The primary goal of pKYC is to modernize the approach to watchlist screening. Traditionally, the updates to watchlists by various governments, the United Nations, the US with its OFAC, NGOs, and other regulatory bodies around the world have placed a significant burden on entities governed by ML/TF regulations worldwide. These updates, influenced by FATF Recommendations 6 and 7 and the United States OFAC list, require not only monitoring for sanctions but also for any high-risk individuals or entities that emerge as threats over time. The challenge is not just regulatory compliance but ensuring that compliance is effective, efficient, and up to date to avoid regulatory fines or worse, criminal convictions for failing to satisfy the pKYC requirements.

Chief Compliance Officers (CCO), Money Laundering Reporting Officers (MLRO), Chief Anti-Money Laundering Officers (CAMLO), and all those within the compliance and risk departments that are tasked with the prevention, detection, and deterrence of ML/TF within their organizations know the stakes are high. Failure to identify a true positive hit on new or updated lists can lead to significant legal and reputational risks.

What is Perpetual KYC or pKYC?

Perpetual KYC is a modern approach to Customer Due Diligence (CDD) and Watchlist Screening processes. Unlike traditional KYC methods that involve one-time or periodic reviews, pKYC enables persistent, real-time monitoring of a customer’s KYC information. This ongoing process ensures that any new information that is found within the various watchlists, based on the initial KYC information of the customer, is brought to the attention of the compliance team. Thus enabling financial institutions (FIs) to better manage risks, avoid regulatory fines and make their AML/CTF Compliance regime more robust and efficient.

Traditional vs Perpetual KYC

Traditional KYC involves periodic reviews at set intervals, typically annual, semi-annual or at specific points during the customer’s relationship with the FI, whereas Perpetual KYC is an ongoing, event-driven approach that monitors customer information using automated systems and takes into account real-time updates to watchlists against the KYC information throughout the lifespan of the customer relationship.

One of the main challenges faced in traditional KYC processes is the reliance on manual or semi-automated systems, which are not only prone to errors but often outdated by the frequency of regulatory updates, as well as, not really accounting for the time it takes to get to the new updates to watchlist data. These systems typically schedule monitoring of clients against watchlists on a monthly, quarterly, or even yearly basis. This infrequency can lead to significant lapses where an entity or individual is newly added to a watchlist and is not identified in a timely manner, posing severe reputational and regulatory risks to the organization. Conversely, pKYC uses a proactive approach by leveraging AI-driven solutions to continuously monitor KYC information and trigger reviews and investigations only when an actual hit occurs in a particular watchlist.

Lastly, traditional and legacy systems often operate in silos, with sanctions checks and adverse media screenings conducted in separate cycles, leading to disconnects in the information discovery process. The cost of integrating these systems and the manual effort required to manage false positives and verify true hits add another layer of complexity and expense. In contrast, Perpetual KYC systems, can cross reference data across multiple sources in real-time, reducing the chances of missing critical information due to siloed operations, and avoiding the information overload from reviewing past hits that typically come with rescanning alone.

The Mechanics of Perpetual KYC

• Continuous Data Monitoring: Perpetual KYC systems must constantly monitor multiple watchlist data sources for additions or changes, ensuring FIs always have access to the most current data.
• AI & ML Driven Analysis: In today’s world, advanced technologies like AI and ML are a must to automate the analysis of vast amounts data for the detection of unusual events such as sanctions or predicated offences.
• Automated Alerts and Investigations: When the system detects these changes to the watchlist against the KYC information, they must trigger an automated alert, prompting the compliance team to investigate further.
• Documentation and Record-keeping: Documentation for every step of the pKYC process must be maintained, including event triggers and alert histories, updates to customer profiles, and actions taken by the compliance team. This provides a clear audit trail for verifiable auditability.

The Challenges of pKYC

FIs are faced with multiple limitations in the process of implementing a pKYC system, some of the most significant challenges include:

Technology and Integration: Perpetual KYC requires real-time monitoring systems, advanced analytics and AI along with an effective case management system. Developing and integrating these with legacy systems can be complex and resource intensive.

