A - E
Anti-bribery and corruption
A broad term which refers to efforts and initiatives to prevent bribery and corruption. The leading global anti-bribery and corruption body is Transparency International, which has local chapters in many countries.
Anti money laundering (AML)
The processes by which organisations seek to prevent their services being used to launder money. Though money laundering is closely related to terrorist financing, it is distinct: terrorist financing can be performed using legitimately obtained funds.
Beneficial owner
A person (or group of people) in ultimate possession of an entity. The threshold for beneficial ownership is a person in possession, directly or indirectly, of 25% of shares in an entity.
Central bank digital currency
A digital currency issued by a country’s central bank. One example is the People’s Bank of China’s digital renminbi (Digital RMB).
Corporate social responsibility
A business model that seeks to ensure that organisations act in a socially responsible manner, specifically in regard to the environment, sustainability, social inclusion and equality.
Counter financing of terrorism (CFT)
The processes and procedures followed by organisations seeking to prevent their services being used for terrorist financing. Also known as counter terrorist financing (CTF).
Customer due diligence (CDD)
A collective term for a series of checks that look to ensure that a customer is not engaged in illegal activity. Transaction monitoring, screening and identity and verification are each key parts of the CDD process.
Designated non-financial business and professions (DNFBPs)
Non-financial professions which are governed by AML and CFT provisions, including lawyers, accountants, real-estate agents, tax advisors and brokers.
Electronic identity verification
A tool for identifying individuals and entities via digital means. It typically involves the electronic cross-referencing of information on an individual that is both public and private to confirm a person’s true identity.
Enhanced due diligence (EDD)
A more stringent form of customer due diligence (CDD), enhanced due diligence refers to the identification of risk by scrutinising customer information. It involves gathering more information on higher-risk customers, and analysing it in greater detail, to spot risks and prevent them from materialising.
Enterprise risk management
A framework for risk management, the ultimate goal of which is to prioritise risk so as to achieve better outcomes for an organisation.
Environment, social and governance (ESG)
A set of principles that emphasises the importance of considering an organisation’s impact on the environment and society at large, including its employees. A core part of ESG is that it encourages organisations to look beyond mere profit as a marker of success.
Equality, diversity and inclusion
A series of values and beliefs that aim to explore the ways in which a more equitable, diverse and inclusive workplace can provide for greater opportunities for growth, a fairer work environment, and a broader spectrum of ideas and opinions for successful business
F - J
Financial Action Task Force (FATF)
The leading global body for anti money laundering (AML) and counter financing of terrorism (CFT). FATF provide guidance and analysis on AML and CFT, and routinely evaluates efforts to prevent money laundering and terrorist financing in jurisdictions across the world. Its 40 Recommendations are recognised as a benchmark for effective AML and CFT.
Financial Conduct Authority (FCA)
The UK regulator for financial services firms. The FCA was established in 2013 in the wake of the closure of the Financial Services Authority (FSA), the former UK financial services regulator, whose responsibilities were divided between the FCA and the Prudential Regulation Authority (PRA).
Financial crime compliance
The processes, procedures and measures adopted by an organisation to ensure compliance with legislative and regulatory requirements and to prevent financial crime.
Financial crime prevention
An umbrella term which describes a range of efforts and processes designed to identify and stop financial crime, including fraud, bribery, corruption, money laundering and terrorist financing.
Financial Crimes Enforcement Network (FinCEN)
Part of the US Department for the Treasury, FinCEN aims to protect the US financial system from the threat of money laundering, terrorist financing and illicit activity. It is the financial intelligence unit (FIU) for the United States.
