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Financial crime glossary
Plain-English definitions of the AML, KYC, sanctions and fraud terms that turn up in every policy, audit and regulatory exam. Written for practitioners, not for a dictionary.
A
Anti-Money Laundering
The collective framework of laws, regulations, controls and procedures designed to stop criminals disguising illegally obtained funds as legitimate income.
Anti-Money Laundering Authority
The EU-level authority established to supervise higher-risk cross-border financial institutions directly and to drive consistency across national supervisors.
Alert
An output from a monitoring or screening system flagging activity for human review. An alert is not a suspicion; it is a prompt to form one.
Authorised Push Payment Fraud
Fraud in which a victim is deceived into authorising a payment to an account controlled by a criminal. The payment is genuine; the authorisation is obtained by deception.
B
Beneficial Owner
The natural person who ultimately owns or controls a customer, or on whose behalf a transaction is conducted, regardless of whose name appears on the account.
Business-Wide Risk Assessment
A firm’s documented assessment of the financial-crime risks it is exposed to across customers, products, channels and geographies. It is the foundation every other control is justified against.
C
Customer Due Diligence
Identifying and verifying a customer and their beneficial owners, understanding the purpose of the relationship, and monitoring it on an ongoing basis.
Counter-Terrorist Financing
Controls aimed at detecting and disrupting funds raised for or used by terrorist organisations. Unlike laundering, the funds may be entirely legitimate in origin.
Correspondent Banking
An arrangement where one bank provides services on behalf of another, often cross-border. Higher risk because the correspondent has no direct relationship with the underlying customers.
Cuckoo Smurfing
A laundering method in which criminal funds are deposited into the account of an innocent third party expecting a legitimate transfer, disguising the origin of the money.
D
Defence Against Money Laundering
A request for consent to carry out an act that would otherwise be a money-laundering offence. It must identify the specific act proposed and the specific criminal property involved.
De-risking
Exiting or refusing entire categories of customer rather than managing their risk individually. Reduces a firm’s exposure but can push activity into less visible channels.
E
Enhanced Due Diligence
Additional scrutiny applied to higher-risk relationships: deeper source of wealth and funds enquiries, senior sign-off, and more frequent review.
Electronic Money Institution
A regulated firm authorised to issue electronic money and provide payment services without holding a full banking licence.
F
Financial Action Task Force
The intergovernmental body that sets global AML and CTF standards and assesses countries against them through mutual evaluations.
Financial Intelligence Unit
The national agency that receives, analyses and disseminates suspicious activity reports. In the UK this function sits within the National Crime Agency.
False Positive
An alert that, on review, does not indicate the risk it was designed to detect. High false-positive rates are a tuning and data-quality problem, not simply a staffing one.
Fuzzy Matching
Screening logic that identifies near-matches to a watchlist entry, accounting for spelling variants, transliteration and name order.
G
Grey List
Informal term for FATF’s list of jurisdictions under increased monitoring. Listing typically triggers enhanced scrutiny of related customers and payments.
Gatekeeper
A professional (lawyer, accountant, company formation agent) whose services can be used to give criminal activity a veneer of legitimacy.
I
Integration
The final stage of laundering, where funds re-enter the legitimate economy in an apparently lawful form, typically through property, business ownership or investments.
Identity Verification
Confirming that a customer is who they claim to be, using documents, electronic data sources, or biometric checks.
K
Know Your Customer
The process of identifying a customer, verifying that identity, and understanding their expected activity. The evidential base every later suspicion is measured against.
Know Your Business
The equivalent process for corporate customers, extending to ownership structure, control, trading activity and the people behind the entity.
L
Layering
The second stage of laundering: moving funds through multiple transactions, accounts or jurisdictions to obscure the audit trail back to the predicate offence.
Three Lines of Defence
A governance model separating risk ownership (first line), oversight and challenge (second line), and independent assurance (third line).
M
Money Laundering Reporting Officer
The named individual responsible for receiving internal suspicion reports, deciding whether to report externally, and acting as the firm’s focal point for financial-crime matters.
