AML | KYC | RISK | REGULATIONS
AML & Regulatory Compliance Glossary
A comprehensive glossary of AML, KYC, sanctions screening, and regulatory compliance terms built for financial institutions and regulated businesses.
Account Takeover (ATO)
Fraud where criminals hijack a legitimate account to move illicit funds. Unusual post-login behaviour — large transfers, rapid detail changes — is detected through AML transaction monitoring systems.
Adverse Media Screening
Searching news and public sources for negative customer information — fraud, convictions, sanctions. A mandatory component of any AML screening solutions programme, surfacing risk beyond standard watchlists.
AML (Anti-Money Laundering)
Laws and procedures preventing criminals from disguising illegal funds as legitimate income. Regulated businesses use anti – money laundering software to automate screening, monitoring, and reporting.
AML Compliance
AML Screening
Checking customers against sanctions lists, PEP databases, and watchlists to surface financial crime risk. An effective AML screening service applies checks at onboarding and throughout the lifecycle.
Asset Freezing
Legally blocking a sanctioned party from accessing or transferring assets. Regulated entities must act immediately on confirmed matches from their sanctions screening software and notify the relevant authority.
Audit Trail
A tamper-evident record of all compliance activities — checks, alerts, approvals. Automatically generated by anti – money laundering compliance software and essential for regulatory examination.
Automated Onboarding
Technology-driven customer acceptance that combines ID checks, screening, and risk scoring. An automated customer onboarding workflow reduces time-to-onboard while maintaining full AML compliance.
Backlist
Individuals, entities, or countries prohibited from accessing financial services due to financial crime or sanctions. Core reference in any sanctions screening software deployment, including OFAC SDN and UN lists.
Batch Screening
Running an entire customer portfolio through AML screening software simultaneously — used for periodic re-screening after sanctions list updates or during regulatory-mandated portfolio reviews.
Beneficial Owner
The natural person who ultimately owns or controls a legal entity, often referred to as an Ultimate Beneficial Owner (UBO). Identifying beneficial owners is a core AML and KYB requirement used to understand ownership structures and uncover the individuals behind a company
Beneficial Ownership Register
A government-maintained database of the beneficial owners of legal entities. Many jurisdictions mandate public disclosure. Cross-referencing these registers is a standard KYB due diligence step for corporate customers.
Biometric Verification
Using unique physical characteristics — facial geometry, fingerprints — to confirm customer identity. A core component of identity verification solutions, providing stronger assurance than documents alone.
Bribery
Offering or receiving value to improperly influence authority. A predicate offence to money laundering. PEP screening software identifies customers in roles associated with elevated bribery exposure.
Business Risk Assessment
A structured evaluation of a regulated entity’s AML risks — customers, products, channels, geography. Required by FATF. AML risk assessment software formalises and documents this framework.
Case Management
The process of investigating and resolving AML alerts and compliance cases. Robust compliance case management ensures consistent decisions and produces the audit records regulators require.
CDD (Customer Due Diligence)
Collecting and verifying customer information to assess identity and risk before a business relationship begins. An automated CDD process completes standard due diligence at scale without manual effort.
Compliance Officer (MLRO)
The designated individual overseeing AML compliance and SAR filing. A structured KYC AML platform gives the MLRO the case documentation and audit records needed to support every decision.
Corporate Registry Verification
Validating a business’s legal existence and registration details against official government or regulatory registries. A core KYB process used to confirm company information and support due diligence.
Correspondent Banking
One bank providing services on behalf of another across borders — with limited visibility into underlying customers. FATF requires enhanced due diligence and robust ongoing monitoring AML for these relationships.
Cryptocurrency AML
Applying AML controls to virtual asset transactions. Crypto exchanges and VASPs must maintain KYT compliance — monitoring individual transactions in real time to detect layering and structuring.
Currency Transaction Report (CTR)
A mandatory US report filed with FinCEN for cash transactions exceeding $10,000. CTRs are a primary tool for detecting structuring attempts and must be filed accurately and on time.
Customer Risk Rating
A score reflecting a customer’s AML risk based on geography, business type, and PEP or sanctions status. The customer risk rating determines due diligence level and monitoring frequency throughout the relationship.
Data Privacy in AML
Protecting customer data collected during KYC under regulations like GDPR. A digital KYC compliance solution built with privacy-by-design handles both AML retention and data protection obligations together.
