JAIBP Stage III key terms

A mandatory process in which a bank verifies a customer's identity, address, and business nature using documents such as CNIC, utility bills, and income proof before opening an account or starting a relationship, and refreshes it periodically.

The wider risk-based assessment of a customer's identity, source of funds, expected transaction profile, and beneficial ownership, used to decide the level of monitoring and whether enhanced measures are needed.

Deeper scrutiny applied to high-risk customers such as politically exposed persons, non-resident clients, or cash-intensive businesses, involving senior approval, source-of-wealth checks, and closer ongoing transaction monitoring.

A confidential report a bank files with the financial intelligence unit when it suspects funds are linked to crime or terrorism, without tipping off the customer, and after the transaction is normally allowed to proceed.

A report filed with the financial intelligence unit whenever cash transactions above a prescribed threshold occur, capturing the customer's identity, amount, and account details, regardless of whether the activity looks suspicious.

The set of laws, procedures, and controls a bank uses to detect, deter, and report money laundering, including customer screening, transaction monitoring, record keeping, staff training, and an appointed compliance officer.

A politically exposed person is someone entrusted with prominent public office, or a close relative or associate of such a person, who is treated as higher risk and requires senior approval and source-of-wealth checks.

The identity of the natural person who ultimately owns or controls a legal entity or the funds in an account, established by tracing shareholding and control rather than accepting a nominee's name.

The legal and contractual bond created when an account is opened, under which the bank owes duties of confidentiality, care, and honouring instructions, while the customer owes duties such as keeping the bank informed of forgery.

The bank's obligation not to disclose a customer's account information to third parties, subject to recognised exceptions such as consent, compulsion by court or regulator, public interest, and the bank's own legal interests.

The written authority given by an account holder specifying who may operate the account, the signatures required, and any limits, which the branch must verify before acting on any instruction.

The branch control of comparing a signature on a cheque or instruction against the specimen signature held on record, and escalating to the account holder when a mismatch or doubt arises.

A clearing process in which the physical cheque is stopped at the collecting bank and only an image and data are transmitted electronically to the paying bank, which then makes the payment decision.

The interbank process of exchanging cheques or electronic payment instructions, determining which bank owes what, and settling the resulting net positions through the central bank or a clearing house.

A bank's right to retain a customer's property, such as securities or deposits, until a debt owed to the bank is repaid, exercisable only where the property is lawfully in the bank's possession.

The bank's right to combine a customer's accounts and apply a credit balance against an overdue debit balance, typically subject to the account terms, notice, and rules on joint accounts.

The bank's ability to apply a payment received from a customer to whichever debt it chooses, including an unsecured or time-barred one, unless the customer has given a specific instruction at the time of payment.

A security arrangement in which the borrower delivers physical possession of an asset, such as gold or goods, to the bank, which may retain or sell it on default to recover the secured obligation.

A charge over movable assets such as stock or machinery in which the borrower keeps possession and uses the assets, while the bank holds a charge registrable under applicable company or charge law.

A charge over immovable property, such as land or a building, created in the bank's favour so that the bank may enforce the property if the borrower defaults, usually with registration at the land registry.

The loan-to-value ratio expresses the loan amount as a percentage of the appraised value of the property or asset financed, and caps how much a bank will lend against that collateral.

The borrower's own contribution to the cost of an asset, or the cushion between the loan and collateral value, which protects the bank if the asset's value falls.

A demand by the bank for additional collateral or cash when the value of pledged security falls below an agreed level, restoring the required cushion against the loan.

A percentage discount applied to the market value of collateral when calculating how much lending it can support, reflecting price volatility and the difficulty of selling it quickly.

The proportion of a bank's deposits that must be held as cash or balances with the central bank, which earns little or no return and restricts how much can be lent out.

A regulatory measure comparing a bank's stock of high-quality liquid assets with the net cash outflows expected over thirty days of stress, requiring a ratio of at least one hundred percent.

A bank's regulatory capital expressed as a percentage of its risk-weighted assets, showing whether it holds enough capital to absorb losses and meet the minimum set by the regulator.

The total of a bank's exposures after applying regulatory risk weights, so that loans to governments count less than unsecured corporate lending, and used as the denominator of capital ratios.

The risk that a borrower or counterparty fails to meet interest or principal obligations on time, the largest risk in most banks and managed through appraisal, limits, collateral, and monitoring.

A loan on which the borrower has stopped servicing principal or interest for a defined period, usually ninety days, requiring classification, provisioning, and a recovery or restructuring plan.

The charge a bank recognises in its accounts to absorb expected losses on loans, split between general provisions for performing portfolios and specific provisions for identified impaired accounts.

The accounting removal of a loan from the bank's books after it is judged irrecoverable, which does not extinguish the borrower's legal obligation and usually follows full provisioning.

A bank's irrevocable written undertaking to pay a seller a stated amount against presentation of specified documents within a time limit, substituting the bank's credit for the buyer's.

The ICC's uniform rules governing documentary credits, setting out how banks examine documents, what counts as a complying presentation, and the five-banking-day examination period.

A transport document issued by a carrier that serves as a receipt for goods, evidence of the contract of carriage, and a document of title that can transfer control of the goods.

A mismatch between documents presented under a letter of credit and the credit's terms or the UCP, which entitles the issuing bank to refuse payment unless the applicant waives it.

An Islamic financing structure in which the bank buys an asset and sells it to the customer at a disclosed cost-plus-profit price, payable on deferred terms agreed in advance.

An Islamic leasing arrangement in which the bank owns an asset and leases its usufruct to the customer for a rental, retaining ownership risks and responsibilities during the lease term.

A partnership in which the bank and the customer contribute capital to a venture and share profit in an agreed ratio, while losses are borne in proportion to capital contributed.

Any predetermined increase charged for the mere deferment of a loan or exchange of money, which Islamic law prohibits; profit must instead arise from real trade, leasing, or shared risk.

The requirement that products, contracts, and operations conform to Islamic law, verified by a bank's Shariah board and supported by an internal audit and a dedicated compliance function.

The risk that one party to a transaction delivers cash or securities but the counterparty fails to deliver its side at the expected time, leaving the first party exposed to loss.

The risk that the other party to a contract, such as a derivative or interbank placement, defaults before the transaction matures, distinct from ordinary lending risk because exposure changes with market prices.

The risk of loss from failed internal processes, people, systems, or external events, including fraud, processing errors, system outages, and branch-level control breakdowns.

A control that splits incompatible tasks, such as initiating a payment and authorising it, between different staff so that no single person can complete a transaction end to end.

The policies, authorisation limits, reconciliations, and checks a branch operates to ensure transactions are accurate, properly approved, and recorded, and that assets are safeguarded.