, or simply interested in how money flows in today’s global economy, mastering these terminologies is the first step toward robust risk management.
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