Data Privacy: The continuous access to and updating of customer information raises concerns around data privacy and security. FIs implementation of robust systems to protect sensitive data and ensure compliance with data protection regulations can be challenging and requires an ongoing process of ensuring the data is secure.

Data Quality and Consolidation: pKYC relies heavily on high-quality, consolidated data from multiple sources. Ensuring that data is accurate, comprehensive, and up to date is critical not only for regulatory compliance but also for minimizing false alerts.

The Benefits of pKYC

Despite these challenges, pKYC presents clear advantages in terms of efficiency, costs, and risk management once implemented correctly. The most beneficial advantages are:

Continuous Risk Management: Perpetual KYC’s proactive approach allows FIs to spot suspicious activities related to sanctions and financial crimes in near real-time, enabling compliance teams to respond quickly and effectively. This reduces the risks of reputational damage and potential fines that may be incurred from failures to detect potential threats. Furthermore, automated monitoring processes minimize the chance of human errors and inconsistencies in AML/CTF compliance programs.

Operational Efficiency: By automating many aspects of the KYC process, pKYC eliminates the need for time-consuming periodic reviews, greatly reducing the manual effort required by compliance teams on unnecessary reviews. It also breaks down the siloed nature of compliance operations, thus significantly reducing overhead costs.

Customer Satisfaction: Automated workflows reduce the need for repeated documentation requests and reviews if there are no changes in a customer’s risk profile. This improves customer experience and reduces friction in customer onboarding and ongoing engagements.

Implementing pKYC – The KYC2020 Advantage:

As financial transactions become increasingly global and regulatory burdens expand, the shift from traditional KYC to pKYC becomes crucial. KYC2020’s persistent ongoing monitoring solutions can help facilitate this transition, ensuring that FIs stays ahead in the fight against money laundering, terrorist financing, and other financial crime.

The move to pKYC begins with an effective data strategy. KYC2020’s aggregates data from a growing list of 1500+ sources and 10,000+ news outlets across 193 countries to build a comprehensive global watchlist database. Advanced technology, including Artificial Intelligence (AI) and Natural Language Processing (NLP) goes into normalizing, de-duplicating and contextualizing the data to create personas. This approach integrates OFAC/SDN, Sanctions, PEP, Regulatory, Criminal, HIO, High Risk Business and Adverse Media data to provide a more holistic view of the customer’s risk profile to compliance staff when it comes to watchlist screening.

Persistent ongoing monitoring systems for KYC/KYB data that can alert compliance teams in real-time is a critical element. KYC2020 achieves this with SanctionWatch which continuously monitors OFAC/SDN, Sanctions and Adverse Media data sources using advanced data science techniques to compute data change vectors. SanctionWatch is able to proactively detect changes in underlying KYC/KYB data with faster processing and lower costs versus the tradition of rescanning methods predominantly used today by most FIs.

Add to this, KYC2020 utilizes human centric knowledge or Collaborative Intelligence to automate the processing of alerts generated and in accordance with an organization’s risk-based approach. This results in minimizing false alerts, providing a significant reduction in manual interventions and overall costs, and allowing compliance teams to focus on reviewing true positives, i.e., those alerts that pose the real risk to the organization from a sanctions and financial crime perspective.

Data Privacy baked in

An essential part of implementing pKYC in is to ensure that data privacy, privacy considerations, and legal aspects of data privacy are built into the solution from the beginning. Customer data must be stored securely and in accordance with data protection accepted practices, laws, and regulations such as GDPR. This is why in one of the reasons why KYC2020’s has ensured all its solutions are ISO27001 compliant and SOC 2 Type 2 certified This provides a strong foundation for demonstrating the seriousness of secure data management at KYC2020. Furthermore, when it comes to uploading KYC/KYB data and downloading the results, or using KYC2020’s APIs, all of the sensitive files and data the customer provides, benefit from the heightened encryption methods used such as SSL, sFTP, PGP.

In conclusion, the transition to Perpetual KYC is not just a strategic advantage but a necessity in today’s increasingly complex regulatory environment. KYC2020’s persistent monitoring solutions are designed to support your transformation to pKYC, providing continuous, real-time oversight while reducing the risk of missing a sanction or financial crime alert.

