AML/CFT Glossary: Core Terms Explained

Stages of Money Laundering

Placement

The first stage of money laundering, in which the proceeds of crime are first introduced into the financial system — the point at which illicit cash is hardest to disguise and, correspondingly, where many AML controls are concentrated.

Layering

The second stage of money laundering, in which funds already placed into the financial system are moved through a series of transactions designed to obscure their illicit origin and the identity of the beneficial owner.

Integration

The third and final stage of money laundering, in which layered funds are reintroduced into the legitimate economy and appear to come from a lawful source, completing the laundering process.

Risk-Based Approach

An AML compliance principle requiring a firm to apply the greatest scrutiny and resources where money laundering/terrorist financing risk is highest, rather than applying identical controls to every customer regardless of risk.

International Standard-Setting Bodies

FATF

The Financial Action Task Force — the global standard-setting body for combating money laundering and terrorist financing, whose Recommendations form the baseline AML/CFT framework most jurisdictions implement into domestic law.

FATF Recommendations

The FATF's own set of international standards that countries are expected to implement through domestic legal and regulatory measures to combat money laundering and terrorist financing.

FSRB (FATF-Style Regional Body)

A regional body, affiliated with the FATF, that promotes and assesses the implementation of the FATF Recommendations among its own member countries.

NCCT

Non-Cooperative Countries and Territories — FATF's historical designation for jurisdictions identified as having weak or absent AML/CFT regimes, a precursor to today's FATF grey- and black-list processes.

APG

The Asia/Pacific Group on Money Laundering — the FATF-style regional body covering the Asia-Pacific region.

Customer & Relationship Risk

PEP (Politically Exposed Person)

An individual who holds, or has held, a prominent public role — and, by extension, their immediate family members and close associates — who is treated as carrying elevated money-laundering/corruption risk and typically requires enhanced due diligence.

Correspondent Banking

An arrangement under which one bank (the correspondent) provides services on behalf of another bank (the respondent), typically to let the respondent's customers access markets or currencies it cannot reach directly — a relationship type carrying its own specific AML exposure because the correspondent has limited direct visibility into the respondent's own underlying customers.

The Wolfsberg Group

An association of global banks that develops industry guidance (including on correspondent banking and PEP due diligence) aimed at raising the quality and consistency of AML/CFT practice across the industry.

Prudential & Regional Frameworks

Basel Committee

The Basel Committee on Banking Supervision — a standard-setting body for prudential bank regulation whose guidance on customer due diligence and sound AML risk management is widely referenced alongside the FATF Recommendations.

EU AML Directive (AMLD)

The European Union's own legislative framework implementing AML/CFT standards across its member states, issued and updated as successive numbered Anti-Money Laundering Directives.

Global Cooperation & US Law

Egmont Group

An international network of Financial Intelligence Units (FIUs) that facilitates cross-border cooperation and the secure exchange of financial intelligence between member countries' AML authorities.

USA PATRIOT Act

US federal legislation that substantially expanded American AML obligations on financial institutions, including customer identification and enhanced due diligence requirements, in the wake of the September 11, 2001 attacks.

AMLA (Anti-Money Laundering Act)

US federal legislation reforming and modernizing the country's AML regulatory framework, including beneficial-ownership reporting requirements and expanded information-sharing provisions.