CAFCA flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Placement

The first money-laundering stage, in which illicit cash enters the financial system through deposits, cash purchases of instruments, or cash-intensive businesses.

Layering

The second stage, in which conversions, transfers and transactions are used to break the audit trail and separate funds from their criminal origin.

Integration

The final laundering stage, where funds re-enter the legitimate economy as apparently lawful assets, income or investments, making them difficult to trace.

Structuring

Splitting cash transactions into amounts below reporting thresholds to avoid currency transaction reports; deliberate structuring is itself a criminal offence in many jurisdictions.

Beneficial owner threshold

Standard test in FATF and EU rules: the natural person who ultimately owns or controls more than 25% of a legal entity's shares or voting rights.

Travel rule

Requirement that originator and beneficiary name, account and address data travel with a wire transfer; the EU and US threshold is EUR/USD 1,000.

Enhanced due diligence

Intensified customer due diligence for higher-risk relationships such as PEPs, high-risk jurisdictions and correspondent banks, adding source-of-funds and source-of-wealth checks plus senior approval.

Politically exposed person

A person entrusted with a prominent public function, together with family members and close associates, requiring senior approval and ongoing source-of-wealth monitoring.

Fraud triangle

Model of fraud causation combining a pressure or incentive, an opportunity created by weak controls, and a rationalisation that lets the offender justify the act.

Fraud diamond

Extends the fraud triangle with a fourth element, capability, meaning the skills, knowledge and position needed to execute and conceal the scheme.

Asset misappropriation

Occupational fraud category covering theft or misuse of an organisation's assets, such as billing, expense, payroll and cash-larceny schemes; the most common scheme type.

Financial statement fraud

Deliberate misstatement or omission in financial reports, such as fictitious revenue or concealed liabilities; the least common occupational fraud category but with the highest median loss.

Synthetic identity fraud

Use of a fabricated identity, often a real national identification number combined with invented personal details, to open accounts, build credit and then default.

Account takeover

Fraud in which a criminal gains control of a genuine customer account, usually through credential theft or social engineering, then redirects funds or data.

Authorised push payment fraud

Scam in which the victim is manipulated into authorising the transfer themselves; because the payment is genuine, chargeback rights are limited and behavioural analytics are the main control.

Three lines model

Governance structure in which business operations own and run controls, risk and compliance functions monitor them, and internal audit provides independent assurance to the board.

OFAC SDN list

US Treasury list of specially designated nationals and blocked persons whose assets must be frozen and with whom US persons may not deal.

Fifty percent rule

OFAC rule that any entity owned 50% or more, directly or indirectly, by one or more blocked persons is itself blocked, even if it does not appear on a list.

Strict liability

Principle that most sanctions regimes impose liability regardless of intent or knowledge, so unknowing dealings with a prohibited party are still violations.

Sectoral sanctions

Programmes prohibiting only defined transaction types with a listed party, such as specified debt or equity dealings, rather than blocking all dealings.

Secondary sanctions

Measures penalising non-US persons for specified activity involving a sanctioned party, even where no US person or US dollar is involved.

Fuzzy matching

Name-screening technique that scores similarity, for example with Levenshtein or Jaro-Winkler algorithms, to catch transliteration and spelling variants of sanctioned names.

General licence

Published authorisation permitting a defined class of otherwise-prohibited activity, subject to stated conditions, without the need for an individual application.

Blocking report

Written notice filed with OFAC within 10 business days of blocking property; an annual report of all blocked property is due by 30 September.

Suspicious activity report

Filing to a financial intelligence unit describing activity suspected of involving criminal proceeds; mandatory in most regimes, and the fact of filing must not be disclosed to the customer.

Tipping off

Offence of telling a customer or any third party that a suspicious report has been filed or that an investigation is under way.

Chain of custody

Chronological record of who handled evidence, when, and how it was stored or transferred, used to demonstrate integrity and support admissibility.

US SAR deadline

US requirement: file within 30 calendar days of detecting suspicious activity, extended to 60 calendar days if no suspect has been identified.

Investigation report content

Document setting out scope, methodology, evidence, findings and recommendations, answering who, what, when, where, why and how.

Escalation criteria

Predefined triggers, such as a confirmed sanctions match, senior-staff involvement or losses above a set threshold, that require referral to a higher authority.

Cognitive interview

Questioning technique using free recall and context reinstatement first, then open questions, then specific closed questions, to maximise accurate recall.

Evidence integrity

Property of evidence that is authentic, complete and unaltered, supported by hashing of digital files, sealed exhibits and controlled access.