De-risking
Exiting entire customer segments to reduce AML exposure — often harming financial inclusion. A proportionate customer risk assessment approach allows firms to manage individual risk rather than abandoning whole sectors.
Digital Identity Verification
Confirming customer identity remotely using document scanning and biometrics. Identity verification solutions enable fully digital, AML-compliant onboarding for individuals and businesses without in-person attendance.
DNFBP (Designated Non-Financial Businesses and Professions)
Non-financial businesses subject to AML obligations — real estate agents, lawyers, accountants, jewellers. Many lack compliance infrastructure and benefit from purpose-built anti – money laundering solutions.
Document Verification
Authenticating government-issued ID — passports, driving licences — using MRZ checks and AI forgery detection. A foundational step in KYC verification software during customer onboarding.
Due Diligence
Investigating a customer before entering a business relationship. Categorised as Standard (CDD), Simplified (SDD), or Enhanced (EDD) based on risk. Enhanced due diligence software automates the appropriate level.
Dynamic Risk Profiling
Updating customer risk scores in real time as new information emerges — sanctions hits, adverse media, unusual transactions. Supported by AML transaction monitoring systems, it outperforms static periodic reviews.
EDD (Enhanced Due Diligence)
Deeper due diligence for high-risk customers — PEPs, complex ownership structures, high-risk jurisdictions. Enhanced due diligence software triggers EDD workflows automatically when risk scores exceed a defined threshold.
Electronic Verification (eVerification)
Verifying customer identity using electronic databases — credit agencies, electoral rolls — without physical documents. A scalable approach for lower-risk customers within KYC AML software onboarding flows.
Emerging Market Risk
Elevated AML risk from customers linked to markets with weak regulation or high corruption. A standard input in customer risk screening models, often triggering enhanced due diligence obligations.
Entity Resolution
Matching records to the same real-world entity despite name variations or transliterations. Essential in AML screening solutions to accurately identify sanctions matches without excessive false positive alerts
Escalation
Referring suspicious findings to a senior officer or MLRO for review. Clear escalation steps built into an AML compliance checklist ensure high-risk cases get appropriate oversight without delay.
Exposure
The AML risk level a firm carries based on customers, products, and geographies. Quantifying exposure drives AML risk scoring and informs how monitoring thresholds and screening intensity are calibrated.
False Positive
An AML alert that investigation confirms is not suspicious. High false positive rates waste compliance resource. Intelligent name-matching within AML monitoring software significantly reduces false positives without compromising coverage.
FATF (Financial Action Task Force)
The intergovernmental body setting global AML/CFT standards. FATF’s grey and black list designations directly affect sanctions screening tools requirements for firms with cross-border customer exposure.
FinCEN (Financial Crimes Enforcement Network)
US bureau administering the Bank Secrecy Act and receiving SARs and CTRs. Its Beneficial Ownership registry is a key resource in KYB as a service verification for US corporate customers.
Financial Crime
Illegal activities involving the financial system — money laundering, fraud, bribery, tax evasion. Anti – money laundering solutions bring the screening, verification, and monitoring controls needed to detect it.
FINTRAC
Canada’s financial intelligence unit responsible for receiving, analyzing, and sharing financial crime intelligence. Regulated entities report suspicious transactions and other prescribed activities to FINTRAC to support anti-money laundering and anti-terrorist financing efforts.
Financial Intelligence Unit (FIU)
A national body receiving, analysing, and sharing SARs with law enforcement. Every SAR produced through AML transaction monitoring tools and filed by a regulated entity flows to the FIU.
Fraud Detection
Identifying fraudulent transactions using rules and machine learning. AML monitoring systems designed for financial crime also surface fraud typologies — account takeover, synthetic identity, and payment fraud.
Fuzzy Matching
Identifying watchlist matches despite name spelling variations or transliterations. Applied in AML screening solutions to prevent sanctioned individuals from evading detection through minor name alterations.
GDPR (General Data Protection Regulation)
EU regulation governing personal data collection and storage. A digital KYC compliance solution with privacy-by-design satisfies both AML data retention requirements and GDPR obligations in one framework.
Geographic Risk
AML risk assigned to a country based on corruption, FATF listing, and sanctions exposure. A primary factor in customer risk screening models determining whether simplified, standard, or enhanced due diligence applies.
Global Sanctions
Penalties from the UN, EU, OFAC, and OFSI targeting individuals, entities, or countries. Regulated firms must screen all customers against current global sanctions as part of their AML screening service.
