CKYCA key terms

The baseline set of steps a firm takes to know who a customer is, what they do, and what risk they pose before and during a business relationship. It includes identification, verification, and understanding of purpose and expected activity.

The documented procedures a regulated firm uses to collect identifying information from each customer, verify it using reliable independent sources, and keep records of those checks. It is a required component of the broader CDD process.

The overall discipline of identifying customers, understanding their business and risk profile, and monitoring their activity so the firm can detect and prevent illicit use of its services. It underpins anti-money-laundering and sanctions compliance.

Laws, regulations, and internal controls designed to stop criminals from disguising the origin of illegal funds through the financial system. Firms must detect, report, and deter suspicious activity as part of their AML obligations.

A method of allocating compliance resources in proportion to the assessed risk of each customer, product, channel, and geography. Higher-risk situations receive more scrutiny, while lower-risk ones may be handled with simplified measures.

Additional, more intrusive checks applied to higher-risk customers, such as politically exposed persons or those in high-risk jurisdictions. It typically includes source-of-funds and source-of-wealth review, senior sign-off, and more frequent monitoring.

Reduced identification and verification measures permitted where a customer, product, or jurisdiction is assessed as low risk. It must still allow the firm to identify the customer and monitor activity, and it is never allowed where money laundering risk is elevated.

The natural person who ultimately owns or controls a legal entity or arrangement, or on whose behalf a transaction is conducted. Ownership is often measured by a threshold such as 25 percent of shares or voting rights.

The final layer of natural-person ownership or control behind a customer, reached after tracing through intermediate companies, trusts, or nominee arrangements. Identifying UBOs prevents criminals from hiding behind layered corporate structures.

A natural person who exercises effective control over an entity even without a large ownership stake, for example through senior management authority, voting agreements, or the power to appoint directors. Control is assessed alongside ownership when identifying beneficial owners.

The sequence of intermediate entities and individuals linking a customer to its ultimate beneficial owners. Analysts document each link, the percentage held, and the jurisdiction involved to confirm where real control sits.

A person or company that holds shares on behalf of another party, appearing on records as the legal owner while the real owner stays hidden. Nominee arrangements are a common concealment technique and require closer beneficial ownership scrutiny.

An individual appointed to a board who acts on the instructions of another person rather than independently. Their presence can indicate that real control lies elsewhere, so firms look beyond the director of record.

An entity with no meaningful operations, employees, or assets of its own, often used to hold accounts or move funds. Shell companies are legitimate in some structures but are frequently used to obscure ownership.

A business that appears legitimate and conducts real commercial activity but exists primarily to disguise illegal proceeds or the true parties behind a transaction. Its legitimate trading can make suspicious flows harder to spot.

A person entrusted with a prominent public function, such as a head of state, minister, judge, or senior military officer, along with closely associated family members and known associates. PEPs are treated as higher risk because of their potential to abuse influence.

The specific origin of the money involved in a particular transaction or account relationship, such as salary, property sale, or a loan. Verifying it helps confirm that the funds are legitimate and consistent with the customer profile.

The origin of a customer's total accumulated wealth, for example business ownership, inheritance, or investment gains. It is broader than source of funds and is typically reviewed for high-risk and PEP customers.

Negative news coverage linking a customer to financial crime, corruption, sanctions, or other serious misconduct. Screening adverse media helps firms spot risks that formal records and self-declarations may not reveal.

The process of comparing customers, transactions, and counterparties against government sanctions lists and watchlists. A match, whether exact or fuzzy, must be investigated before the relationship or payment proceeds.

An alert generated by screening or monitoring that initially appears to match a prohibited party or suspicious pattern but turns out to be a legitimate, unrelated match. Documented disposition of false positives is essential to demonstrate an effective control.

A country or territory subject to trade or financial restrictions that limit dealings with it. Firms must check whether a customer, counterparty, or transaction touches such a jurisdiction before proceeding.

The step of confirming that the identity information supplied by a customer is genuine, using documents, databases, biometrics, or other independent sources. It goes beyond simply collecting a name and address.

The process of accepting a new customer, from initial application through identification, verification, risk rating, and account opening. Weak onboarding controls allow prohibited or high-risk customers to enter the firm undetected.

A score or category assigned to a customer reflecting the combined risk from factors such as business type, geography, product use, and delivery channel. The rating drives how much due diligence and monitoring the relationship receives.

The risk that a customer's links to a particular country, such as residence, nationality, or transaction routes, raise the likelihood of money laundering, corruption, or sanctions exposure. It is a core input to customer risk ratings.

The continuous process of reviewing a customer's transactions and profile against expectations to detect unusual or suspicious activity. It includes automated alerts, manual review, and periodic updates to due diligence information.

The systems and processes that screen customer activity for patterns indicating money laundering, fraud, or sanctions evasion, such as unusual volumes, round amounts, or rapid movement of funds. Alerts generated are investigated and resolved.

The first review stage of a monitoring or screening alert, where an analyst decides whether it is a false positive, needs more information, or warrants escalation. Consistent triage documentation supports later reporting and audit.

Deliberately breaking up transactions into smaller amounts to stay below reporting or scrutiny thresholds. It is itself a suspicious indicator, and firms must detect and report patterns across accounts and time.

A confidential report filed with the financial intelligence unit when a firm knows, suspects, or has reason to suspect that funds are linked to criminal activity. Filing is typically protected by a prohibition on tipping off the customer.

Disclosing to a customer or third party that a suspicious activity report has been or may be filed, or that an investigation is underway. It is prohibited by law because it can undermine the investigation.

A national agency that receives, analyses, and disseminates suspicious activity reports and other financial information to law enforcement and regulators. Firms file reports to their local FIU.

The requirement to keep customer identification records, transaction data, and due diligence documentation for a defined period after the relationship ends or the transaction occurs. Records must be retrievable for regulators and law enforcement.

A scheduled refresh of a customer's due diligence information and risk rating, with frequency set by the customer's risk level. It ensures the firm's understanding of the customer stays current as circumstances change.

The process of making illegally obtained money appear legitimate, typically through placement, layering, and integration stages. Understanding these stages helps analysts recognise suspicious transaction patterns.

The first stage of money laundering, where illegal cash enters the financial system through deposits, purchases, or currency exchange. It is the most vulnerable stage and the focus of many cash-reporting controls.

The stage of money laundering in which funds are moved through multiple transactions, accounts, or jurisdictions to separate them from their criminal origin. Complex layering makes tracing difficult and often triggers monitoring alerts.

The final money laundering stage, where laundered funds re-enter the legitimate economy as apparently lawful assets or income. At this point the funds look clean, making detection harder.

Moving value across borders by misrepresenting the price, quantity, or quality of goods in trade transactions. It exploits the complexity of international trade documentation and is hard to detect without trade data analysis.

A relationship in which one bank provides accounts and payment services to another bank so the latter can operate in a different country or currency. Because it creates cross-border exposure, it demands enhanced due diligence on the respondent bank.

The government body that supervises a firm's compliance with AML and KYC rules, issues guidance, and can impose penalties. Firms must demonstrate that their controls meet the regulator's expectations.

The person responsible for overseeing a firm's AML and KYC programme, including policy, training, monitoring, and reporting. The role typically includes authority to escalate issues to senior management and the board.

The documented, chronological record of decisions, checks, and actions taken on a customer or alert. A clear audit trail lets reviewers and regulators reconstruct why a decision was made.