Money Laundering Regulations
The UK regulations setting out AML and CTF obligations for regulated firms, including risk assessment, due diligence, record keeping and training requirements.
Money Mule
A person who receives and transfers criminal funds through their own account, sometimes knowingly, often recruited under the guise of legitimate work.
Model Risk
The risk that a detection or scoring model produces incorrect or unexplainable outputs. Growing in significance as machine learning enters monitoring and screening.
N
National Crime Agency
The UK law enforcement agency that houses the UK Financial Intelligence Unit and receives suspicious activity reports and DAML requests.
Nominee
A person or entity appearing as the owner or director of record on behalf of someone else, frequently used to obscure true beneficial ownership.
O
Office of Financial Sanctions Implementation
The UK body responsible for implementing and enforcing financial sanctions, including licensing and breach reporting.
Ownership and Control Test
The assessment of whether an entity is caught by sanctions because a designated person owns it above a threshold or otherwise controls it. That is often the harder half of the question.
P
Politically Exposed Person
An individual entrusted with a prominent public function, together with their family members and close associates. Status indicates higher risk; it is not an allegation of wrongdoing.
Placement
The first stage of laundering, where criminal proceeds first enter the financial system, historically through cash deposits and increasingly through digital channels.
Predicate Offence
The underlying criminal activity that generated the proceeds being laundered: fraud, trafficking, corruption, tax evasion and similar.
Perpetual KYC
An approach replacing fixed periodic reviews with continuous, event-driven refresh of customer information as data changes.
R
Regulatory Technology
Technology applied to regulatory compliance: screening, monitoring, reporting, identity verification and case management.
Risk Appetite
The level and type of financial-crime risk a firm is willing to accept in pursuit of its objectives, formally set and approved at board level.
S
Suspicious Activity Report
A report submitted to the financial intelligence unit where there is knowledge or suspicion of money laundering or terrorist financing. Quality of narrative determines whether it is actionable.
Sanctions
Restrictive measures imposed on states, entities or individuals. Financial sanctions typically require asset freezing and prohibit making funds available, directly or indirectly.
Simplified Due Diligence
A reduced level of due diligence permitted where risk is demonstrably low. Simplified does not mean absent; the rationale still has to be evidenced.
Source of Wealth / Source of Funds
Source of wealth explains how a customer’s overall assets were accumulated; source of funds explains the origin of the specific money in a transaction. They are not interchangeable.
Structuring / Smurfing
Breaking a large transaction into smaller ones to stay beneath reporting or detection thresholds.
Shell Company
A company with no meaningful operations or assets, which may be entirely legitimate but is frequently used to layer funds and obscure ownership.
T
Trade-Based Money Laundering
Disguising criminal proceeds through trade transactions: over- and under-invoicing, multiple invoicing, or misrepresenting the quality or quantity of goods.
Tipping Off
Disclosing to a customer or third party that a suspicion report has been made or an investigation is underway, where that disclosure may prejudice it. A criminal offence in many jurisdictions.
Transaction Monitoring
Ongoing review of customer activity against expected behaviour and known typologies, to identify patterns warranting investigation.
Travel Rule
The requirement to transmit originator and beneficiary information alongside transfers, extended to crypto-asset transfers between virtual asset service providers.
U
Ultimate Beneficial Owner
The natural person at the end of a chain of ownership who ultimately benefits from or controls an entity, however many layers sit in between.
Unexplained Wealth Order
A court order requiring a person to explain how they obtained property where their known lawful income appears insufficient to have funded it.
V
Virtual Asset Service Provider
A business conducting crypto-asset activities such as exchange, transfer or custody on behalf of customers, and subject to AML obligations in most major jurisdictions.
Velocity
The speed and frequency at which funds move through an account. Sudden changes are a common monitoring indicator, particularly in mule networks.
W
Wolfsberg Group
An association of international banks that publishes financial-crime principles and standardised due diligence questionnaires widely used between institutions.
Watchlist
A list of names screened against: sanctions designations, PEPs, adverse media or internal risk lists. Coverage and refresh frequency matter as much as the matching logic.
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