Key Terminologies in AML, KYC, and CFT
(Clear Table Format)
General AML / CFT Terms
Term Definition
AML Anti-Money Laundering – efforts and
regulations to prevent criminals from
disguising illegally obtained funds.
CFT Countering the Financing of Terrorism –
strategies to prevent funding of terrorist
activities.
Money Laundering The process of making illegally-gained
proceeds appear legal.
Terrorist Financing Providing funds for terrorist activities from
legal or illegal sources.
PEP (Politically Exposed Person) Someone with a prominent public role, at
higher risk for bribery or corruption.
Beneficial Owner The natural person who ultimately owns or
controls a customer or the person on
whose behalf a transaction is being
conducted.
Risk-Based Approach (RBA) Allocating resources to higher-risk
customers, jurisdictions, and transactions.
Compliance Officer / MLRO Money Laundering Reporting Officer –
responsible for compliance with AML laws.
Suspicious Activity Report (SAR) A report filed when suspicious transactions
or behaviors are identified.
STR (Suspicious Transaction Report) Similar to SAR, focuses on specific
transactions that seem unusual.
Transaction Monitoring Ongoing process of reviewing transactions
for signs of suspicious activity.
KYC / CDD / EDD Terms
Term Definition
KYC Know Your Customer – procedures to
verify the identity of a client.
CDD (Customer Due Diligence) Verifying a customer's identity and
assessing risks before establishing a
business relationship.
EDD (Enhanced Due Diligence) Additional scrutiny for high-risk customers
(e.g., PEPs, offshore companies).
Simplified Due Diligence (SDD) Reduced level of due diligence for low-risk
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customers.
Onboarding The process of registering and verifying a
new customer.
KYB (Know Your Business) Verifying details of corporate clients,
including UBOs and company structure.
Customer Profile Documented information about a
customer’s identity, risk level, and
behavior.
Regulatory / Legal Terms
Term Definition
FATF (Financial Action Task Force) International body that sets global
AML/CFT standards.
FATF Grey List / Blacklist Lists of countries with strategic deficiencies
in AML/CFT controls.
OFAC (Office of Foreign Assets Control) U.S. agency that administers sanctions.
Sanctions Screening Checking individuals and entities against
sanction lists.
Basel AML Index A ranking of countries' risk levels in
relation to money laundering and terrorist
financing.
Egmont Group An international network of Financial
Intelligence Units (FIUs).
Banking / Financial Crimes Terms
Term Definition
Structuring / Smurfing Breaking large transactions into smaller
ones to avoid detection/reporting.
Layering Complex transactions used to obscure the
origin of illicit funds.
Integration Final stage of money laundering where
funds re-enter the economy as legitimate
money.
Shell Company A non-operational legal entity used to hide
ownership or illicit activity.
Offshore Account A bank account held in a foreign
jurisdiction, often used for secrecy or tax
avoidance.
Trade-Based Money Laundering (TBML) Use of trade transactions to disguise the
origin of illicit funds.
Hawala / Informal Value Transfer Systems Informal networks used to transfer money
(IVTS) without physical movement of cash.
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Technology / Automation Terms
Term Definition
AML Screening Tool Software used to detect and prevent money
laundering by checking names against
watchlists.
Watchlists Lists of individuals/entities of concern (e.g.,
sanctions, PEPs).
False Positive An alert flagged by AML systems that turns
out not to be suspicious.
Case Management System Software used to track and manage alerts
and investigations.
AI / Machine Learning in AML Technologies used to improve pattern
recognition and reduce false positives.
Risk and Reporting
Term Definition
Risk Assessment Evaluating the risk level of customers,
geographies, or transactions.
KRI (Key Risk Indicators) Metrics used to identify potential AML/CFT
issues.
CTR (Currency Transaction Report) Filed for large cash transactions (e.g., over
$10,000 in the U.S.).
Typology A pattern or method used in financial
crime, used for training and monitoring.
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