The financial industry has been facing money laundering challenges since years. For example, even some of the non-financial businesses have been inundated with money laundering risks. The national, regional, and international organizations and associations have also responded to these high risks with relevant anti-money laundering policies and regulations for countries and companies.
However, a key issue is that businesses, employees, and people across the world are not aware of all the terms used in the money laundering dictionary. Once they understand the AML glossary, only then they will have a better understanding of the AML regulations, laws, legislation, policies, and guidelines. Moreover it is the duty of governments and economies to make their citizens aware of such AML dictionary words. It is also done to prevent the risks of money laundering and criminal activities.
In this article, we provide you a money laundering glossary so that you understand the terms. It also refers to the prevention of money laundering activities in your company or country through the identification of suspicious transactions.
Why you should know these terms?
It is important for you to know the specific terms and concepts in the AML dictionary because you will have a better understanding of AML laws and regulations. Moreover employees in the AML teams or management positions in the company need to understand the money laundering dictionary terms in a better way. So that they can contribute to the relevant decisions, plans, and strategies for AML.
The process of making money through illegal means and methods. For example, terrorist funding or drug trafficking and concealing the source of income by showing it as legitimate income by passing it through a sequence of commercial, legal transactions is called money laundering.
AML – Anti-money laundering
The set of laws, processes, procedures, systems, and controls that can help to detect, prevent, and control the laundering of money is called anti-money laundering (AML).
Adherence to a set of rules, regulations, policies, guidelines, legislation, and laws is called compliance.
AML compliance officer
An AML compliance officer is a senior officer who handles the AML programs and policies in a company. Moreover it ensures to make the company compliant with all the relevant AML regulations and laws.
Anti-Money Laundering International Database (AMLID)
A multi-lingual database of the research and analysis of various national and international AML laws and regulations useful to the enforcement officers is called AMLID.
CTF – Counter-terrorism financing
CTF means the laws and policies adopted by countries to detect, investigate, and report any activities that lead to the funding of terrorism activities such as recruiting terrorists, maintaining logistics, or carrying out terrorism operations.
It is the first stage of the money laundering process. For example, illicit money enters the financial system.
It is the second stage of the money laundering process, in which the illicit money is covered under a protective layer of financial transactions to take it far away from the crime so that the origins cannot be sourced back.
It is the third stage of the money laundering process. For example, the money moves in the system as clean money.
KYC – Know Your Customer
KYC is the process of verifying the identity of your customers to understand their suitability for your business. Additionally it is to know the risks for the company in maintaining the relationship with them.
KYE – Know your employees
The process implemented by companies to check and verify the identity of their employees.
CDD – Customer due diligence
Customer due diligence means verifying the identity of customers. Moreover it is evaluating the risk they pose to the business relationship.
EDD – Enhanced due diligence
A better form of CDD is EDD. It is the process of ascertaining the risks of a customer or client to a company. Specifically when the customer or client is highly suspicious. Moreover EDD is different from CDD since it requires additional checks and verifications on the customer.
SDD – Simplified due diligence
If a customer poses a lower risk of money laundering or criminal activity. Companies also conduct a simplified form of CDD, called SDD.
Identity theft is the process used by criminals to obtain an individual’s personal and financial information without their permission. It is done to carry out unauthorized transactions or criminal activities.
The outcomes of criminal activities in terms of property or legal documents proving the title or interest in such property are called criminal proceeds.
RBA – Risk-based approach
AN RBA is the methodology companies and countries use to ascertain, and understand. It is also to evaluate the money laundering risks that their company faces to devise the appropriate measures to reduce the impact of these risks or eliminate them.
Smurfing is a technique of layering step in the money laundering process. Especially, where large amounts of cash are segregated into several small cash transactions and spread over multiple accounts. It is also done to avoid detection or suspicion by authorities.
It is the process of identifying a customer’s risk profile, meaning identifying their risk capacity and tolerance to risk. Additionally, it also identifies expected returns.
AML/CTF compliance audit
It is the procedure to review the AML/CTF policies, test the compliance procedures, and assess the KYC for clients. It also evaluate all financial transactions. Moreover it gauges the efficiency of the AML systems implemented in the company.
EFT – Electronic funds transfer
The electronic movement of funds between banks and other financial institutions is called EFT.
A front company is the face of a company used to protect the actual company or owners from liability or investigation. For example, in the case of criminal or illegal activities such as money laundering.
Gatekeepers are the persons that are a go-between two persons or two activities. In the case of money laundering, lawyers, accountants, trusts, notaries, investment advisors, and company service providers help in the movement of money from one place to another. Therefore, they are called gatekeepers. Moreover It is essential to identify the relevant gatekeepers of a transaction to prevent money laundering operations.
It is a set of all the processes of governing a company or government or institution. For example, the accountability structure, control systems, decision-making processes. Moreover there are other norms of keeping a company’s operations organized.
Illegal entry or transport of a human being from one country to another against the laws is human smuggling.
It refers to the trade of human beings across international borders. For example, sexual slaves, exploit them, or make them forced laborers.
Financial penalties imposed by a country or multiple countries against an individual or country or any other entity are called economic sanctions.
Multilateral sanctions are the sanctions supported by multiple countries of entities.
The adherence to all the regulations and laws related to sanctions is called sanctions compliance.
SCO – Sanctions compliance officer
An SCO is a senior officer responsible for managing the sanction compliance activities in the company. For example, identifying suspicious transactions, reviewing exception reports, and checking for any non-compliant operations.
It is a list of all the individuals, countries, and companies, which have been considered illegal by countries to conduct business with.
SDD – Sanctions due diligence
SDD is the due diligence of sanctions-related risks.
Some countries attract businesses to operate in their countries by offering tax incentives, or tax avoidance possibilities. These countries are called tax havens.
SAR – Suspicious activity report
In the case of suspicions of money laundering activities, financial institutions and other bodies subject to AML regulations. They also submit reports to the FIU regarding the suspected activities. Therefore, these reports are called SARs.
STR – Suspicious transaction report
STRs are the same as SARs; different countries have different terms for it.
BO – Beneficial owner
A beneficial owner is an individual who enjoys the benefit of or controls a legal entity or property. Although the property or entity is in someone else’s name.
FATF – Financial Action Task Force
G7 nations found FATF, an inter-governmental organization, in 1989 to develop standards and policies. The purpose is fighting money laundering in the world.
FIU – Financial Intelligence Unit
FIUs are central, national agencies in each country to combat money laundering and terrorism financing. Such national FIUs receive financial information from competent authorities regarding suspicious money laundering activities, analyze them, and disseminate it further to authorities requesting further insights on criminal activities and terrorism financing operations.
DNFBPs – Designated Non-Financial Businesses and Professions
FATF recognizes some non-financial businesses and professions that have the same risk of money laundering. It also accounts for terrorism financing as the financial institutions and businesses. These DNFBPs also include casinos, dealers in precious metals and stones, trusts and company service providers. Additionally, others are real estate agents, and lawyers, notaries, and other independent legal professionals and accountants.
PEP – Political Exposed Person
PEPs are individuals holding prominent function and position in government or public sector.
Add these words to your money laundering dictionary. It helps you understand the implications of the rules and regulations. Moreover it assists you with making strategic business decisions.