For financial crime professionals, AML officers, or anyone seeking clarity on fraud and AML terms, Edifice offers a glossary of common acronyms and definitions.
We’ll continuously update this resource to reflect industry developments.
“Specified unlawful activities” whose proceeds, if involved in the subject transaction, can give rise to prosecution for money laundering. Most anti-money laundering laws contain a wide definition or listing of such underlying crimes. Predicate crimes are sometimes defined as felonies or “all offenses in the criminal code.”
A department in a financial institution that provides high-end services to wealthy individuals. Private banking transactions tend to be marked with confidentiality, complex beneficial ownership arrangements, offshore investment vehicles, tax shelters and credit extension services.
Payment screening plays a vital role in enforcing the application of sanctions regimes. Screening is a regulatory requirement to prevent transactions linked to sanctioned parties from being processed.
A warning signal should bring attention to a potentially suspicious situation, transaction or activity.
A corporate register is a listing of crucial information about the company, such as when a corporation was formed and who its owners and directors are. Corporate (or company) registers are often publicly available on the company’s website or websites maintained by professional associations or entities, such as chambers of commerce and government registry databases.
Risk appetite is the total risk the organisation can bear in a given risk profile, usually expressed in aggregate. In contrast, risk tolerance is the level of risk that an organisation can accept per individual risk; risk tolerance is related to the acceptance of the outcomes of risk should they occur and having the right resources and controls in place to absorb or “tolerate” the given risk, expressed in qualitative and/or quantitative risk criteria. On the other hand, Risk appetite is related to the longer-term strategy of what needs to be achieved and the resources available to achieve it, expressed in quantitative criteria.
AML risk assessment is a thorough, systematic process designed to detect, evaluate, and mitigate money laundering risks and terrorist financing linked to a business relationship. This includes identifying and assessing critical risk factors to consider the AML risk exposure of a specific organisation and enabling the given organisation to identify a customer with a higher risk of money laundering and adopt risk-based approach prevention methods. Customer risk assessment is critical to an organisation’s overall AML risk review.
This means that countries, state authorities, and the private sector should understand the ML/TF risks to which they are exposed and apply AML/CFT measures in a manner that would ensure the mitigation of these risks. The set of AML/CFT measures formulated by the FATF must be based on understanding ML/TF risks already in the 2003 Recommendations. With the revised 2012 Recommendation, a risk-based approach has become central to effectively implementing all the requirements.
Sanctions refer to penalties or restrictions imposed by governments, international bodies, or regulatory authorities on individuals, entities, or countries. These measures are levied to deter illegal activities, such as terrorism, human rights violations, or nuclear proliferation, and promote compliance with laws and regulations. They can include trade embargoes, removal of diplomatic ties, and financial restrictions.
Sanctions restrictions can be applied to entire states, like North Korea, or individuals and companies, as seen in Russia-related sanctions.
Adhering to sanction rules by knowing who a company conducts business with and avoiding providing goods and services to anyone who is sanctioned.
