Financial Crime World

Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT): Key Definitions

Terms Defined

The following terms are defined in relation to the implementation of international standards for anti-money laundering and combating the financing of terrorism, specifically the FATF (Financial Action Task Force) Standards.

1. Money Laundering

  • Defined for the purposes of Recommendation 3 of the FATF Standards: The process of converting profits from criminal activity into legitimate assets to disguise their origin.

2. Money or Value Transfer Service

  • Defined for Recommendations 10, 14, and 16: A service that involves accepting currency, cheques, etc., and paying a corresponding sum to a beneficiary.
    • Examples:
      • Wire transfer services
      • Currency exchange services
      • Money order services

3. Occasional Transaction

  • Defined for Recommendations 10, 11, 15, 25, and 26: Any transaction not taking place in the context of a business relationship.
    • Examples:
      • One-time payment to a friend or family member
      • Payment for a small business purchase

4. Originating Entity

  • Defined for Recommendations 10, 15, and 16: A financial institution that receives a request to execute an electronic currency transfer.
    • Examples:
      • Bank
      • Money transfer service provider

5. Politically Exposed Person (PEP)

  • Defined for Recommendations 10, 11, and 12: An individual who has been entrusted with a prominent public function.
    • Examples:
      • Government officials
      • Heads of state or government
      • Senior politicians

6. Property

  • Defined for Recommendations 3, 4, 5, 6, 30, 31, 33, and 38: Assets of any kind, including documents or instruments in electronic form, evidencing title to or an interest in assets.
    • Examples:
      • Cash
      • Real estate
      • Stocks and bonds

7. Record

  • Defined for Recommendations 3, 4, 5, 6, 10, 11, 30, 31, 33, and 38: Any material on which data or information is recorded or marked and capable of being read or understood by a person, computer system, or other device.
    • Examples:
      • Documents
      • Emails
      • Digital files

8. Reporting Entity

  • Defined for Recommendations 1, 6, 7, 10, 11, 16, 17, 22, 23, 24, 25, 28, 31, 34, 35, 37, and 40: An entity that is required to report suspicious transactions or activity.
    • Examples:
      • Bank
      • Money transfer service provider
      • Casino

9. Secretary

  • Defined for Recommendation 10: The Secretary for Justice and Border Control.

10. Sender

  • Defined for Recommendations 10 and 16: A person who requests a reporting entity to execute an electronic currency transfer.
    • Examples:
      • Individual making a wire transfer
      • Business sending money internationally

11. Senior Management

  • Defined for Recommendations 1 and 10: The directors of the reporting entity or key employees appointed to ensure effective control on a day-to-day basis.

12. Shell Bank

  • Defined for Recommendation 12: A bank that is incorporated or licensed in a country with no physical presence and not affiliated with a financial group subject to effective consolidated supervision.
    • Examples:
      • Virtual banks
      • Offshore banks