Key definitions in anti Money Laundering and Financing of Terrorism

Money laundering is the processing of assets generated by criminal activity to obscure the link between the funds and their illegal origins. Terrorism financing raises money to support terrorist activities.

Fighting money laundering and terrorist financing contributes to global security, integrity of the financial system and sustainable growth.

Below are key definitions in anti Money Laundering and Terrorist Financing:

- AML/CFT: Anti-Money Laundering / Countering the Financing of Terrorism (also used for Combating the financing of terrorism)

- Beneficial owner: refers to the individual who ultimately owns or controls a customer and/or the person on whose behalf a transaction is being conducted. It also incorporates those persons who exercise ultimate effective control over a legal entity or arrangement.

- CDD – Customer Due Diligence: one of the measures to be taken by financial institutions and non-financial business and professions to prevent money laundering and terrorist financing.

- Competent authorities: competent authorities refers to all public authorities that includes financial supervisors established as independent non-governmental authorities with statutory powers  with designated responsibilities for combating money laundering and/or terrorist financing. 

- Criminal activity: criminal activity refers to: (a) all criminal acts that would constitute a predicate offence for money laundering in the country; or (b) at a minimum to those offences that would constitute a predicate offence.

- Cross-border Wire Transfer: refers to any wire transfer where the ordering financial institution and beneficiary financial institution are located in different countries.

- FATF: The Financial Action Task Force (FATF) is the global money laundering and terrorist financing watchdog. The inter-governmental body sets international standards that aim to prevent these illegal activities and the harm they cause to society. As a policy-making body, the FATF works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas.
The FATF has developed the FATF Recommendations, or FATF Standards, which ensure a co-ordinated global response to prevent organised crime, corruption and terrorism. They help authorities go after the money of criminals dealing in illegal drugs, human trafficking and other crimes.  The FATF also works to stop funding for weapons of mass destruction.

- FATF Recommendations: 40 recommendations to combat Money Laundering and Terrorist Financing issued by FATF. These are the measures the FATF has agreed to implement and which all countries are encouraged to adopt.

- Freeze: in the context of confiscation and provisional measures, the term freeze means to prohibit the transfer, conversion, disposition or movement of any property, equipment or other instrumentalities on the basis of and for the duration of the validity of, an action initiated by a competent authority or a court under a freezing mechanism or until a forfeiture or confiscation determination is made by a competent authority.

- Funds or other assets: the term funds or other assets means any assets, including, but not limited to, financial assets, economic resources (including oil and other natural resources), property of every kind, whether tangible or intangible, movable or immovable, however acquired and legal documents or instruments in any form, including electronic or digital, evidencing title to, or interest in, such funds or other assets, including, but not limited to, bank credits, travellers cheques, bank cheques, money orders, shares, securities, bonds, drafts, or letters of credit, and any interest, dividends or other income on or value accruing from or generated by such funds or other assets and any other assets which potentially may be used to obtain funds, goods or services.

- Identification data: the term identification data refers to reliable, independent source documents, data or information.

- KYC – Know your customer: the due diligence that financial institutions and other regulated companies must perform to identify their clients and ascertain relevant information pertinent to doing financial business with them.

- Legal person: legal person refers to any entity other than natural persons that can establish a permanent customer relationship with a financial institution or otherwise own property. This can include companies, bodies corporate, foundations, anstalt, partnerships or associations and other relevantly similar entities.

- MONEYVAL: Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism of the Council of Europe - the FATF Style Regional Body charged with evaluating the performance of Council of Europe member (and applicant) states, which are not members of the FATF. Members of MONEYVAL who subsequently become members of the FATF can elect to retain full membership of MONEYVAL.

- Non-profit organisations: refers to a legal person or arrangement or organisation that primarily engages in raising or disbursing funds for purposes such as charitable, religious, cultural, educational, social or fraternal purposes or for the carrying out of other types of “good works”.

- Ordering financial institution: refers to the financial institution which initiates the wire transfer and transfers the funds upon receiving the request for an wire transfer on behalf of the originator.

- Originator: refers to the account holder who allows the wire transfer from that account or where there is no account, the natural or legal person that places the order with the ordering financial institution to perform the wire transfer.

