Glossary of AML Terms

This glossary defines the anti-money-laundering, counter-terrorism-financing and sanctions terms compliance teams meet in daily practice, from asset blocking to the Wolfsberg Group. Definitions are deliberately short. Where a term needs more than a sentence or two, the entry links through to a fuller explainer elsewhere on this site.

Looking for how these fit together rather than what they mean? The Compliance Q&A answers the how and why, and the FAQ covers MemberCheck itself.

A

Adverse Media — Negative news linking a person or business to financial crime or other risk that a clean sanctions or PEP result would not reveal. See adverse media screening.

Alert — A single potential match raised by a screening or monitoring system, which an analyst must review and either dismiss or escalate.

AML/CTF Act — The Australian statute setting out anti-money-laundering and counter-terrorism-financing obligations for reporting entities, including enrolment, customer due diligence, monitoring and reporting.

AML/CTF Programme — The documented policies, procedures and controls a business maintains to identify, mitigate and manage its money-laundering and terrorism-financing risk. Its starting point is a risk assessment.

Anti-Money Laundering (AML) — The body of law, regulation and internal control aimed at preventing the proceeds of crime being disguised as legitimate funds.

Asset Blocking — Restricting an individual's or legal entity's access to assets during or because of a sanctions enquiry.

Asset Confiscation — Taking permanent possession of an individual's or legal entity's assets during or after an investigation into a sanctions violation.

Asset Flight — The illegal transfer of assets from one jurisdiction to another to avoid fines, seizures, or other penalties.

Audit Trail — The dated record of who reviewed an alert, what evidence they saw, and what they decided. It is what a regulator asks for when testing whether a control worked.

AUSTRAC — The Australian Transaction Reports and Analysis Centre, Australia's AML/CTF regulator and financial intelligence unit. Reporting entities enrol with AUSTRAC and lodge suspicious matter and threshold transaction reports with it.

Autonomous Sanctions — Sanctions implemented and enforced by a single government or coalition acting on its own initiative, rather than under a United Nations obligation.

B

Batch Screening (Scanning) — Screening an entire client base, and other linked parties such as vendors, against watchlists on a regular cycle rather than one record at a time.

Bearer Shares — Share certificates owned by whoever physically holds them, leaving no register of the owner. They obscure control and are prohibited or restricted in many jurisdictions.

Beneficial Owner — The natural person who ultimately owns or controls an account or entity, including anyone holding significant ownership. See ultimate beneficial owner.

Beneficial Ownership Register — A government-held record of who ultimately owns or controls registered companies, intended to make ownership chains visible to businesses and investigators.

Blacklist — A dated term for a watchlist. Prefer "watchlist" or "sanctions list", both of which describe what is actually being screened against.

Bribery — Offering or accepting something of value to improperly influence an official or business decision. It is a common predicate offence for money laundering.

C

Case Management — The workflow that carries an alert from creation through review, escalation and decision, and records the evidence behind each step.

Cash Intensive Business — A business that deals primarily in cash, such as restaurants, cafés, and car washes, where illicit funds are more easily mixed with takings.

Compliance — The state of adhering to a set of legislation, regulations, rules, policy, specifications, or accepted norms.

Comprehensive Sanctions — Sanctions prohibiting almost all transactions or activity with a sanctioned country, as opposed to measures aimed at named individuals or sectors.

Correspondent Banking — The provision of banking services by one bank to another, typically offered by large foreign banks to institutions without a local presence.

Counter-Terrorism Financing (CTF) — Measures aimed at detecting and preventing funds reaching terrorists or terrorist organisations. Usually legislated alongside anti-money laundering.

Country Risk — The money-laundering and sanctions risk attached to a jurisdiction, drawn from its controls, corruption levels and sanctions exposure. See jurisdiction risk.

Currency Smuggling — The illegal movement of significant amounts of cash across borders, frequently into jurisdictions with lax banking secrecy.

Currency Transaction Report (CTR) — A report documenting a physical currency transaction that exceeds a specified monetary threshold.

Customer Due Diligence (CDD) — The whole process of identifying and verifying a customer, identifying any beneficial owners, understanding the purpose of the relationship, and assessing the risk it presents. Know your customer is the identity step within it, not a synonym for it — see KYC, KYB, CDD and EDD compared.

