HKIB ECF-AML/CFT Core key terms

The process of disguising the true origin of funds gained from crime so that they appear to come from a legitimate source, typically through placement, layering and integration stages.

Providing, collecting or moving funds or assets, whether from legal or illegal sources, with the intention or knowledge that they will be used to support terrorist acts or organisations.

The underlying criminal activity that generates the proceeds later laundered, such as fraud, drug trafficking or corruption. Its scope is set by each jurisdiction's anti-money laundering legislation.

The first stage of money laundering, in which illicit cash or assets enter the financial system, for example through deposits, purchases of high-value goods or currency exchange.

The stage of money laundering that separates proceeds from their source through multiple transactions, transfers, shell companies or cross-border movements, making the audit trail difficult to follow.

The final money laundering stage, where laundered funds are reintroduced into the legitimate economy as apparently lawful assets, investments or business income.

Deliberately splitting transactions or cash deposits into smaller amounts to stay below reporting or threshold limits, a practice also known as smurfing and often treated as a criminal offence itself.

The set of measures a financial institution must apply to identify and verify customers and beneficial owners, understand the purpose of the relationship, and assess its money laundering and terrorist financing risk.

Additional, more intensive checks applied to higher-risk customers and relationships, such as politically exposed persons or correspondent banks, including deeper source-of-funds and source-of-wealth enquiries.

A reduced level of customer due diligence permitted only where a documented risk assessment shows lower money laundering or terrorist financing risk, while still identifying the customer and monitoring the relationship.

The natural person who ultimately owns or controls a customer or the funds involved, usually through a specified ownership or voting threshold, or who exercises control by other means.

A person entrusted with prominent public functions, and their family members and close associates, who presents higher corruption and money laundering risk and therefore requires enhanced scrutiny.

An entity with no significant operations or physical presence, often used to hold assets or move funds while concealing the identity of the people who really control it.

A report filed with the financial intelligence unit when an institution knows, suspects or has reasonable grounds to suspect that funds are linked to criminal activity or terrorist financing.

The national body that receives, analyses and disseminates suspicious transaction reports and other financial information to law enforcement and supervisory authorities.

Disclosing to a customer or third party that a suspicious transaction report has been or may be made, or that an investigation is underway, which is generally a criminal offence.

A report submitted for transactions above a fixed monetary amount, such as large cash deposits, regardless of whether any suspicion exists, to create a data trail for authorities.

A report covering the movement of funds or currency across national borders above a set value, used by authorities to monitor large international transfers.

The principle that anti-money laundering controls should be proportionate to the assessed risk of each customer, product, channel and jurisdiction, so that resources focus where risk is highest.

The documented evaluation of a particular customer's money laundering and terrorist financing risk, considering factors such as occupation, business, geography, products used and expected transaction activity.

Continuous scrutiny of a customer's transactions and activity against their known profile, so that unusual or inconsistent patterns are detected and followed up during the relationship.

Automated or manual processes that screen customer transactions against rules, thresholds and behavioural baselines to generate alerts for review by compliance staff.

An alert generated by screening or monitoring systems that, after investigation, turns out not to reflect genuine suspicious activity, consuming review resources and requiring documented closure.

Checking customers, beneficial owners and transactions against designated lists of sanctioned persons, entities and countries, with matches blocked or escalated as required by law.

The identification and verification procedures an institution applies before and during a relationship, forming the practical foundation of customer due diligence and ongoing monitoring.

The origin of the specific money used in a transaction or relationship, which institutions may need to verify to confirm it is consistent with the customer's known profile.

The origin of a customer's total accumulated wealth, such as salary, business ownership, inheritance or investments, examined particularly for higher-risk customers.

The Financial Action Task Force, an intergovernmental body that sets international standards on anti-money laundering and counter-financing of terrorism, known as the Forty Recommendations.

A peer review process in which assessors examine whether a jurisdiction has implemented the FATF standards effectively in practice, resulting in a published report and ratings.

Industry guidance developed by a group of major banks setting out expectations for anti-money laundering programmes, customer due diligence and correspondent banking controls.

An arrangement in which one bank holds accounts and provides services for another bank, creating cross-border exposure that requires due diligence on the respondent institution and its controls.

An electronic movement of funds between institutions, subject to rules requiring originator and beneficiary information to travel with the payment for traceability.

The legal obligation to retain customer identification data and transaction records for a specified period, enabling authorities to reconstruct activity and supporting effective supervision.

The designated person responsible for implementing and overseeing an institution's anti-money laundering and counter-financing of terrorism programme, training staff and reporting to senior management.

The accountability of an institution's board and top executives for establishing, resourcing and maintaining an effective anti-money laundering and counter-financing of terrorism framework.

The duty to keep customer information and suspicious transaction reporting secret, subject to lawful disclosure to authorities, supporting both privacy and the prohibition on tipping off.

The chain of entities and individuals that own or control a customer, which must be mapped and understood so that the ultimate beneficial owners can be identified.

A customer onboarded without physical presence, such as through online or postal channels, which typically carries higher identity fraud and impersonation risk requiring additional verification measures.