Grey List (FATF)
FATF list of jurisdictions under increased monitoring for AML/CFT deficiencies. Customers linked to grey-listed countries require enhanced due diligence under most AML compliance solutions frameworks.
Group-Wide AML Policy
Unified AML standards applied consistently across all group entities. Ensures AML screening and monitoring meets the highest regulatory bar across every subsidiary and branch in scope.
High-Net-Worth Individual (HNWI)
Individuals with significant wealth whose complex finances and potential PEP exposure create elevated AML risk. HNWIs typically require enhanced due diligence and close ongoing monitoring AML.
High-Risk Jurisdiction
AML risk assigned to a country based on corruption, FATF listing, and sanctions exposure. A primary factor in customer risk screening models determining whether simplified, standard, or enhanced due diligence applies.
High-Risk Customer
A customer with an elevated risk rating — PEP status, high-risk sector, or jurisdiction exposure. Their AML risk factors must be clearly documented and periodically reassessed throughout the relationship.
Hit Rate
The proportion of customers generating a potential match during screening. Optimising hit rate against false positives is a key tuning objective in sanctions screening software deployments.
Identity Document Verification
Authenticating passports, licences, and national ID cards using MRZ checks and AI forgery detection. A foundational step in KYC verification software before accepting a new customer.
Identity Verification
Confirming a customer is who they claim to be via document checks, biometrics, and database matching. Identity verification solutions support fully digital, AML-compliant onboarding for individuals and businesses.
Integration (Money Laundering Stage)
The final laundering stage — illicit funds re-enter the legitimate economy through property, luxury goods, or investments. AML transaction monitoring solutions detect asset purchases disproportionate to known customer wealth.
Internal Controls
Policies, systems, and oversight mechanisms implemented to detect and prevent money laundering. Span customer screening, identity verification, transaction surveillance, and documented case management — and must be regularly tested.
Joint Account Risk
Elevated AML risk in accounts with multiple holders, where identifying the controlling party is complex. Requires identity verification and sanctions screening for every account holder.
Jurisdiction Risk
AML risk assigned to a country based on corruption, FATF status, and sanctions exposure. A primary input in customer risk screening determining the appropriate level of due diligence.
KRI (Key Risk Indicator)
Metrics tracking AML risk in near real time — SAR volumes, high-risk onboarding rates, alert counts in AML monitoring systems. Regular KRI reporting signals a mature compliance programme.
KYB (Know Your Business)
Verifying a corporate customer’s identity, legal status, and UBO structure. KYB as a service platforms automate business verification across multiple jurisdictions, reducing manual registry checks.
KYC (Know Your Customer)
Verifying individual customer identity and assessing risk before and during a business relationship. KYC verification software automates the end-to-end process for faster, compliant onboarding.
KYC Onboarding
Collecting, verifying, and risk-assessing new customer information at relationship start. Delivering seamless digital customer onboarding without sacrificing AML completeness is a core compliance challenge.
KYT (Know Your Transaction)
Monitoring individual transactions for AML risk — particularly in crypto and payments. KYT compliance goes beyond customer-level KYC to flag transactions inconsistent with expected behaviour.
Large Cash Transaction
A cash transaction above a jurisdiction’s reporting threshold — $10,000 in the US — triggering a mandatory CTR. Detected and flagged by AML transaction monitoring systems alongside aggregation rules for structuring.
Layering (Money Laundering Stage)
The second laundering stage — complex transactions obscuring the origin of illicit funds. Advanced AML monitoring software detects layering by analysing fund flows across interconnected accounts.
Legal Entity Identifier (LEI)
A 20-character code uniquely identifying legal entities in financial transactions. Increasingly referenced during merchant onboarding solutions workflows to verify business details without manual registry checks.
Liveness Detection
Confirming a person submitting a digital selfie is physically present — not a photo or deepfake. An essential anti-spoofing control in identity verification solutions, and increasingly mandated as a minimum standard for remote KYC acceptance.
Low-Risk Customer
A customer with minimal AML risk — low-value transactions, straightforward business, low-risk jurisdiction. May qualify for SDD, defined within the firm’s customer risk assessment framework.
Match Rate
The proportion of customers generating a screening hit. Maximising true positives while minimising false alerts is the core tuning challenge in PEP screening and sanctions screening deployments.
