IATI Diploma key terms

The process of disguising the origin of money obtained from crime so it appears to come from a legitimate source, typically through placement, layering and integration stages.

The provision or collection of funds, from legal or illegal sources, with the intention that they be used to carry out terrorist acts or support terrorist organisations.

The first stage of money laundering, in which criminal proceeds are introduced into the financial system, for example through cash deposits, currency exchange or the purchase of assets.

The stage of money laundering in which a series of transactions is used to distance illicit funds from their source, obscuring the audit trail and complicating tracing.

The final stage of money laundering, where laundered funds are reintroduced into the economy and appear to be legitimate income or assets.

An underlying criminal act, such as fraud, drug trafficking or corruption, that generates the proceeds which are then laundered; money laundering is generally charged in relation to such an offence.

Deliberately breaking up transactions into smaller amounts to stay below reporting or identification thresholds, a technique also known as smurfing.

The intergovernmental body that sets global standards for combating money laundering and terrorist financing, known as the FATF Recommendations, and assesses countries against them.

The international standards issued by the FATF covering preventive measures, criminalisation, international cooperation and supervision, which member jurisdictions are expected to implement.

A peer review process in which assessors from other jurisdictions examine a country's implementation of AML/CTF standards and publish a report rating its technical compliance and effectiveness.

A set of voluntary industry guidelines developed by major banks that describe good practice for managing money laundering and terrorist financing risks in the financial sector.

The international standard-setter for banking supervision that issues guidance on customer due diligence and the management of money laundering and terrorist financing risks.

The principle that the intensity of AML/CTF controls should be proportionate to the assessed risk of money laundering or terrorist financing posed by a customer, product, channel or jurisdiction.

A structured process of identifying, analysing and evaluating money laundering or terrorist financing risks, often combining a business-wide assessment with individual customer or transaction-level analysis.

The level of money laundering or terrorist financing risk that remains after mitigating controls have been applied.

The level of money laundering or terrorist financing risk present before any controls or mitigating measures are taken into account.

The amount and type of money laundering or terrorist financing risk that an institution is willing to accept in pursuing its business objectives, set by senior management.

The set of measures an institution must take to identify and verify a customer and beneficial owner, understand the purpose of the relationship and monitor activity on an ongoing basis.

The broader process of establishing and maintaining knowledge about customers, their business and their expected activity, of which customer due diligence forms the core element.

The natural person who ultimately owns or controls a customer or the funds involved, typically identified through ownership thresholds or control arrangements.

A person entrusted with prominent public functions, or a close associate or family member of such a person, who presents higher corruption-related money laundering risk.

Additional and more intensive checks applied to higher-risk relationships, such as obtaining extra information on source of funds and wealth and requiring senior management approval.

A reduced set of due diligence measures permitted where risk is assessed as lower, provided the institution still identifies the customer and monitors the relationship.

Information explaining where the money used in a specific transaction or relationship came from, such as salary, savings or the sale of an asset.

Information explaining how a customer accumulated their overall wealth, including the origin of the assets and the activities that generated them.

The continuous process of reviewing customer activity against expected behaviour, keeping due diligence information up to date and identifying transactions that require further examination.

The automated or manual review of customer transactions against rules, thresholds or behavioural profiles to detect unusual or suspicious activity.

The process of reviewing and prioritising system-generated monitoring alerts to decide whether they are false positives or require escalation for investigation.

An alert generated by a monitoring system that, after review, is found not to represent genuinely suspicious activity.

A report filed with the national financial intelligence unit when an institution knows, suspects or has reasonable grounds to suspect that funds are linked to crime or terrorism.

The national body that receives, analyses and disseminates suspicious transaction reports and other intelligence relating to money laundering and terrorist financing.

Disclosing to a customer or other person that a suspicious transaction report has been or may be made, which is generally prohibited by law.

Restrictive measures that freeze the funds and economic resources of designated persons or entities and prohibit making funds available to them, without prior notice.

The process of comparing customers, beneficial owners and transactions against sanctions lists and other watchlists to identify matches before providing services.

A prohibition on dealing with, moving or making available funds and economic resources owned or controlled by a designated person or entity.

The documented framework of policies, procedures, systems, training and controls an institution maintains to comply with AML/CTF obligations and manage related risk.

The individual responsible for overseeing an institution's AML/CTF programme, advising staff, liaising with regulators and ensuring suspicious activity is escalated and reported.

The policies, procedures, checks and oversight mechanisms, including segregation of duties and independent testing, designed to ensure AML/CTF obligations are met.

A periodic review of the AML/CTF programme by a function separate from the compliance team, assessing whether controls are adequate and effective.