Reference · 59 terms

AML Glossary

Clear, plain-language definitions of the Anti-Money Laundering and financial-crime terms compliance teams use every day — from STR and CTR through to sanctions, watchlists, CDD, EDD, UBO, PEP and the FATF Travel Rule.

A

Adverse Media: Negative news coverage linking a person or entity to financial crime, fraud, corruption, terrorism or other reputational risks. A standard input to risk-based screening alongside sanctions and PEP data.
AMLA: The EU Anti-Money Laundering Authority — a new EU-level supervisor stood up under the 2024 AML package. From 2027 it will directly supervise the highest-risk cross-border financial groups.
AMLD 6: The Sixth EU Anti-Money Laundering Directive, part of the 2024 AML package alongside the AMLR and AMLA Regulation. Harmonises predicate offences, beneficial-ownership transparency and supervisory powers across Member States.
AMLR: The EU Anti-Money Laundering Regulation — a single, directly applicable AML rulebook for the EU covering CDD, beneficial ownership, sanctions and reporting obligations.
Anti-Money Laundering (AML): The framework of laws, regulations and controls designed to prevent criminals from disguising illegally obtained funds as legitimate income.
Age Verification: Confirming that a user meets a legal minimum age before granting access to a product or service, using document checks, facial age estimation or verified third-party data.

B

Bank Secrecy Act (BSA): The foundational US AML statute (1970), enforced by FinCEN. Requires US financial institutions to maintain records, file CTRs and SARs, and operate AML programmes.
Biometric Verification: Identity confirmation using physical characteristics — most commonly a facial match between a selfie and the photo page of an identity document.

C

Counter-Financing of Terrorism (CFT): Controls designed to detect and prevent the funding of terrorism. CFT obligations sit alongside AML in nearly every regulatory regime (often referred to together as AML/CFT).
Currency Transaction Report (CTR): A US BSA filing required from financial institutions for any cash transaction exceeding USD 10,000 in a single business day, whether single or aggregated.
Customer Due Diligence (CDD): The standard set of identification, verification and risk-assessment checks performed on every customer at onboarding and updated throughout the relationship.

D

Deepfake: Synthetic audio, image or video generated by AI to impersonate a real person. A growing onboarding threat that liveness detection and injection-attack checks are designed to defeat.
Document Verification: Automated authentication of an identity document — checking security features, MRZ or NFC chip data, fonts, tampering and expiry — before extracting the holder's details.

E

Enhanced Due Diligence (EDD): A deeper level of due diligence applied to high-risk customers — PEPs, high-risk jurisdictions, complex ownership structures or unusual activity. Typically requires source-of-funds evidence and senior approval.
eIDAS: The EU regulation on electronic identification and trust services. eIDAS 2 introduces the European Digital Identity Wallet, which regulated firms will be able to accept for customer identification.
eKYC: Electronic KYC — completing identity verification entirely through digital channels (document capture, biometrics, database checks) with no in-person contact.

F

False Positive: An alert generated by a screening or monitoring system that, on review, does not represent a true match or risk. Reducing false positives without missing true hits is the central tuning challenge of any AML programme.
FATF: The Financial Action Task Force — the inter-governmental body that sets global AML/CFT standards through its 40 Recommendations and evaluates jurisdictions on their implementation.
Financial Intelligence Unit (FIU): The national authority that receives, analyses and disseminates Suspicious Activity / Transaction Reports filed by regulated firms. Examples: FinCEN (US), MOKAS (CY), NCA-UKFIU (UK).
FinCEN: The Financial Crimes Enforcement Network — the US Treasury bureau that administers the BSA and operates as the US FIU.
FATF Grey List: FATF's list of 'jurisdictions under increased monitoring' with strategic AML/CFT deficiencies. Customers and payments linked to these countries usually attract enhanced due diligence.

I

Identity Theft: Use of another person's real identity data to open or take over an account. Detected through document authentication, biometric matching and device or behavioural signals.
Integration (Money Laundering Stage): The third stage of money laundering, where laundered funds re-enter the legitimate economy as apparently lawful assets — property, businesses or investments.

K

Know Your Business (KYB): The B2B equivalent of KYC: verifying a legal entity's existence, structure, directors and ultimate beneficial owners before onboarding.
Know Your Customer (KYC): The process of verifying a customer's identity, suitability and risk before and during a business relationship.
Know Your Transaction (KYT): Risk assessment at transaction level, especially in crypto: tracing counterparties, wallet exposure and fund flows rather than only the customer's identity.

L

Layering: The second stage of money laundering: moving funds through complex transfers, shell entities and jurisdictions to obscure their criminal origin.
Liveness Detection: Techniques that confirm a real, present human is being captured — not a photo, mask, replayed video or deepfake — during a selfie or video verification step.