Examples of some key FIUs include:
- Australia: Australian Transaction Reports and Analysis Centre (AUSTRAC)
- Canada: Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)
- France: Tracfin
- Hong Kong: Hong Kong Monetary Authority (HKMA)
- Malta: Financial Intelligence Analysis Unit (FIAU)
- Singapore: Monetary Authority of Singapore (MAS)
- United Kingdom: UKFIU, part of the National Crime Agency (NCA)
- United States: Financial Crimes Enforcement Network (FinCEN)
FinTech
Financial technology – FinTech – refers to electronic systems that facilitate financial services. FinTechs, due to their rapid and digital nature, have transformed the landscape of financial services. A famous example of a FinTech firm is PayPal.
Foreign exchange
The conversion of one currency to another. Forex, the global foreign exchange market, serves as an exchange market for currencies worldwide, and sets the exchange rate for each currency.
Free trade zone
A geographic area in which certain trade conditions, most prominently customs duties, are relaxed or absent.
General Data Protection Regulation (GDPR)
Landmark data protection law passed by the EU in 2016 which came into force on 25 May 2018 that compels businesses that operate within the EU to protect customer data.
Governance, risk and compliance (GRC)
A series of connected disciplines that aim to establish responsible governance, a holistic and responsible approach to risk, and optimal measures to achieve compliance within an organisation. Together, these three strands represent a comprehensive and professional approach to modern business practice within an organisation.
High-net-worth individual
An individual in possession of liquid assets above a certain threshold, typically $1 million. High-net-worth individuals are usually dealt with by distinct business units within large financial organisations.
Identity and verification (ID&V)
A part of the customer due diligence (CDD) process which aims to confirm the identity of a customer.
Initial public offering (IPO)
An IPO is the sale of shares by a private company for the first time on a public market. An IPO occurs so that a private firm can raise capital.
Informal value transfer system
An informal value transfer system is a means of transferring money via non-traditional methods, in other words, from outside the traditional banking system. They can involve large networks or small teams of individuals. A prominent example is hawala, which is prevalent across the Middle East. Informal value transfer systems may or may not require the services of traditional banks and are reliant on third parties. The foundation of an informal value transfer system is trust.
Illegal wildlife trade
The illegal trade in animals and animal parts. Elephant poaching is a prominent example of a crime related to the trade in illegal wildlife. Prevalent across the globe and very lucrative, the illegal wildlife trade takes concerted and collaborative efforts to prevent.
International Compliance Association
The leading professional body for the global regulatory and financial crime compliance community. The International Compliance Association has over 30,000 members in 155 counties, and to date has trained more than 190,000 compliance professionals.
K - O
Know your business (KYB)
A series of checks intended to ensure that an organisation can confirm the nature and risk profile of a client before doing with business with that client.
Know your customer (KYC)
A series of measures intended to confirm the identity and activity of a customer. KYC checks serve to help prevent money laundering, terrorist financing and fraud.
Know your customer’s business (KNCB) and know your customer’s customer (KYCC) are related checks which go further than merely knowing the customer, and seek to identify and confirm in detail the nature of its business and its customers.
Letter of credit
A document issued by one bank or financial institution to another that acts as a guarantee that the seller will receive the specified funds on a certain date from the buyer.
Libor
The London Inter-Bank Offered Rate was the average daily interest rate for short-term loans between major banks. The manipulation of the Libor rates by major banks caused a significant scandal in 2012 and investigation by multiple regulators. Libor was phased out from 2021 by the Bank of England. Its final listings were published on 30 September 2024.
Limited liability company
A business structure that ensures that the business itself is liable for financial losses should the business fail, not any individual partners or shareholders.
Markets in Crypto-Assets Regulation (MiCA)
A key regulation which came into full force on 30 December 2024 across the EU, MiCA aims to maintain financial stability in the cryptoassets market by protecting participants and regulating cryptoasset services across the EU.
Markets in Financial Instruments Directive (MiFID)
An important EU law that relates to financial investments and related services. Issued in 2014, MiFID seeks to standardise the EU’s legislative framework for investment-related financial instruments.
Machine learning
Machine learning, a subset of artificial intelligence, is the means by which algorithms can learn from data without the input of human intelligence.
Memorandum of understanding
A non-legally binding agreement between parties that lays the foundation for further collaboration and establishes trust.