Our solutions enhance verifiable auditability both internally and externally with regulators, auditors, or examiners that includes alert histories, clearing process decisions, and reviews that are tracked and documented. This level of detailed record-keeping also provides FIs with the transparency and accountability needed to build trust with all involved parties. With KYC2020, FIs can navigate the shift to pKYC, knowing that their compliance operations as it relates to KYC/KYB watchlist management are robust, secure, and ready to tackle future concerns of transparency and functionality.

In this blog, we will explore the intricate landscape of regulations as it applies to cryptocurrencies, the critical issue of sanctions compliance in the cryptocurrency space, and how KYC2020’s DecisionIQ, with the power of AI and collaborative intelligence, is transforming the way regulated entities benefit from these advancements while maintaining the importance of auditability and transparency over opaque solutions and systems.

The Crypto Conundrum: Money Laundering and Terrorist Financing

As the cryptocurrency industry becomes more ubiquitous in the financial systems, it faces similar challenges to traditional financial systems in combating money laundering and terrorist financing. Terrorists and criminal organizations seek to exploit the pseudonymous nature of cryptocurrencies to disguise the illicit origins or destination of their funds. By doing so, they are attempting to evade law enforcement to fund further criminal activities, while leaving a trail of damage in their wake.

Anti-Money Laundering (AML)/Counter Terrorist Financing (CTF) measures have been in place in traditional finance for some time now to help detect, deter, and in some cases prevent financial crimes from happening. While it is estimated that only 5-10% of ML/TF is actually detected, regulators worldwide have issued comprehensive guidelines and directives to at least try to make a dent. The rapid growth of the crypto industry has outpaced these efforts and is creating opportunities for criminals to exploit the regulatory gaps while they play catchup. The complexity of crypto, as it relates to AML/CTF regulations, has made it challenging for cryptocurrency exchanges to comply with new and ever-expanding regulations.

The Rising Tide of Regulatory Obligations

Many custodial and non-custodial Virtual Asset Services Providers (VASPs) are subject to Know Your Customer (KYC) obligations. Among the primary aspects of dealing with cryptocurrency is to put in place transaction monitoring, adherence to the Travel Rule, and screening for sanctions, PEP and Adverse Media on persons and entities who are involved in those transactions. Failure to perform these and other functions that are required by AML/CTF regulations exposes these businesses to significant reputational risk, civil penalties and criminal charges that could lead to prison.

The FATF and the Future of Crypto Regulation

The Financial Action Task Force (FATF) provided clarity related to AML/CTF regulations in its “Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers”. It makes recommendations on how countries, regulators, and virtual asset service providers should manage ML/TF risks related to dealing in cryptocurrencies. This guidance promotes a risk-based approach, similar to that of traditional regulated entities including those that would be most affected like financial institutions and MSBs. It is the member countries’ responsibility  to implement the recommendations to ensure that there are safeguards against widespread abuse in the use of cryptocurrencies in ML/TF related crimes.

KYC for Crypto Companies

A strong AML/CTF compliance program, rooted in a risk-based approach, is essential to align with the FATF recommendation and country-specific regulations. Customer screening and monitoring, understanding the customer’s financial activities and source of funds/wealth, assessing risk and compliance with the Travel Rule, are all key aspects in preventing, detecting and deterring ML/TF offences in financial systems. The role of a qualified compliance officer is pivotal in maintaining the integrity of a cryptocurrency exchange’s compliance efforts. Any lapses in compliance could result in severe fines and penalties, underscoring the importance of rigorous compliance in cryptocurrency exchanges.

To onboard and engage with high-risk customers, businesses must implement Customer Due Diligence (CDD) procedures as of their AML compliance regime. CDD procedures include screening against watchlists including sanctions, regulatory, criminal, and negative news. For businesses that deal with crypto transactions, this is not enough.

OFAC has expanded its purview by incorporating digital currency addresses into the SDN List, aiming to notify the public about specific digital currency identifiers linked to blocked individuals. Originally, the incorporation of cryptocurrency addresses into these due diligence processes was observed during the Silk Road crackdown and in the context of Darknet markets like Hydra and AlphaBay, as well as mixer services such as TornadoCash and Blender. More recently, we’ve seen the inclusion of Digital Currency Addresses related to the terrorist group Hamas in OFAC’s SDN and other watchlists.