MLRO (Money Laundering Reporting Officer)
The designated person within a UK firm responsible for assessing and filing SARs. Relies on a structured AML compliance checklist and case records to support every filing decision.
Money Laundering
Making illegal funds appear legitimate through placement, layering, and integration. Anti – money laundering software detects and disrupts laundering at each stage through screening, monitoring, and reporting controls.
Monitoring Alert
A notification from AML transaction monitoring systems when a transaction matches a suspicious pattern or threshold. Analysts triage alerts — dismissing, escalating, or converting them into SAR filings.
Name Screening
Checking customer names against sanctions lists, PEP databases, and watchlists. Intelligent matching within AML screening accounts for spelling variations and aliases without excessive false positive volumes.
Negative News Screening
Searching media for adverse customer information — fraud, criminal proceedings, regulatory fines. Mandatory for EDD and refreshed periodically using pep screening with integrated adverse media coverage.
Nominee Director
A director who acts on behalf of a hidden controlling party. A key red flag in KYB as a service reviews — real UBO tracing is needed to identify the individual actually in control.
Non-Cooperative Countries and Territories (NCCTs)
Former FATF classification for jurisdictions failing to cooperate with AML standards — now replaced by grey and black lists. Shaped the jurisdiction risk models underpinning modern customer risk screening.
Non-Face-to-Face Customer
A customer onboarded digitally rather than in person — treated as higher risk. A digital KYC compliance solution with biometrics and liveness detection is the standard control for remote onboarding.
OFAC (Office of Foreign Assets Control)
US agency administering sanctions and maintaining the SDN list — one of the most widely screened lists globally. Any sanctions screening software deployment must include up-to-date OFAC SDN coverage
Offshore Account
A bank account held outside a customer’s country of residence, often in low-regulation territories. Customers with offshore exposure typically require more thorough AML screening coverage and enhanced due diligence.
Onboarding (Client Onboarding)
Accepting and verifying a new customer before beginning a business relationship. An automated customer onboarding workflow combining KYC, screening, and risk scoring reduces time-to-onboard while staying fully compliant.
Ongoing Monitoring
Continuous review of customer transactions and profile throughout the relationship — not just at onboarding. Ongoing monitoring AML platforms alert compliance teams to risk changes requiring review or updated due diligence.
Organisational Risk Assessment
A top-level evaluation of a firm’s AML risks across customers, products, and geographies. AML risk assessment software formalises and maintains this documented framework for regulatory review.
Payment Screening
Checking payments against sanctions lists before processing. A time-sensitive requirement. Automated PEP and sanctions screening API integrations enable high-volume payment screening with the low latency needed for real-time payments.
PEP (Politically Exposed Person)
Individuals in prominent public roles — heads of state, senior officials — with elevated bribery and corruption risk. PEP screening maintains current PEP databases and applies them at onboarding and ongoing.
Placement (Money Laundering Stage)
The first laundering stage — illicit cash enters the financial system via deposits or cash-intensive businesses. The most detectable stage. AML transaction monitoring systems and CTR reporting are the primary controls.
QDD (Qualified Due Diligence)
Due diligence meeting both regulatory and internal risk standards — potentially exceeding standard CDD. An AML compliance checklist allows compliance teams to define QDD requirements consistently by customer type or sector.
Quality Assurance (AML QA)
Reviewing completed AML decisions to verify procedures were followed and decisions properly evidenced. Essential check on the integrity of anti – money laundering compliance software outputs.
Questionnaire - KYC
Structured questions collecting customer identity, source of funds, and business purpose at onboarding. Part of an automated CDD process — calibrated to risk tier, simpler for low-risk and more detailed for high-risk customers.
RBA (Risk-Based Approach)
Allocating AML resources proportionate to identified risk — FATF’s core methodology. AML risk assessment supports the RBA by scoring customers and calibrating screening and monitoring intensity accordingly.
Real-Time Monitoring
Analysing transactions as they occur — not in retrospective batch reviews. AML transaction monitoring systems with real-time capability interrupt financial crime in progress rather than reporting it after the fact.
Regulatory Reporting
Mandatory submission of SARs, CTRs, and threshold reports to regulators. Anti – money laundering platform tools that automate report preparation and submission reduce errors and missed deadlines.
Relationship mapping
The process of identifying and visualizing connections between individuals, businesses, beneficial owners, and associated entities. Used in AML and KYB programs to uncover hidden ownership, control structures, and potential financial crime risks.