Mobile financial services (m-FS)
Financial services offered on a mobile device, typically via an app.
Money laundering
The process by which illegal funds are made to appear legitimate. Money laundering is closely related to terrorist financing, though the two are distinct.
Money laundering reporting officer (MLRO)
A role within banks and financial institutions which entails oversight of anti money laundering and counter financing of terrorism controls within that organisation.
Money services businesses (MSBs)
An organisation involved in the transmission or conversion of money, like a bureau de change. MSBs are not formal banking institutions, and are therefore sometimes exploited by money launderers. As a result, MSBs have in recent years come under greater scrutiny by regulators in many jurisdictions.
Natural language processing
Part of artificial intelligence, natural language processing refers to a computer’s ability to recognise and replicate human language. Chat GPT, a tool by Open AI, is a famous example of a programme that uses natural language processing.
Non-banking financial institution
An institution that operates within the financial landscape but which does not offer banking services. An example of a non-banking financial institution is a hedge fund or an insurance firm.
Non-Cooperative Countries or Territories
Jurisdictions identified by the Financial Action Task Force (FATF) that are deemed to have failed to sufficiently implement its standards in relation to the prevention of money laundering and terrorist financing. Such countries are prompted by FATF in a ‘call to action’, but are more often referred to in the media as being on FATF’s ‘blacklist’.
Non-fungible token (NFT)
If something is fungible, it means that it can be replaced by something of equal nature or value. A non-fungible token, recorded on a blockchain, is a digital asset that is unique and cannot be replicated or exchanged for an identical token. NFTs include digital art and other collectible tokens.
Non-governmental organisation
Any organisation that serves to advocate a cause or aim, but which is independent of government. They usually seek to promote the efforts of a societal goal, like the protection of the environment or heritage protection. Sometimes voluntary in nature, a non-governmental organisation is typically non-profit.
Non-profit organisation
An organisation that is not set up to make a profit, but to effect change or support a cause. Non-profit organisations often have at their heart a social purpose. A charity is a non-profit organisation.
Offshore financial centre
A jurisdiction, typically with lax regulatory oversight and other attractive amenities, that offers financial services to non-residents. Offshore financial centres are not illegal in themselves, although they have historically been exploited by some actors, for example to commit tax evasion.
Organised criminal group
Any criminal group that operates in a systemic and organised way. Such groups often conduct their activities across national borders and may cooperate with other criminal actors to achieve their goals. They are distinguished from petty crime by the scale, size and severity of their operations.
P - T
Pathways language model
A large language model developed by Google AI. Known as PaLM, it is trained on an enormous dataset that can interpret language and display reasoning in a sophisticated way.
Politically exposed person (PEP)
An individual whose proximity to a public function, or to somebody charged with a public function, means that they represent a higher risk for bribery and corruption.
RegTech
RegTech, or regulatory technology, are electronic applications that facilitate the regulatory process for firms within regulated industries. In financial services, artificial intelligence is one example of a RegTech that seeks to support firms in sifting through vast data sets to meet their regulatory requirements.
Risk assessment framework
A risk assessment framework is a process put in place by organisations to effectively monitor risk. It is typically comprised of identifying, assessing, prioritising, mitigating, communicating and monitoring risk, while subjecting its processes to review.
Risk-based approach
A simple methodology whereby organisations and jurisdictions recognise the money laundering and terrorist financing risks to which they are exposed, and apply the most stringent controls in those areas which carry the greatest risk.
Sanctions compliance programme
A structured programme put in place by an organisation to ensure that it is compliant with any sanctions regimes to which it is subject. Its core elements include policies, procedures and internal controls.
Simplified due diligence
The most basic form of due diligence that is applied to low-risk customers, but which nevertheless still adheres to money laundering regulations. Simplified due diligence still entails conducting checks and verifying identities, but it does so in a less comprehensive way than more thorough forms of due diligence, as the risk to the organisation is lower.