Following this development, it is imperative that businesses implement rigorous screening processes for digital currency addresses. This is necessary to guarantee that they do not engage in transactions or trade involving digital currency identifiers associated with a blocked person.

In Conclusion: Screening for Cryptocurrency addresses with DecisionIQ

The importance of robust compliance solutions that include cryptocurrency address screening for sanctions and other related ML/TF exposure has never been greater. KYC2020, with its innovative DecisionIQ, all-in-one Sanctions, PEP & Adverse Media Screening platform, is aimed at transforming the way VASPs, DeFi, and blockchain innovators meet their regulatory obligations.

Businesses need more than just a compliance screening tool; they need a partner that understands the nuances of cryptocurrency compliance as it relates to sanctions.

DecisionIQ combines the power of AI and collaborative intelligence to significantly reduce false positives, provide transparency in the results, and ultimately demonstrate to the regulator or examiner that all steps have been taken to reduce the risk of dealing with a person or entity on a sanctions list. DecisionIQ ensures that every screening decision is recorded and auditable, similar to the blockchain concept of transparency through “proof of work”, or in our case, what we call a “proof of decision”.

KYC2020’s AI-driven technology with collaborative intelligence empowers those dealing with cryptocurrencies to maintain a rigorous compliance program without compromising on quality or incurring unnecessary costs.

“A compelling part of the technology is that it provides a proof of decision for every screening decision. Unlike other ‘black-box’ AI solutions, KYC2020 approach is similar to the blockchain concept of transparency via ‘proof of work.'” – Coinchange

Click here to read the full Coinchange Case Study and discover how DecisionIQ transformed their screening efforts related to compliance by reducing the cost and manual effort in dealing with false positives and bad data.

Verifiable Auditability: DecisionIQ’s “Proof of Decision” approach aligns with blockchain principles of transparency. It provides a verifiable audit trail for every screening decision and reviewer action. Unlike other ‘black-box’ AI solutions, DecisionIQ ensures clarity and transparency through its ‘proof of work.’

Reduce False Positives: False positives can be a significant challenge in compliance. DecisionIQ uses high quality and structured data and a screening decision system with auto-clearing capabilities to deliver one of the lowest false positive rates in the industry, saving your business time and resources while ensuring that legitimate customers are not held up in unnecessary reviews.

Faster Onboarding: Speed is of the essence in the crypto world. DecisionIQ’s rapid screening processes ensure faster onboarding, allowing regulated entities to provide a seamless experience to their customers.

Rapid Review and Clearing System: KYC2020’s Rapid Review and Clearing System (aka RABBIT) is the solution to the slowdown caused by case management systems that are not ‘human factored’ for large volume reviews. RABBIT is equipped with built-in functions for visualizing and processing information on a large scale, making it a more efficient and effective bulk review process over the traditional methods deployed by many others.

Watchdog‘s Automated Clearing Technology: We further improved DecisionIQ’s capability to handle edge cases in AI that result in false positives. Watchdog’s tech stack is designed around Collaborative Intelligence (CI), and it includes a hit pattern recognition system, Contextual AI to predict gender and nationality of names, and a proprietary name relevancy scoring system that is more effective and intuitive than fuzzy scoring. This additional intelligence is used as part of a rule-based system to lower the rate of false positives caused by borderline cases that humans can detect better than AI. Watchdog is also supported by a clear proof of work for verifiable auditability.

DecisionIQ offers a range of features designed to meet the unique needs of the crypto industry, ensuring compliance is not a burden but a competitive advantage. With DecisionIQ, crypto companies can focus on what they do best – innovating and providing value to their customers – while leaving the complexities of compliance in capable hands.

Remember, you don’t have to compromise on quality and compliance while lowering costs. DecisionIQ is here to make AML compliance a seamless and efficient journey. Stay ahead in the crypto compliance landscape with KYC2020.­­­

One of the distinctive challenges in this region is the complexity of name screening in Arabic script. Transliterating Arabic names into Latin characters presents specific challenges with significant implications for AML compliance.

