IIBF AML/KYC key terms

The mandatory process by which a regulated entity identifies and verifies each customer's identity, understands the nature of the business relationship, and monitors activity on an ongoing basis before and during the relationship.

The baseline set of measures - identifying the customer, verifying identity, identifying beneficial owners, and understanding the purpose of the relationship - applied to every customer before or during onboarding.

Heightened scrutiny applied to higher-risk customers such as politically exposed persons or those in high-risk jurisdictions, including extra identity checks, source of funds verification, and more frequent monitoring.

Reduced identification and verification measures permitted only where the assessed money laundering and terrorist financing risk is demonstrably low, with the decision documented and periodically reviewed.

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

A person entrusted with prominent public functions, plus close family members and associates, who presents higher corruption risk and therefore requires enhanced due diligence and senior management approval.

The documented evaluation of a customer's money laundering and terrorist financing risk based on factors such as occupation, geography, products used, delivery channel, and expected transaction profile.

The low, medium, or high classification assigned to a customer after the risk assessment, which determines the intensity of due diligence and monitoring applied to that relationship.

The specific origin of the money involved in a transaction or relationship, such as salary, sale proceeds, or a loan, which must be evidenced where risk requires it.

The origin of a customer's total accumulated wealth, such as business ownership, inheritance, or investment gains, established to confirm that overall assets are legitimate.

The layered map of legal entities, shareholders, directors, and arrangements through which a customer is owned or controlled, used to trace the ultimate beneficial owners.

An entity with no meaningful operations, employees, or physical presence, often incorporated in a secrecy jurisdiction and used to obscure the true owner of funds or assets.

A person formally appointed to a company's board who acts on the instructions of another party, frequently used to conceal who really controls the entity.

Confirming a customer's identity in person by inspecting original identity documents, as opposed to remote or non-face-to-face onboarding channels that carry higher impersonation risk.

The scheduled refresh of a customer's identification data, risk rating, and profile at intervals set by the assigned risk level, ensuring records stay current.

The obligation to retain identification records and transaction documentation for a legally prescribed period after the relationship ends, so they can be produced to authorities on request.

The body of laws, regulations, and internal controls designed to prevent criminals from disguising the proceeds of crime as legitimate assets and to detect such activity when it occurs.

The process of concealing the criminal origin of funds by moving them through placement, layering, and integration stages so they appear to come from a lawful source.

The first stage of money laundering, in which illicit cash enters the financial system through deposits, purchases, or currency exchange, making it hardest to detect at this point.

The second stage of money laundering, involving a series of complex transfers, conversions, and transactions intended to break the audit trail between the funds and their criminal origin.

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

Deliberately splitting transactions into amounts below reporting or identification thresholds to avoid triggering a disclosure obligation, which is itself a reportable suspicious activity.

A confidential 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 terrorism.

A mandatory report filed when cash transactions exceed a prescribed threshold, providing authorities with a data trail independent of any suspicion about the customer.

The national agency that receives, analyses, and disseminates suspicious transaction and cash reports, and shares intelligence with domestic and international counterpart authorities.

Disclosing to a customer or any third party that a suspicious transaction report has been or may be filed, which is a criminal offence because it can compromise an investigation.

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

The systematic review of customer activity against expected profiles and defined rules or models to identify unusual patterns that may indicate money laundering or terrorist financing.

Continuous scrutiny of transactions and the business relationship throughout its life, keeping the customer profile current and ensuring activity remains consistent with what was disclosed.

The designated individual responsible for implementing the AML/CFT programme, advising staff, overseeing reporting, and acting as the contact point for regulators and the financial intelligence unit.

Formal sign-off by an institution's senior management required before establishing or continuing higher-risk relationships, such as those involving politically exposed persons.

A jurisdiction offering low taxation and light regulation, frequently used to hold entities whose ownership is hard to trace, making it a recognised geographic risk factor.

Measures aimed at preventing funds from reaching terrorists or terrorist organisations, focusing on the destination and intended use of money rather than only its criminal origin.

The raising, collection, or provision of funds for terrorist acts or organisations, which may involve legitimately earned money and therefore often shows no link to prior crime.

Freezing the assets of and prohibiting dealings with named individuals and entities designated under terrorism or proliferation lists, without prior notice to the customer.

Comparing customers, beneficial owners, and transactions against national and international sanctions lists before onboarding and on an ongoing basis to detect matches.

A screening or monitoring alert that superficially matches a listed name or suspicious pattern but is cleared on investigation as not genuinely linked to the concern.

The elevated terrorist financing exposure of non-profit entities, whose donor funds and cross-border operations can be diverted, requiring scrutiny of governance, beneficiaries, and fund flows.

Opening accounts through online channels using electronic identity verification, which improves access but raises impersonation and identity fraud risk requiring compensating controls.