NIBAF AML & CFT key terms

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

Collecting, providing or moving funds for terrorist acts or for organisations that support them. The funds may come from legal sources, so motive and intended use matter more than origin.

Any underlying crime whose proceeds become the subject of a money laundering offence. Pakistan's AML Act 2010 lists these offences in its Schedule, including narcotics, corruption, fraud and terrorist financing.

The first stage of money laundering, where cash from crime enters the financial system through deposits, purchases or currency exchanges. It is the stage most visible to reporting institutions.

The stage where funds are moved through multiple accounts, institutions or jurisdictions to break the audit trail and hide the link to the original crime. Complex or rapid transfers are common signals.

The final laundering stage, where funds re-enter the legitimate economy as apparently lawful assets such as property, investments or business capital. Detection at this point is difficult.

Forty global standards issued by the Financial Action Task Force that set out how countries should criminalise laundering and financing of terrorism and regulate financial institutions. They are the benchmark for national AML/CFT regimes.

An intergovernmental body that develops AML/CFT standards, assesses how countries apply them and identifies jurisdictions with weak controls. Pakistan has been subject to its monitoring processes.

A peer review in which assessors examine whether a country has implemented FATF standards effectively in practice, not just in law. Findings include ratings on technical compliance and effectiveness.

The extent to which a country's AML/CFT system achieves its intended outcomes, such as detecting and disrupting crime, rather than merely adopting compliant laws. It is a core focus of FATF assessments.

Assessment of whether a country's laws, regulations and institutional arrangements meet each FATF Recommendation's specific requirements. It is judged separately from how well the system works in practice.

The FATF's list of jurisdictions under increased monitoring that have committed to action plans to fix strategic AML/CFT weaknesses. Listing can raise costs and scrutiny for cross-border business.

Freezing of funds and economic resources of designated persons and entities without prior notice, and prohibiting dealings with them. Countries must implement these under UN Security Council resolutions and FATF standards.

An individual or entity named on a sanctions list, such as the UN consolidated list or a national list issued under Pakistan's AML Act. Institutions must screen customers and transactions against such lists.

A prohibition on moving, converting or using funds and assets belonging to a designated person, imposed without delay. It differs from seizure or confiscation, which usually require a court or authority order.

Pakistan's principal anti-money laundering statute, which establishes laundering and terrorist financing offences, the Financial Monitoring Unit and obligations on reporting entities. It has been amended several times, notably in 2020.

Pakistan's financial intelligence unit, established under the AML Act 2010. It receives suspicious transaction and currency transaction reports, analyses them and shares intelligence with law enforcement and regulators.

A national agency that receives, analyses and disseminates suspicious transaction reports and other financial disclosures to competent authorities. Its functions are guided by the Egmont Group principles.

Binding rules issued by the State Bank of Pakistan requiring regulated financial institutions to maintain AML/CFT programmes, conduct customer due diligence, screen sanctions lists and report suspicious activity.

The steps an institution takes to identify a customer, verify identity using reliable documents, understand the purpose of the relationship and identify beneficial owners before or during onboarding.

The broader set of policies and procedures used to establish and keep updated information about who a customer is and what activity to expect. It underpins monitoring and reporting decisions.

The natural person who ultimately owns or controls a customer or the funds involved in a transaction. Ownership thresholds and control tests are set by national rules, commonly at 25 percent or more.

Additional checks applied to higher-risk relationships, such as politically exposed persons, correspondent banking and high-risk jurisdictions. Measures may include source-of-funds checks, senior approval and closer monitoring.

Reduced identification and verification measures permitted only where assessed risk is genuinely low, for example certain low-value products. It never allows skipping identification of the customer entirely.

A person entrusted with prominent public functions, such as a head of state, minister, judge or senior military officer, along with close family and associates. Such relationships require enhanced scrutiny and senior approval.

Allocating compliance resources according to the assessed likelihood and impact of money laundering or terrorist financing. Higher-risk customers and products receive more intensive controls than lower-risk ones.

A country-level exercise that identifies, assesses and prioritises money laundering and terrorist financing risks across sectors and threats. Its findings should inform institutional risk assessments and supervisory priorities.

A documented evaluation by a reporting entity of how its customers, products, delivery channels and geography expose it to laundering and financing risk. It should be reviewed periodically and drive control design.

A report filed with the Financial Monitoring Unit when an institution knows, suspects or has reasonable grounds to suspect that funds relate to crime or terrorist financing. Filing must not be disclosed to the customer.

A report submitted for cash transactions at or above a threshold set by national rules, regardless of suspicion. In Pakistan this is filed with the Financial Monitoring Unit, typically for transactions of 2 million rupees or more.

Disclosing to a customer or third party that a suspicious transaction report has been or may be filed, or that an investigation is underway. It is a criminal offence because it can defeat detection.

Splitting transactions into smaller amounts to stay below reporting thresholds or avoid scrutiny. Deliberately breaking up cash deposits is itself a suspicious indicator and may be a criminal offence.

Continuous scrutiny of transactions and activity against the customer's profile to detect unusual patterns. It includes keeping due diligence information current and reviewing alerts generated by automated systems.

The person appointed by a reporting entity to oversee its AML/CFT programme, including policy, training, reporting and liaison with regulators. The role requires direct access to senior management and the board.

The combined policies, procedures, systems, staff and controls an institution maintains to prevent and detect money laundering and terrorist financing. It must be approved at senior level and independently tested.

An independent function that tests whether AML/CFT controls are designed and operating as intended, and reports weaknesses to the board or audit committee. It is distinct from day-to-day compliance monitoring.

Retaining customer identification data, account records and transaction documents for the period required by law, so they can be produced promptly to authorities. Pakistan generally requires at least five years after the relationship ends.

Structured AML/CFT education for staff so they recognise suspicious activity and understand their reporting duties. It should be role-specific, refreshed periodically and its completion documented.

Comparing customers, beneficial owners and transactions against sanctions lists, politically exposed person lists and other watchlists. Matches must be reviewed and resolved before business proceeds.