This blog delves into the world of AML compliance in the Middle East, discussing the challenges of transliterating Arabic names, navigating the regulatory landscape, and highlighting the key authorities shaping AML requirements in the region. We’ll also emphasize the critical role of precision in AML compliance, particularly when it comes to Arabic language screening.

Understanding AML Regulations in MENA

Significance of the Middle East

MENA covers 6% of the world’s population and contributes to 4.5% of the global economy through 21 diverse countries, it holds a complex regulatory landscape for Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF).

Some of the key regulators are:

UAE – CBUAE

The Central Bank of the UAE (CBUAE) is the central financial regulator. It oversees, develops, and maintains the UAE’s financial system. The Regulatory Development Division within its Banking and Insurance Supervision Department sets AML/CFT policies.

Qatar – QFCRA

Qatar’s financial sector is regulated by the Qatar Financial Centre Regulatory Authority (QFCRA). Established in 2002, it authorizes and regulates financial services, with a dedicated AML/CFT unit. The QFCRA also actively engages with international standard-setting bodies.

Saudi Arabia – Ministry of Anti-Money Laundering, SAFIU & SAMA

Saudi Arabia takes a coordinated approach to tackle money laundering. The Ministry of Anti-Money Laundering, the Saudi Arabian Monetary Agency (SAMA), and the Saudi Arabian Financial Intelligence Unit (SAFIU). The Permanent Committee for Anti-Money Laundering, coordinates AML efforts at the SAMA head office in Riyadh.

Oman – CBO & CMA

Oman has two primary regulatory authorities. The Central Bank of Oman (CBO) oversees and licenses financial institutions, implementing AML/CFT regulations. The Capital Markets Authority (CMA) supervises Oman’s capital market and insurance sectors.

Egypt – Egyptian FIU

Egypt’s AML/CFT landscape is managed by the Egyptian Financial Intelligence Unit (FIU). It analyzes suspicious transaction reports and ensures compliance. Egypt also commits to combating financial crimes through the National Committee for Combating Money Laundering and Terrorism Financing (NCMLTF).

Jordan – Central Bank of Jordan

The Central Bank of Jordan leads AML/CFT efforts. It regulates and supervises financial institutions, participating in international initiatives against financial crimes.

Lebanon – BDL

Lebanon’s Banque du Liban (BDL) is responsible for AML/CFT oversight, ensuring the stability and integrity of Lebanon’s financial system.

Comprehensive AML Requirements

AML requirements in the Middle East align with international standards, the MENAFATF adopts and implements the FATF 40 Recommendations in the region in a way that does not conflict with the cultural values, constitutional frameworks and legal systems in the member countries. They encompass key areas like Customer Due Diligence (CDD), Transaction Monitoring, Suspicious Activity Reporting, Record Keeping, Employee Training, PEP and Adverse Media screening, Sanctions Compliance, and a risk-based approach.

The Challenges of Arabic Language Screening for AML

In the multifaceted Middle East and North Africa region, where ancient civilizations meet modern finance, an intriguing challenge emerges for Anti-Money Laundering (AML) screening: the diversity of scripts. Regulatory bodies often maintain watchlists with names in Latin scripts, while Middle Eastern banks may have names recorded in Arabic script. This linguistic divergence poses unique challenges for AML screening providers.

Transliteration Complexities

Transliterating Arabic names into Latin script becomes imperative due to the distinctive Arabic script, which features sounds markedly different from English. Currently, there’s no universally accepted standard for this transliteration, leading to variations in spelling that screening providers must navigate. Let’s delve into some transliteration scenarios:

1. The Elusive “ق”: Arabic’s “ق” represents a unique “k”-sound, pronounced deep in the throat. In Latin script, it’s typically transliterated as either “k” or “q,” adding a layer of ambiguity.
2. The Enigmatic ‘ayin: Arabic’s ‘ayin, represented by the letter ع, introduces another challenge. The sound often gets marked with an apostrophe or omitted in English transliterations, generating diverse spellings.
3. Pronunciation vs. Script: Arabic names occasionally defy their written forms. This discrepancy results in multiple Latin transliterations, further compounded by the presence or absence of hyphens.
4. Dialectal Variations: Arabic’s letter “ج” is pronounced differently in Egypt (“g” as in “good”) and elsewhere in the Middle East (“j” as in “jungle”). This linguistic diversity necessitates multiple spelling choices.
5. Segmentation Variants: A single Arabic name can be segmented differently, leading to variants like ” Ghasem Soleymani,” ” Qasmi Sulayman,” or ” Qasem Salimani,” all referring to the same name.
6. Transliteration Discrepancies: Different languages employ distinct rules for transliterating Arabic letters. For instance, English transliterates “ش” as “sh,” while French opts for “ch.” The challenge arises when English documents containing French transliterations intersect, resulting in multiple name variations.

Beyond Transliteration: AML Screening Complexities

Transliteration challenges extend beyond merely matching names in Latin characters. AML screening entails even greater complexities:

• Diverse Naming Conventions: Arabic naming conventions aren’t universally standardized. Varying cultural influences and historical practices contribute to a rich tapestry of naming styles.
• Cultural Diversity: Arabic culture has transcended geographical boundaries, leading to diverse naming traditions across different regions.
• Religious Variability: Arabic names aren’t exclusively linked to Islam; they span various religions, including Arab Christians.
• Traditional Naming Conventions: Some individuals adhere to deeply traditional naming conventions, which may contrast with contemporary culture.

Navigating this linguistic landscape requires not only precise transliteration but also a deep understanding of the cultural nuances surrounding Arabic names. For AML screening providers, it’s a multifaceted journey through the diverse world of script, sound, and meaning in the MENA region.

The Importance of Arabic Name Screening

The significance of understanding Arabic names cannot be overstated. The Middle East is a region where the diversity and intricacies of names pose a unique challenge. Effective screening requires not only a grasp of the complexities of Arabic names but also an appreciation of their paramount importance.

Imagine this scenario: Middle Eastern banks maintain databases replete with names written in Arabic script. Regulated entities, private institutions, and regulatory bodies across the globe, including OFAC (Office of Foreign Assets Control), the UAE Local Terrorist list, the EU Consolidated list, Iraq AML & CFT Office Individuals and Entities, UNSC Consolidated list, and many others, publish lists that feature names in Arabic script, often in advanced formats.

It’s a testament to the global nature of finance and the need for precise AML screening.

Arabic names encompass various components, each laden with significance: the Ism (forename), Kunya (paedonymic), Laqab (surname), Nasab (patronymic), and Nisbah (geographical or clan indicator). Notably, not all Arabic names follow fixed conventions, and Arabic culture transcends geographical and religious boundaries, further complicating the landscape.

To illustrate the challenge, let’s consider “Ali Saed bin Ali al-Houri.” This name comprises the Ism, Nasab, and Nisbah, with each element holding a specific meaning and cultural resonance. Similarly, “abu Hamza al-Masri” combines the Kunya and Nisbah, with “Masri” signifying Egyptian heritage.

Understanding Arabic names is not just a matter of linguistic curiosity; it’s the key to precise AML screening. It enables financial institutions, regulatory bodies, and businesses to differentiate between individuals, eliminate false positives, and adhere to stringent AML regulations with cultural sensitivity. It’s a critical facet of the global effort to combat financial crime and uphold the integrity of the financial system.

KYC2020’s Enhanced Arabic Language Screening

With an increasing number of customers in the Middle East, KYC2020 is committed to meeting the unique challenges posed by the Arabic language. In a region where precision in Anti-Money Laundering AML and counter-terrorism financing CTF screening is of utmost importance, our product team is rising to the occasion.

KYC2020 has responded with an advanced screening engine featuring a customized scoring system for Arabic names. This enhancement excels at detecting diacritics within Arabic script, elevating precision in name matching and identification of unique name parts. It’s a solution designed specifically for demanding lists, including the advanced formats of OFAC’s Specially Designated Nationals list, UAE Local Terrorist list, EU Consolidated list, Iraq AML & CFT Office Individuals and Entities, UNSC Consolidated list, private blacklists uploaded by users and more.