Risk Score
A numerical value reflecting a customer’s estimated AML risk. The AML risk score — derived from geography, business type, and screening results — directly determines due diligence level and monitoring intensity.
Risk Framework
A structured methodology for identifying, assessing, and managing AML risk across customers, products, services, and jurisdictions. Risk frameworks support a risk-based approach and help ensure consistent compliance decisions.
Risk Band
A classification level assigned to a customer based on their assessed AML risk. Risk bands — typically low, medium, or high — determine the level of due diligence, monitoring, and review required throughout the customer relationship.
SAR (Suspicious Activity Report)
A mandatory report filed with the national FIU when funds are suspected of financial crime involvement. A structured AML compliance checklist for SAR preparation ensures consistent documentation and defensible decisions.
Sanctions
Penalties from the UN, EU, OFAC, and OFSI targeting individuals, entities, or countries. Compliance requires real-time sanctions screening software and immediate asset freezing on confirmed matches.
SDD (Simplified Due Diligence)
Reduced due diligence applied where customers are genuinely low risk. Must be justified through a documented customer risk assessment and immediately withdrawn if the customer’s risk profile changes.
STR (Suspicious Transaction Report)
A mandatory report for a specific suspected transaction, used alongside or instead of SARs in many jurisdictions. Filing workflows are managed through anti – money laundering platform tools.
Third-Party Risk
AML exposure from agents, introducers, or vendors through whom services reach end customers. Regulated firms remain responsible and must apply appropriate AML screening solutions to all third-party relationships.
Trade-Based Money Laundering (TBML)
Laundering through trade — over-invoicing, false goods descriptions, multiple payments. Requires specialist AML transaction monitoring tools that analyse trade data patterns alongside financial flows.
Transaction Monitoring
Analysing customer transactions to detect money laundering and financial crime patterns. AML transaction monitoring systems use rules and behavioural models to generate alerts covering both traditional payments and digital assets.
UBO (Ultimate Beneficial Owner)
The natural person ultimately controlling a company regardless of intermediary layers. An automated UBO disclosure workflow traces ownership chains systematically and documents the process for audit purposes.
Underbanked
Individuals with limited access to formal financial services. Digital identity verification solutions accepting alternative data sources help regulated firms onboard underbanked customers responsibly without compromising AML standards.
User Authentication
Confirming the legitimate account holder is accessing their account. Multi-factor and biometric identity verification are critical controls against account takeover fraud used to launder money.
VASP (Virtual Asset Service Provider)
A business exchanging or custodying virtual assets. Subject to FATF AML/CFT obligations including KYC, KYT compliance, and Travel Rule — one of the fastest-growing compliance sectors globally.
Vendor Due Diligence
Assessing the AML compliance and risk profile of third-party vendors. AML screening include vendor and counterparty checks alongside standard customer screening programmes.
Verification
Confirming customer-provided information matches authoritative sources. The core output of KYC verification software — must be documented and retained for audit in line with jurisdiction data retention requirements.
Vulnerability Assessment
Evaluating weaknesses in a firm’s AML controls that criminals could exploit. AML risk assessment software supports ongoing vulnerability identification by tracking risk indicators across the business.
Watchlist
A database of high-risk individuals and entities — sanctions, PEPs, adverse media. AML screening solutions aggregate multiple watchlists into a single interface and apply intelligent matching simultaneously.
Watchlist Screening
Mandatory checks of customer names against multiple watchlists at onboarding and throughout the lifecycle. AML screening software delivers accurate results while minimising manual review time.
Workflow Automation
Technology automating compliance tasks — onboarding, alert triage, SAR preparation. End-to-end AML workflow automation connects screening, verification, and monitoring into a seamless compliance operation.
Cross-Border Payments Risk
Elevated AML risk in payments crossing national borders due to regulatory variation and reduced counterparty visibility. Requires enhanced AML transaction monitoring tools and Travel Rule compliance.
Cross-Border Transactions
Transactions originating in one country and received in another. Carry elevated AML risk. Aml screening solutions apply jurisdiction risk logic to cross-border flows, flagging transactions linked to sanctioned territories.
XML Regulatory Reporting
Structured data format for submitting SARs and CTRs to FIUs electronically. An anti – money laundering checklist that includes XML validation steps reduces submission errors and ensures timely delivery.