IIBF AML/KYC flashcards

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

Customer Due Diligence

The process of identifying a customer, verifying identity using reliable documents, identifying the beneficial owner, and understanding the purpose and intended nature of the business relationship.

Beneficial Owner

A natural person who ultimately owns or controls a customer or the funds involved, identified by an ownership percentage threshold or by exercising control through other means.

Politically Exposed Person

An individual entrusted with a prominent public function, plus family members and close associates, whose relationship requires senior management approval and enhanced source of funds scrutiny.

Enhanced Due Diligence

Additional measures applied to high-risk customers such as PEPs, non-residents and complex structures, including deeper source of wealth checks and more frequent monitoring.

Simplified Due Diligence

Reduced identification and verification measures allowed only for demonstrably low-risk customers, and never where money laundering or terrorist financing is suspected.

Customer Acceptance Policy

A written framework defining which customer categories the institution will accept, which it will refuse, and the documentation required for each category.

Periodic KYC Updation

Risk-based refresh of customer identity and profile data, performed more frequently for high-risk customers and less frequently for low-risk customers.

Risk-Based Approach

Allocating compliance resources in proportion to assessed money laundering and terrorist financing risk, so that higher-risk relationships receive more intensive controls.

Source of Funds

The origin of the specific money used in a transaction or relationship, verified separately from the broader source of the customer's overall wealth.

Record Retention Period

The minimum time identity and transaction records must be preserved, generally five years after the relationship ends or the transaction is completed.

Onboarding Verification

Confirming a customer's identity before or shortly after establishing the relationship, using independent, reliable and current documents, data or information.

Money Laundering

The process of disguising the origin of proceeds of crime so that the funds appear to come from a legitimate source and can be used freely.

Placement Stage

The first laundering stage, where illicit cash or assets enter the financial system, often through deposits, purchases or cash-intensive businesses.

Layering Stage

The second laundering stage, using transfers, shell entities and complex transactions to obscure the audit trail and separate funds from their origin.

Integration Stage

The final laundering stage, where laundered funds re-enter the legitimate economy as apparently lawful assets, investments or business income.

Suspicious Transaction Report

A report filed with the financial intelligence unit when a transaction appears unusual or lacks apparent economic purpose, regardless of whether wrongdoing is proven.

Tipping Off

Disclosing to a customer or third party that a suspicious transaction report has been or will be filed, which is a criminal offence in most jurisdictions.

Structuring

Splitting transactions into smaller amounts deliberately to stay below reporting or identification thresholds, a recognised money laundering indicator.

FATF Recommendations

The international standards on anti money laundering and counter terrorist financing, comprising 40 recommendations covering legal, preventive and international cooperation measures.

Financial Intelligence Unit

A national agency that receives, analyses and disseminates suspicious transaction reports and other financial disclosures to law enforcement and supervisors.

Correspondent Banking

A relationship where one bank provides services to another, requiring enhanced due diligence on the respondent institution and a prohibition on shell bank relationships.

Three Lines of Defence

A governance model where business units own risk, compliance monitors and advises, and internal audit provides independent assurance over the control framework.

Cash Transaction Report

A value-triggered report filed when cash transactions exceed a prescribed threshold, independent of any suspicion about the customer.

Terrorist Financing

Providing or collecting funds, from lawful or unlawful sources, with the intention that they be used to carry out terrorist acts.

Targeted Financial Sanctions

Freezing of funds and prevention of making funds available to designated persons and entities, applied without delay and without prior notice.

UNSCR 1373

A 2001 Security Council resolution requiring states to criminalise terrorist financing, freeze terrorist assets and cooperate in preventing terrorist acts.

Sanctions Screening

Comparing customer and transaction names against designated lists, including spelling variants and transliterations, at onboarding and on every list update.

Hawala

An informal value transfer system operating outside regulated channels, settling obligations through trust and netting rather than formal wire transfers.

NPO Sector Risk

The elevated terrorist financing risk of non-profit organisations, addressed by verifying governance, beneficiary selection and delivery of funds to intended recipients.

Wire Transfer Rule

The requirement that originator and beneficiary information accompany fund transfers, with full originator data required for cross-border transfers.

Freezing Without Delay

The obligation to block designated funds immediately upon identification, without prior notice to the customer and without waiting for a court order.

Terrorist Financing Red Flags

Indicators such as small remittances to conflict zones, unexplained charity accounts and use of informal transfer channels inconsistent with the customer profile.