The below are the list of Key terms and Concepts related to Anti-Money Laundering (AML).
Anti-Money Laundering (AML): The laws, regulations, and procedures designed to prevent the conversion or transfer of illegally obtained funds into seemingly legitimate assets.
Combating the Financing of Terrorism (CFT): The measures taken to prevent, detect, and sanction illegal activities intended to fund terrorist actions.
Designated Non-Financial Businesses and Professions (DNFBPs): Certain businesses and professions, as identified by the Financial Action Task Force (FATF), which are not financial institutions but may be at risk of being used for money laundering or terrorist financing purposes.
GoAML: A fully integrated software solution developed by the United Nations Office on Drugs and Crime (UNODC) and used by Financial Intelligence Units (FIUs) worldwide. It aids in the detection, analysis, and reporting of suspicious transactions and activities related to money laundering and terrorism financing.
Money Laundering: The process of making illegally-gained proceeds appear legal, usually involving three steps: placement, layering, and integration.
Terrorist Financing: The process of providing financial support to individual terrorists or non-state actors, often involving funds raised from both legal and illicit sources.
Customer Due Diligence (CDD): A process used to gather data about customers for the purpose of serving them better and managing risks prudently. This is often referred to as “Know Your Customer” (KYC) procedure.
Know Your Customer (KYC): The process of a business verifying the identity of its clients and assessing potential risks of illegal intentions for the business relationship.
Suspicious Transaction Reporting (STR): The act of reporting transactions that are suspected to be related to money laundering or terrorist financing to the competent authorities.
Beneficial Owner: The natural person(s) who ultimately owns or controls a customer or the natural person on whose behalf a transaction is being conducted.
Politically Exposed Persons (PEPs): Individuals who hold or have held a prominent public position, or individuals who are closely related to such persons, who may present a higher risk for potential involvement in corruption.
Financial Action Task Force (FATF): An inter-governmental body responsible for setting international standards for combating money laundering and terrorist financing.
Central Bank of the UAE (CBUAE): The central bank of the United Arab Emirates, responsible for the implementation of monetary, credit and banking policies in the UAE.
Federal Decree Law No. 20 of 2018: The primary AML law in the UAE, which sets out the AML and CFT regulations applicable to financial institutions and DNFBPs.
FIU (Financial Intelligence Unit): The FIU represents a central, national agency in the UAE that plays a key role in the AML framework. It is entrusted with receiving, analyzing, and disseminating disclosures concerning suspicious transactions to the relevant law enforcement or supervisory authorities.
Simplified Due Diligence (SDD): Reduced customer due diligence measures that may be applied in lower-risk situations. Nevertheless, it does not mean no due diligence.
Risk-Based Approach (RBA): An effective way to combat money laundering and terrorist financing. This involves identifying the risks to which the company is exposed, and designing and implementing controls tailored to manage and mitigate those risks.
Sanctions: Restrictions placed by one country on another, or on individuals or entities, often in the form of trade barriers, tariffs, or other economic measures. In the AML context, sanctions screening is a key element of the CDD process.
Source of Funds (SoF): Information about where the customer’s funds originated. This must be identified as part of the CDD process.
Source of Wealth (SoW): Information about how the customer acquired their total wealth. This is often required as part of the EDD process for high-risk customers.
Third-Party Reliance: In some circumstances, one entity may rely on CDD performed by another. However, the ultimate legal responsibility for CDD compliance always stays with the entity relying on the third party.
Wire Transfer: A method of electronic funds transfer from one person or institution to another. Wire transfers may be more susceptible to being used for money laundering and, hence should be monitored closely.
Shell Company: A company that exists only on paper and has no office and no employees. It might be used for money laundering, tax evasion, or to achieve a deceptive appearance of corporate legitimacy.
Placement: The first stage in the process of money laundering where the criminal introduces the illicit money into the financial system.
Layering: In the context of money laundering, layering is the second stage where the origin of illicit money is obscured through a series of complex transactions and bookkeeping tricks.
Integration: The third stage in the process of money laundering in which the ‘cleaned’ money is mixed with legally obtained money, making it difficult to distinguish between the two.
Predicate Offence: A crime that is a component of a more serious crime. For example, theft might be a predicate offence to money laundering if the money stolen is then used in the money laundering process.
Tipping Off: “Tipping off” refers to the act of informing a person or entity that they are under investigation or scrutiny for suspicious activities, particularly those linked to money laundering or terrorist financing, potentially jeopardizing the investigation or enabling evasion of legal actions.
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