Customer Risk Rating — The risk score assigned to a customer at onboarding and revised afterwards, which sets how much due diligence and monitoring they receive.

Cybercrime — Criminal conduct involving computers or the internet, including online fraud and identity theft.

D

De-risking — Exiting or refusing whole categories of customer rather than managing their risk individually. See account exit and de-risking.

Denied Persons List (DPL) — A list, published by the US Bureau of Industry and Security, of individuals, entities, or companies denied export privileges.

Designated Service — A service listed in legislation as bringing the business providing it within the AML/CTF regime.

DFAT Consolidated List — Australia's official sanctions list, maintained by the Department of Foreign Affairs and Trade, covering Australian autonomous sanctions and United Nations Security Council obligations.

Digital Identity — A set of verified electronic attributes used to establish who a person is without physical documents. See identity verification.

Due Diligence — The enquiry and analysis of a firm or group carried out as part of establishing a business relationship.

E

Electronic Verification (eKYC) — Confirming a customer's identity against electronic data sources rather than by inspecting physical documents.

Enhanced Due Diligence (EDD) — Deeper checks applied to higher-risk customers, such as politically exposed persons or customers in high-risk jurisdictions. See enhanced due diligence.

Entity List — A list, published by the US Bureau of Industry and Security, of parties subject to specific export licensing requirements.

Escalation — Referring an alert or customer to a more senior reviewer, or to the compliance officer, when the decision exceeds an analyst's authority.

EU AML Package — The European Union reform package creating a single rulebook and a central authority for anti-money-laundering supervision across member states.

Exclusions List — A list of names excluded from future screening because the compliance team has validated them as false matches.

F

False Negative — A genuine match that screening failed to surface at all: the customer was on a list, and the system did not flag them. It is the more serious failure, because nobody sees it happen.

False Positive — An alert raised during screening that is later found not to be a genuine match, usually a name coincidence. Reducing them is a core measure of screening quality.

Financial Action Task Force (FATF) — An intergovernmental body that develops and promotes policies to combat money laundering and terrorism financing.

Financial Crime — The broader category covering money laundering, terrorism financing, sanctions evasion, fraud, bribery and tax evasion.

Financial Intelligence Unit (FIU) — A government agency that receives and analyses reports of suspicious financial activity. Australia's is AUSTRAC.

Forfeiture — The loss of property or assets as a result of legal action.

Front Company — A company used to conceal the identity of the true owner or controller of funds.

Fuzzy Matching — Name matching that allows for spelling variants, transliteration and nicknames rather than requiring an exact match, so genuine hits are not missed. See how it applies to sanctions and PEP screening.

G

Gatekeeper Professions — Lawyers, accountants, conveyancers, real estate professionals and similar advisers whose services can be used to move or disguise illicit funds.

Geographic Risk — Risk arising from where a customer, counterparty or transaction is located. See the jurisdictions in country coverage.

Greylist — A list of jurisdictions or entities identified as posing a heightened risk, subject to increased monitoring.

H

Hawala — An informal value-transfer system that operates outside the formal financial sector.

High-Risk Jurisdiction — A country or territory with weak anti-money-laundering controls and a heightened risk of illicit financial activity.

Hit — A record returned by screening that matches the name or details being checked. A hit is not yet a confirmed match; it becomes one only after review.

I

Identity Verification — Confirming that a customer is who they claim to be, using documents, electronic data, or biometrics. See identity verification.

Independent Review — A periodic review of an AML/CTF programme by someone not responsible for running it, required in many regimes.

Integration — The third and final stage of money laundering, in which laundered funds are reintroduced into the legitimate economy.

J

Jurisdiction Risk — The risk a country carries as a place to do business, based on its sanctions exposure, corruption levels, and the strength of its AML controls. See jurisdiction risk.

K

Know Your Business (KYB) — Verifying a business customer: its registration, its structure, and the people who ultimately own or control it. See know your business.

Know Your Customer (KYC) — Establishing and verifying who an individual customer is, usually against official identity data. It is the identity step within customer due diligence, not the whole of it — see KYC, KYB, CDD and EDD compared.

Know Your Employee — Screening and vetting staff, on the basis that insiders can present the same risk as customers.

