AML and sanctions glossary

The set of laws, regulations, and procedures designed to prevent criminals from disguising illegally obtained funds as legitimate income. AML frameworks are established by bodies such as the FATF and implemented through national legislation.

The EU's centralised Anti-Money Laundering Authority, established in Frankfurt in 2024. AMLA has direct supervisory powers over high-risk obliged entities and coordinates national supervisors across EU member states. It represents a fundamental shift from directive-based to regulation-based AML oversight in the EU.

The natural person who ultimately owns or controls a customer, or the person on whose behalf a transaction is being conducted. Identifying beneficial owners is a key requirement under CDD obligations. The EU's AML Directives require member states to maintain beneficial ownership registers.

The process of verifying the identity of customers and assessing the risks they pose. CDD includes identifying the customer, verifying their identity using reliable sources, identifying the beneficial owner, and understanding the purpose of the business relationship.

The set of measures aimed at preventing funds from being used to finance terrorist activities. CFT obligations are closely integrated with AML requirements under the FATF framework. Regulated businesses must screen against terrorism-related sanctions lists and report suspicious activity that may relate to terrorist financing.

Businesses outside the traditional financial sector that are subject to AML regulations due to their vulnerability to money laundering. Non-financial institutions include real estate agents, lawyers, accountants, trust and company service providers, and dealers in precious metals and stones.

Additional checks required for higher-risk customers, such as PEPs, those from high-risk jurisdictions, or complex ownership structures. EDD involves gathering more information about the source of wealth and funds, conducting more frequent monitoring, and requiring senior management approval for the business relationship.

The global inter-governmental body that sets international standards for combating money laundering and terrorist financing. FATF's 40 Recommendations form the basis for national AML/CFT legislation worldwide. Countries are assessed through mutual evaluations against these standards.

An algorithmic technique used in sanctions screening that identifies approximate matches between names, accounting for spelling variations, transliterations, typographical errors, and aliases. Modern fuzzy matching combines string similarity algorithms (Levenshtein, Jaro-Winkler) with phonetic matching (Soundex, Metaphone) and configurable weighting.

The FATF's list of "jurisdictions under increased monitoring" - countries identified as having strategic deficiencies in their AML/CFT regimes but that have committed to resolving them. Being grey-listed signals elevated risk and typically triggers enhanced due diligence requirements for business relationships involving those jurisdictions.

The process of verifying the identity, legitimacy, and ownership structure of a business entity before establishing a commercial relationship. KYB extends KYC principles to corporate customers and includes verifying registration details, identifying beneficial owners, understanding the nature of the business, and screening directors and shareholders against sanctions lists.

The broader process of verifying and understanding a customer's identity, financial activities, and risk profile. KYC encompasses CDD, EDD, and ongoing monitoring. It is a fundamental requirement under AML regulations and applies to all regulated businesses including non-financial institutions.

The individual responsible for overseeing AML compliance within an organisation and filing suspicious activity reports (SARs). Regulated businesses must appoint an MLRO and ensure they have sufficient seniority, resources, and authority to fulfil their role.

The US Treasury department that administers and enforces economic and trade sanctions based on US foreign policy and national security goals. OFAC maintains the SDN List and other sanctions programmes. Due to the global reach of the US financial system, OFAC sanctions have extraterritorial impact.

The UK body responsible for implementing financial sanctions on behalf of HM Treasury. OFSI maintains the UK's consolidated list of financial sanctions targets and can impose monetary penalties for sanctions breaches.

An individual who is or has been entrusted with a prominent public function. PEPs and their family members and close associates present a higher risk for involvement in bribery and corruption. Regulated businesses must apply enhanced due diligence measures when dealing with PEPs.

The principle that regulated businesses should identify, assess, and understand the money laundering and terrorist financing risks to which they are exposed, and take proportionate measures to mitigate those risks. The RBA is the cornerstone of the FATF Recommendations and allows smaller firms to apply controls proportionate to their risk profile.

A list maintained by governments or international bodies identifying individuals, entities, vessels, and countries subject to economic restrictions. Major sanctions lists include the OFAC SDN List, EU Consolidated List, UN Security Council Sanctions List, and the UK Sanctions List.

A report filed with the relevant Financial Intelligence Unit (FIU) when a business suspects or has reasonable grounds to suspect money laundering or terrorist financing. In the UK, SARs are filed with the National Crime Agency (NCA). Failure to file a SAR when required is a criminal offence.

OFAC's primary sanctions list containing the names of individuals, groups, and entities subject to US sanctions. US persons are generally prohibited from dealing with SDN-listed parties, and their assets within US jurisdiction are blocked.

A company that exists only on paper, with no significant assets, operations, or employees. Shell companies are frequently used in money laundering schemes to obscure the ownership and movement of funds. Identifying shell companies is a key challenge for TCSPs and legal professionals conducting beneficial ownership checks.

The origin of the specific funds used in a particular transaction or business relationship. Verifying the source of funds is a key component of CDD and EDD, requiring businesses to understand where the money for a specific transaction came from and whether it is consistent with the customer's known financial profile.

The origin of a customer's total accumulated wealth, as distinct from the source of specific transaction funds. Understanding source of wealth is particularly important in EDD for PEPs and high-net-worth individuals, requiring evidence of how the customer built their overall financial position.

A report filed with the Financial Intelligence Unit when a specific transaction is suspected of involving the proceeds of crime or terrorist financing. In some jurisdictions, STRs and SARs are used interchangeably; in others, STRs relate specifically to transactions while SARs cover broader suspicious activity.

A business that provides formation, management, or administration services for companies, trusts, or similar legal structures. TCSPs are classified as non-financial institutions and are subject to AML obligations due to the potential for entity formation services to be exploited for ownership obfuscation.

The ongoing process of monitoring customer transactions to detect patterns that may indicate money laundering, terrorist financing, or other financial crime. Effective transaction monitoring uses rules-based and behavioural analytics to flag unusual activity for investigation.

The natural person who ultimately owns or controls an entity, typically defined as holding 25% or more of shares or voting rights, or exercising control through other means. UBO identification is synonymous with beneficial ownership identification and is a mandatory component of CDD for entity customers.

A consolidated list of sanctioned individuals, entities, and organisations compiled from multiple regulatory sources for screening purposes. Watchlists are updated frequently as new designations and delistings occur. Effective compliance requires screening against current watchlist data.