M

MiCA: The EU Markets in Crypto-Assets Regulation (2023/1114). Brings crypto-asset service providers (CASPs) into the EU AML perimeter and imposes harmonised authorisation and conduct rules.
MLRO: Money Laundering Reporting Officer — the named individual within a regulated firm responsible for the AML programme and for filing SARs/STRs with the FIU.
Money Mule: A person who receives and transfers criminal funds through their own account, knowingly or not. Typically detected through transaction-monitoring pass-through patterns.

O

OFAC: The US Treasury's Office of Foreign Assets Control. Administers and enforces US economic and trade sanctions, including the Specially Designated Nationals (SDN) list.
OFSI: The UK's Office of Financial Sanctions Implementation, part of HM Treasury. Maintains the UK consolidated sanctions list and enforces breaches.
OCR (Optical Character Recognition): Extraction of machine-readable text from an image of a document, used to auto-populate customer data during identity verification.

P

Perpetual KYC (pKYC): An operating model in which customer data is continuously and event-driven re-verified, replacing fixed periodic refresh cycles. Reduces stale records and analyst workload.
Politically Exposed Person (PEP): An individual entrusted with a prominent public function (heads of state, ministers, senior judges, military, central bank officials, etc.). PEPs require enhanced due diligence under FATF and EU rules.
Placement: The first stage of money laundering: introducing criminal proceeds into the financial system, often via cash deposits, structuring or cash-intensive businesses.
Proof of Address (PoA): Documentary evidence of a customer's residential address — a utility bill, bank statement or government letter — required under most CDD regimes.

R

Relatives and Close Associates (RCAs): Family members and close business associates of a PEP, who are treated as PEPs themselves for due-diligence purposes.
Risk Scoring: Assigning a customer or transaction a risk rating from weighted factors (geography, product, PEP/sanctions exposure, behaviour) to drive the level of due diligence applied.

S

Sanctions: Restrictive measures imposed by governments and supranational bodies (UN, EU, US, UK) against countries, entities or individuals to achieve foreign-policy or security objectives. Breaches typically carry strict-liability penalties.
Sanctions Screening: The process of matching customers, counterparties and transactions against sanctions lists in real time and continuously thereafter.
Source of Funds (SoF): Evidence of the origin of the specific funds used in a transaction or relationship — for example salary, business revenue, sale of an asset. Mandatory for higher-risk customers under EDD.
Source of Wealth (SoW): Evidence of how the customer accumulated their overall net worth, distinct from Source of Funds. Required for PEPs and high-net-worth EDD.
Suspicious Activity Report (SAR): A confidential filing made by a regulated firm to the national FIU when it knows or suspects funds are linked to crime or terrorism. Used in the US and UK.
Suspicious Transaction Report (STR): The equivalent of a SAR in many EU and international regimes — a confidential report to the FIU about a specific transaction (or attempted transaction) suspected of being linked to financial crime.
Simplified Due Diligence (SDD): A reduced level of due diligence permitted under the risk-based approach for clearly low-risk customers (e.g. listed companies, regulated FIs).
SDN List: OFAC's Specially Designated Nationals and Blocked Persons list. US persons are prohibited from dealing with listed parties, and their property must be blocked.
Shell Company: A legal entity with no meaningful operations or assets, often used to hide beneficial ownership and layer illicit funds. A key UBO-verification red flag.
Smurfing: Splitting large sums across many small deposits, accounts or people to stay below reporting thresholds — a common form of structuring.
Structuring: Deliberately breaking transactions into amounts below a reporting threshold (e.g. USD 10,000 for a CTR) to avoid detection. A criminal offence in itself under the BSA.
Synthetic Identity: A fabricated identity combining real and invented data (for example a genuine national ID number with a false name) used to pass basic checks and open fraudulent accounts.

T

Tipping-off: The criminal offence of disclosing to a customer (or any third party) that a SAR/STR has been or will be filed about them, or that an investigation is under way.
Transaction Monitoring: The continuous surveillance of customer transactions against rules, thresholds and behavioural models to detect patterns indicative of money laundering, fraud or sanctions evasion.
Travel Rule: FATF Recommendation 16 requirement that originator and beneficiary information must travel alongside wire transfers — and, since 2021, alongside crypto-asset transfers above defined thresholds.
Trade-Based Money Laundering (TBML): Laundering value through international trade by mis-invoicing, over- or under-shipment, or falsely describing goods to justify cross-border payments.

U

Ultimate Beneficial Owner (UBO): The natural person who ultimately owns or controls a legal entity, directly or indirectly (typically a 25%+ ownership or control threshold under EU rules).

V

Virtual Asset Service Provider (VASP): FATF's term for a business conducting crypto-asset activities — exchange, transfer, custody or issuance — on behalf of others. Subject to AML/CFT and Travel Rule obligations.

W

Watchlist: Any curated list of high-risk parties used in screening — sanctions lists, PEP databases, law-enforcement lists, internal blocklists or SAR-derived lists.

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