Know Your Transaction — Understanding whether a transaction makes sense for the customer who made it, given what is known about their profile and expected activity.

L

Layered Ownership — Ownership held through a chain of intermediate companies or trusts, which obscures who ultimately controls an entity.

Layering — The second stage of money laundering, in which illicit funds are separated from their source through a series of financial transactions.

Legal Arrangement — A trust or similar arrangement that holds assets without being a registered company.

Legal Person — A company or other incorporated body that can hold assets and enter contracts in its own name, as distinct from a natural person.

M

Matching Threshold — The sensitivity setting that decides how close a name must be to a listed name before an alert is raised. Set it high and genuine matches are missed; set it low and analysts drown in false positives.

Money Laundering — The process of disguising the proceeds of crime as legitimate funds.

Money Mule — An individual who transfers illicit funds on behalf of another person or organisation.

Money Service Business (MSB) — A business that provides money transmission, currency exchange, or cheque-cashing services.

Money Transmitter — A business that transmits money or monetary value on behalf of others.

N

Name Screening — Checking a customer's name against sanctions, PEP and adverse-media data. See sanctions and PEP screening.

Negative News — Reporting that associates a person or business with criminal or unethical conduct. See adverse media screening.

Nested Account — An arrangement where a third party gains access to a correspondent banking relationship through another institution's account, without the correspondent bank knowing who they are.

Nominee Director — A person appointed to a board to stand in for the real controller, whose name does not appear in public records.

Nominee Shareholder — A person or company holding shares on behalf of the real owner, concealing that owner from the register.

Non-Bank Financial Institution — A financial institution that is not a bank, such as a money transmitter.

O

Offshore Financial Centre — A jurisdiction offering financial services to non-residents on a scale out of proportion to its domestic economy, often with strong secrecy protections.

Onboarding — The process of taking on a new customer, including identification, verification, risk assessment and initial screening. See customer onboarding.

Ongoing Monitoring — Continuously re-screening existing customers against live data after onboarding, so a change in their risk is caught promptly. See perpetual KYC.

P

PEP Screening — Checking whether a customer, or their family members and close associates, is a politically exposed person. See PEP, sanctions and adverse media compared.

Perpetual KYC — Refreshing customer due diligence continuously as data changes, rather than on a fixed periodic review cycle. See perpetual KYC.

Placement — The first stage of money laundering, in which the proceeds of criminal activity are physically introduced into the financial system.

Politically Exposed Person (PEP) — An individual who holds, or has held, a prominent public position and may carry a higher risk of involvement in bribery or corruption. See politically exposed person.

Predicate Offence — The underlying crime that generated the proceeds being laundered, such as fraud, drug trafficking or corruption.

Proliferation Financing — Providing funds or services for the development or movement of weapons of mass destruction, addressed by dedicated sanctions regimes.

R

Red Flag — A warning signal drawing attention to a potentially suspicious situation, transaction, or activity.

Regulatory Technology (RegTech) — Software used to meet regulatory obligations, including screening, monitoring and reporting systems.

Relatives or Close Associates (RCA) — Individuals related to, or with close personal or professional ties to, a politically exposed person.

Reliance — Depending on another regulated business's customer due diligence instead of repeating it. The obligation normally stays with the business relying on it.

Remediation — Re-screening and re-documenting an existing customer base to bring it up to current standards. See back-book remediation.

Reporting Entity — A business captured by AML/CTF legislation that must enrol with the regulator and meet obligations such as due diligence, monitoring and reporting.

Risk Appetite — The level of money-laundering risk a business has decided it is prepared to accept, which sets where its controls draw the line.

Risk Assessment — A structured evaluation of a business's exposure to money-laundering and terrorism-financing risk across its customers, products, channels and jurisdictions. See AML risk assessment.

Risk-Based Approach — Matching the intensity of due diligence and monitoring to the risk a customer or product actually presents, rather than treating every customer the same.

S

Sanctioned Entity — A person, company or vessel subject to sanctions, whom a business is generally prohibited from dealing with.

Sanctions — Punitive or restrictive measures imposed by countries, regimes, or coalitions to induce a change in behaviour.

Sanctions Evasion — Deliberately structuring dealings to escape sanctions, through front companies, false documentation, or intermediaries in third countries. See sanctions surge response.

