Acronyms are used a dizzying amount in all industries today, and the anti-money laundering (AML) space is no exception. Keeping track of what each acronym stands for can be a tiresome task, especially when they are an add-on to the acronyms already being used in your field.
We have collated some of the most commonly used terms in AML so that you can get on top of them in no time:
Anti-Money Laundering refers to the laws, regulations and procedures intended to prevent criminals from disguising illegally obtained funds as legitimate income.
Customer Due Diligence is the process of performing due diligence on a customer in order to confirm they are who they say they are, and that they aren’t acting on behalf of somebody else.
CFT or CTF
Countering Financing of Terrorism (CFT) or Combating Terrorist Financing (CTF) involves investigating, analysing, deterring, and preventing sources of funding for activities intended to achieve political, religious, or ideological goals, that are achieved through violence and the threat of violence against civilians. By tracking down the source of the funds that support terrorist activities, some of those activities may be able to be prevented from occurring.
The Organisation for Economic Cooperation and Development (OECD) developed the Common Reporting Standard (CRS) for the collection, reporting and exchange of financial account information among participating countries. CRS requires us to capture tax residency information for new and existing customers. CRS is a global standard for the collection and exchange of account information and applies in both Australia and New Zealand.
Electronic Identity Verification is the method of collecting information electronically to then verify a person’s identity, including personal and biometric information.
The Foreign Account Tax Compliance Act is aimed at detecting U.S. taxpayers who use accounts with offshore financial institutions to conceal income and assets from the Internal Revenue Service (IRS).
Financial Action Task Force on Money Laundering is an independent inter-governmental body that develops and promotes policies to protect the global financial system against money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction. The FATF Recommendations are recognised as the global anti-money laundering (AML) and counter-terrorist financing (CFT/CTF) standard.
Know Your Customer refers to understanding and figuring out the potential risks associated with a customer. This includes factors like verifying the customer’s identity and understanding their financial dealings to effectively manage risk. It’s a fundamental part of any AML programme.
The Organisation for Economic Cooperation and Development (OECD) developed the Common Reporting Standard (CRS) for the collection, reporting and exchange of financial account information among participating countries.
Politically Exposed Persons are defined as individuals with high-profile political roles, or people who have been entrusted with a prominent political function. Due to the conspicuous positions they hold, they can present a higher risk of being involved in money laundering and/or terrorist financing.
Special Interest Persons are likely high-profile individuals who have either been convicted of financial/organised crime, or they have been subject to said investigations. SIPs may be identified via intelligence gathered during KYC/AML screening.
Source of Wealth refers to the origin of an entity’s assets, whether it be monetary assets, property or gifts and loans, all considered to be a Source of Wealth that we must verify. By verifying this information, it gives the reporting entity an insight into the amount of wealth that customer is expected to have and how it is acquired.
Source of Funds is a more narrow focus, with the legislation only requiring reporting entities to verify where the funds for a particular transaction have come from.
With ongoing changes to the legislation, keeping up to date with the newest additions and regulations is crucial for you as a reporting entity. Whilst this glossary can help you understand more about the anti-money laundering landscape, it can still feel overwhelming.
Let our team of specialised analysts help guide you through the AML process. Get in touch today and learn how we can help streamline the entire process for you, keeping you compliant.
About First AML
First AML is an AML technology provider, and the maker of Source, an all-in-one AML platform. Source powers thousands of compliance experts around the globe to reduce the time and cost burden of complex and international entity KYC. Its enterprise-wide, long term approach to the KYC / CDD data lifecycle addresses time and cost challenges while minimising compliance, reputational and security risks.