- PEP – Political exposed persons: means a natural person who is or who has been entrusted with prominent public functions in the Republic or in another country, an immediate close relative of such person as well as a person known to be a close associate of such person:

Provided that, for the purpose of the present definition, ‘prominent public function’ means any of the following public functions:
(a) heads of State, heads of government, ministers and deputy or assistant ministers;
(b) members of parliament or of similar legislative bodies;
(c) members of the governing bodies of political parties;
(d) members of supreme courts, of constitutional courts or of other high-level judicial bodies, the decisions of which are not subject to further appeal, except in exceptional circumstances;
(e) members of courts of auditors or of the boards of central banks;
(f) ambassadors, chargés d'affaires and high-ranking officers in the armed forces;
(g) members of the administrative, management or supervisory bodies of State-owned enterprises;
(h) directors, deputy directors and members of the board or equivalent function of an international organisation;
(i) mayor:

Provided further that no public function referred to in points (a) to (i) shall be understood as covering middle-ranking or more junior officials;

Provided furthermore that "close relatives of a politically exposed person" includes the following:
(a) the spouse, or a person considered to be equivalent to a spouse, of a politically exposed person;
(b) the children and their spouses, or persons considered to be equivalent to a spouse, of a politically exposed person;
(c) the parents of a politically exposed person;

Provided even furthermore that ‘persons known to be close associates of a politically exposed person’ means natural person:
(a) who is known to have joint beneficial ownership of legal entities or legal arrangements, or any other close business relations, with a politically exposed person;
(b) who has sole beneficial ownership of a legal entity or legal arrangement which is known to have been set up for the de facto benefit of a politically exposed person.

- Proceeds: proceeds refer to any property derived from or obtained, directly or indirectly, through the commission of an offence.

- Risk Based Approach (RBA): A risk-based approach means that countries, state authorities, competent authorities, as well as the private sector identify, assess, and understand the money laundering and terrorist financing risk to which they are exposed, and take the appropriate mitigation measures in accordance with the level of risk.

- Seize: the term seize means to prohibit the transfer, conversion, disposition or movement of property on the basis of an action initiated by a competent authority or a court under a freezing mechanism. However, unlike a freezing action, a seizure is effected by a mechanism that allows the competent authority or court to take control of specified property. The seized property remains the property of the natural or legal person(s) that holds an interest in the specified property at the time of the seizure, although the competent authority or court will often take over possession, administration or management of the seized property.

- Shell bank: shell bank means a bank that has no physical presence in the country in which it is incorporated and licensed and which is unaffiliated with a regulated financial group that is subject to effective consolidated supervision. Physical presence means meaningful mind and management located within a country. The existence simply of a local agent or low level staff does not constitute physical presence. 

- STR - Suspicious Transaction Report: STR is a report made by a financial institution about suspicious or potentially suspicious activity. Generally the criteria to decide when a report must be made is any financial transaction that does not make sense to the financial institution, is unusual for that particular client or appears to be done only for the purpose of hiding or obfuscating another separate transaction. The report is filed with that country's financial crime enforcement agency.

- Terrorist: the term terrorist refers to any natural person who: (i) commits, or attempts to commit, terrorist acts by any means, directly or indirectly, unlawfully and wilfully; (ii) participates as an accomplice in terrorist acts ; (iii) organises or directs others to commit terrorist acts ; or (iv) contributes to the commission of terrorist acts by a group of persons acting with a common purpose where the contribution is made intentionally and with the aim of furthering the terrorist act or with the knowledge of the intention of the group to commit a terrorist act.

- Terrorist financing: means the provision or gathering of funds by any means, directly or indirectly, with the intention to use such funds or knowing that they will be used in whole or in part for the commission of an offence within the meaning given to the term by section 4 of the International Convention for the Suppression of the Financing of Terrorism (Ratification and Other Provisions) Law.

- Wire transfer: any transaction carried out on behalf of an originator through a financial institution by electronic means with a view to making an amount of funds available to a beneficiary person at a beneficiary financial institution, irrespective of whether the originator and the beneficiary are the same person.

There is much that both financial and non-financial businesses can do to take the initiative and implement their own money laundering and terrorist financial prevention measures.