Sanctions Screening — Checking customers and counterparties against sanctions lists to avoid prohibited dealings. See PEP, sanctions and adverse media compared.

Screening — Comparing customer records against watchlist and media data to identify risk. See sanctions and PEP screening.

Sectoral Sanctions — Sanctions restricting particular activities, such as financing or energy technology, rather than banning all dealings with a target.

Shell Company — A company with no significant assets or operations, used as a vehicle for financial transactions.

Smurfing — A money-laundering method involving multiple individuals or transactions used to disguise the total amount moved.

Source of Funds — Where the money in a specific transaction came from, such as a property sale or a salary payment.

Source of Wealth — How a customer accumulated their overall wealth across their lifetime. It is a broader question than source of funds, and the two are not interchangeable.

Special Interest Person (SIP) — An individual identified as being involved in activities that may carry a higher money-laundering risk.

Specially Designated Nationals and Blocked Persons List (SDN List) — A list published by OFAC of individuals and organisations owned by, controlled by, or acting on behalf of a sanctioned country or designated party.

Straight-Through Processing — Completing a transaction or onboarding without manual intervention, which depends on screening producing few enough false positives to allow it.

Structuring — Splitting cash deposits or withdrawals into smaller amounts to avoid triggering a currency reporting threshold.

Suspicious Activity Report (SAR) — A report filed with a financial intelligence unit or regulator when suspicious activity is detected. The Australian equivalent is the suspicious matter report.

Suspicious Matter Report (SMR) — The report a reporting entity lodges with AUSTRAC on forming a suspicion that a customer or transaction relates to a crime. See SMR and TTR compared.

T

Terrorism Financing — The provision of funds or other financial support to terrorists or terrorist organisations.

Threshold Transaction Report (TTR) — A report to AUSTRAC of a cash transaction at or above AUD 10,000, or its foreign-currency equivalent. See SMR and TTR compared.

Tipping Off — Telling a customer that a suspicious matter report about them has been made, or that they are under investigation. It is an offence in many jurisdictions, including Australia.

Trade-Based Money Laundering — The use of trade transactions, such as mis-invoiced imports, to disguise the proceeds of criminal activity.

Tranche 2 — The reforms extending AML/CTF obligations to lawyers, accountants, conveyancers, real estate professionals, and dealers in precious metals and stones. See Tranche 2.

Transaction Monitoring — Reviewing transactions against expected customer behaviour and known typologies to detect activity that warrants investigation. See transaction monitoring.

Travel Rule — A requirement for institutions to collect and pass on information about the sender and beneficiary of a transfer. See travel rule compliance.

Trust — A legal arrangement where a trustee holds assets for beneficiaries. Identifying the settlor, trustees and beneficiaries is part of due diligence on a trust customer.

Typology — A documented pattern of how a particular laundering method works in practice, published by bodies such as FATF and used to design monitoring rules.

U

Ultimate Beneficial Owner (UBO) — The natural person who ultimately owns or controls a customer entity, commonly assessed at a 25 percent ownership or control threshold. See ultimate beneficial owner.

United Nations Security Council Sanctions — Sanctions imposed by Security Council resolution, which member states are obliged to implement in domestic law.

Unusual Transaction — Activity that departs from a customer's expected pattern. It is not necessarily suspicious, but it warrants a closer look.

V

Virtual Asset — A digital representation of value that can be traded or transferred digitally and used as a means of payment.

Virtual Asset Service Provider (VASP) — A business providing services related to virtual assets, such as exchanges and wallet providers. See virtual asset provider.

W

Watchlist — Any list screened against to identify risk, including sanctions lists, PEP data, law-enforcement lists and a firm's own internal list.

Whistleblower — A person who reports wrongdoing inside an organisation, protected from retaliation under legislation in many jurisdictions.

Whitelist — A list of names a business has cleared, so that repeat matches against them are suppressed rather than re-reviewed.

Wire Transfer — An electronic transfer of funds between institutions, and the transaction type the travel rule applies to.

Wolfsberg Group — An association of international banks that publishes industry guidance on financial crime controls, including a widely used due diligence questionnaire.

More resources

A definition tells you what a term means. If you need to do something with it, the checklists run the four most common processes step by step, and all resources indexes everything on this site by task.