NIBAF AML & CFT flashcards

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

Placement stage

The first stage of money laundering, in which illicit cash is introduced into the financial system through deposits, purchases, or cash-intensive businesses, making it harder to trace to its criminal origin.

Layering stage

The second stage of money laundering, involving complex transfers, conversions, and shell structures designed to obscure the audit trail and separate funds from their source.

Integration stage

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

Predicate offence

The underlying crime that generates proceeds later laundered. The AML Act 2010 Schedule lists predicate offences, and a money laundering charge can rest on a foreign or domestic predicate.

FATF

The Financial Action Task Force, an intergovernmental body that sets global AML/CFT standards through its 40 Recommendations. It does not itself supervise institutions or impose sanctions directly.

Financial intelligence unit

A national agency that receives, analyses, and disseminates suspicious transaction reports and other financial intelligence. Pakistan's FIU is the Financial Monitoring Unit, established under the AML Act 2010.

Egmont Group

The global network of financial intelligence units that supports secure exchange of financial intelligence between member FIUs, subject to reciprocity and confidentiality safeguards.

Wolfsberg Group

A private-sector association of major banks that issues industry guidance on customer due diligence, correspondent banking, and sanctions screening. Its guidance is not binding law.

Financial Monitoring Unit

Pakistan's financial intelligence unit, established under the AML Act 2010. It receives STRs and CTRs through goAML, analyses them, and disseminates intelligence to law enforcement and regulators.

AML Act 2010

Pakistan's primary anti-money laundering statute. It criminalises money laundering, lists predicate offences, establishes the Financial Monitoring Unit, and sets reporting and record-keeping obligations.

CTR threshold

The cash transaction level at which a currency transaction report must be filed with the FMU. It is set by the FMU and is commonly PKR 2 million for individuals and PKR 2.5 million for entities.

STR filing timeframe

Suspicious transaction reports must be filed promptly with the FMU, generally within seven working days of forming the suspicion, using the goAML system. No monetary threshold applies.

FATF Recommendation 10

Requires customer due diligence: identify and verify the customer and beneficial owner, understand the purpose and intended nature of the relationship, and conduct ongoing monitoring of the relationship.

FATF Recommendation 20

Requires reporting of suspicious transactions to the financial intelligence unit and provides tipping-off protection, so institutions can report without alerting the customer or third parties.

FATF Recommendation 6

Requires targeted financial sanctions for terrorism and terrorist financing, including freezing designated funds without delay and prohibiting making funds available to designated persons and entities.

Mutual evaluation

A peer assessment by the FATF or a regional body such as the APG, producing ratings for technical compliance and effectiveness across 11 Immediate Outcomes, with follow-up reporting obligations.

Targeted financial sanctions

Freezing obligations that apply to designated persons and entities without delay and without prior notice, covering funds and economic resources owned or controlled directly or indirectly.

Beneficial owner

A natural person who ultimately owns or controls a customer, commonly through 25% or more ownership or voting rights or control by other means. If none is found, the senior managing official is recorded.

Enhanced due diligence

Additional measures applied to higher-risk situations such as PEPs, high-risk jurisdictions, and complex structures, including source of funds and wealth checks and senior management approval.

Simplified due diligence

Reduced CDD measures permitted only for documented lower-risk situations. It never applies where money laundering or terrorist financing is suspected, or to high-risk categories.

Politically exposed person

An individual entrusted with a prominent public function, plus family members and close associates. Risk continues for at least 12 months after the person leaves office.

Tipping-off

Disclosing to the customer or a third party that a suspicious transaction report has been or will be filed. It is prohibited and is itself a criminal offence under the AML Act.

goAML

The Financial Monitoring Unit's online portal used by reporting institutions in Pakistan to submit suspicious transaction reports and currency transaction reports electronically.

STR narrative quality

A good report states who, what, when, where, and how, with dates, amounts, accounts, and counterparties, and explains why the activity is unusual for that customer.

Three lines of defence

A governance model in which business units own risk (first line), compliance and risk functions oversee it (second line), and internal audit independently tests it (third line).

Independent testing

Periodic review of the AML/CFT programme by internal audit or an external party not involved in compliance, with findings rated by severity and reported to the board audit committee.

Institutional risk assessment

A documented assessment of inherent risk by customer, product, channel, and geography, combined with control effectiveness to derive residual risk that drives resources and monitoring thresholds.

Risk appetite statement

A board-approved statement defining which customer types, products, and jurisdictions the institution will accept, and which it will not, guiding onboarding and monitoring decisions.

Record retention period

Under the AML Act and SBP rules, CDD and transaction records must generally be kept for at least five years after the end of the relationship or transaction, and longer if authorities request.

Source of funds

The origin of the specific funds used in a particular transaction, which must be established and verified in enhanced due diligence for higher-risk customers and transactions.

Source of wealth

The origin of the customer's overall accumulated wealth, established through documentary evidence in enhanced due diligence, particularly for politically exposed persons.

False positive

A sanctions or PEP screening alert that, after review, is resolved as not matching a designated person or PEP. The resolution and rationale must be documented and retained.