Specially Designated Global Terrorist
A designation applied by the US government on individuals or entities deemed to support, promote or commit terrorism. SDGTs are designated by the Office of Foreign Assets Control (OFAC), which is part of the US Department of the Treasury.
Specially Designated Nationals List
The Specially Designated Nationals and Blocked Persons List – the SDN List – is a list of entities and individuals subject to sanctions by the US government. The List is administered by the Office of Foreign Assets Control (OFAC), which is part of the US Department of the Treasury.
Sectoral Sanctions Identifications (SSI) List
A sanctions list compiled by the Office of Foreign Assets Control (OFAC), part of the US Department of the Treasury, that identifies those sanctioned in Russia as part of Executive Order 13662. The US prohibits dealings with those named on the SSI List.
Segregation of duties
The separation of specific duties and responsibilities within an organisation that aims to prevent errors or abuse of the financial system. The diversity of people involved, and the dissemination of duties they are charged with performing, makes it harder for crime to go unnoticed and thus helps lower risk.
State-owned enterprise
An enterprise that is owned fully or in part by the state. A key example in the UK is the National Health Service, which is owned and run by the British state.
Source of funds / source of wealth
Two related but distinct concepts. Source of funds is concerned with the origin, or source, of an individual’s funds. Source of wealth is concerned with identifying the entire wealth of an individual. Source of wealth and source of funds checks are carried out to help identify and prevent financial crimes like money laundering, terrorist financing, fraud and corruption.
Sovereign wealth fund
An investment fund owned by a state. They are typically concerned with long-term investments in lucrative assets aimed at returning a significant profit. The world’s largest sovereign wealth fund in terms of assets is Norway’s Government Pension Fund Global.
SupTech
SupTech, supervisory technology, refers to technological tools used by regulators to rapidly and efficiently regulate financial institutions and markets. Using AI, machine learning and natural language processing, SupTech allows regulators to carry out their duties in a faster, more data-led manner, with the ultimate aim of more effective regulation.
Suspicious Activity Report (SAR)
A report that must be filed when an individual within a financial institution suspects that a person with whom they are dealing may be involved in money laundering, terrorist financing or fraud.
Suspicious Transaction Report (STR)
Report filed to law enforcement by those working within financial institutions providing evidence of their suspicions that illicit activity may be taking place as a result of a transaction. SARs deal with overall activity indicative of illegality, whilst STRs focus on specific transactions.
Terrorist financing
The raising of funds, via legitimate or illegitimate means, with the intention of supporting, promoting or funding terrorists or terrorist activity. Terrorist financing is a crime in many jurisdictions.
Trade-based money laundering
Money laundering that is carried out through the international trading system. The size, scale and complexity of global trade makes it an attractive vehicle for laundering money. Trade-based money laundering techniques include overvaluing or undervaluing goods and manipulating invoices.
Trust or company service provider
An individual or entity legally registered to provide services such as founding a business or registering an office. Due to the relative ease with which they can disguise ownership, trusts and company service providers pose a high risk of financial crime.
U - Z
Ultimate beneficial owner
The person who ultimately profits from a transaction related to a business, even if they have little or no direct ownership of that business.
Unexplained wealth order
An order issued by a court of law that demands an explanation as to the source of an entity’s wealth. Unexplained wealth orders are issued when there is sufficient suspicion that an entity has obtained wealth or property illegally.
USA PATRIOT Act
Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act 2001. Important legislation passed by the US Congress in October 2001 in direct response to the September 11 attacks on the United States. It contains many strictures concerning banking and financial transactions.
Virtual asset service provider (VASP)
An organisation or body that offers the provision of services related to virtual assets. These include trading, storing or transferring virtual assets. Bitcoin is perhaps the best known VASP.
Virtual currency
A form of currency that only exists in a digital form. Virtual currencies are usually unregulated and non-attached to traditional fiat currency. They proliferate in virtual communities online, such as online gaming.