The Arabic language varies across regions and cultures. Latin and Arabic scripts are distinctly different, demanding a customized approach. KYC2020’s scoring engine is meticulously designed to account for these regional nuances. It’s fueled by cutting-edge Natural Language Processing (NLP) techniques and doesn’t just normalize names; it optimizes them. This includes removing diacritics, eliminating unnecessary elements, and enhancing accuracy.

We employ a range of advanced techniques to ensure the accuracy and reliability of our Arabic language screening. This includes a meticulous normalization process that addresses specific intricacies of the Arabic script. Our normalization procedures encompass:

1. Normalization of Hamza with Alef Seat to a Bare Alef: In Arabic script, the Hamza with Alef Seat is a unique character. We normalize this character to a plain Alef to ensure consistent and accurate matching.
2. Normalization of Teh Marbuta to Heh: Arabic script features the Teh Marbuta, a character representing a specific form of the letter Heh. We normalize Teh Marbuta to Heh to ensure uniformity in our database.
3. Normalization of Dotless Yeh (Alef Maksura) to Yeh: The Dotless Yeh, also known as Alef Maksura, is another distinct character in Arabic. We normalize this character to Yeh to facilitate accurate matching and recognition.
4. Removal of Arabic Diacritics (the Harakat): Arabic diacritics, known as Harakat, are marks that indicate vowel sounds and pronunciation. Removing these diacritics helps streamline the screening process and enhance matching precision.
5. Removal of Tatweel (Stretching Character): Tatweel is a character used to elongate certain letters in Arabic script. We remove this character to avoid discrepancies in matching due to variations in character length.

By implementing these normalization techniques, we ensure that Arabic names are accurately represented and matched within our screening engine. This meticulous approach minimizes the chances of false positives or missed matches, contributing to the overall effectiveness of our AML screening solution.

Our customized scoring engine comprehensively addresses phonetic similarities, spelling variations, titles, and honorifics, as well as issues like missing spaces and hyphens, nicknames, and out-of-order components. In essence, it’s a holistic solution that leaves no room for error.

Transliteration between Arabic and Latin scripts is a minefield of potential errors. KYC2020’s engine tackles this using linguistic, orthographic, and phonological algorithms, it minimizes transliteration errors, ensuring that no true positive goes unnoticed. Beyond that, it’s adept at mitigating common errors that often lead to missed matches, such as misspellings, phonetic misunderstandings, and nicknames.

Our commitment to comprehensive screening extends beyond the Arabic language. We’ve obliterated language barriers, regardless of the script. Names in Arabic script or any other non-Roman script are seamlessly processed. Here’s how it works: we translate and transliterate names into Roman characters, normalize them, and integrate them into our persona database. This advanced feature not only facilitates precise searches in the original script but also enables fuzzy searches on Roman name inputs, guaranteeing comprehensive and accurate results across diverse linguistic inputs.

Understanding Payment Service Regulations: Payment service regulations are a collection of guidelines meticulously crafted to ensure that PSPs carry out robust due diligence, effectively mitigating the risks associated with financial fraud. These regulations can vary significantly across different jurisdictions, adapting to the ever-evolving landscape of payment processing. Navigating this regulatory maze demands a strategic approach to compliance.

Regulatory Landscapes Across Jurisdictions:

European Union (EU): The Second Payment Services Directive (PSD2) underscores the regulatory landscape for electronic payment services in the EU. Emphasizing strong customer authentication (SCA) and open banking, PSD2 promotes innovation while enhancing security and consumer choice.

United Kingdom (UK): The Payment Services Regulations 2017 (PSRs 2017) serves as the key legislation governing payment services in the UK. It extends the scope of payment services regulations and introduces changes that improve consumer protection, communication, and fraud prevention.

United States (US): Payment service regulations in the US are governed by multiple state and federal regulators, leading to a complex web of compliance requirements. The emergence of regulations related to digital assets and FinTechs is anticipated in the near future.

Singapore: Regulated by the Monetary Authority of Singapore (MAS), the Payment Services Act (PSA) aims to create an innovative environment for FinTechs. It combines previous acts to establish a comprehensive framework for new and traditional licensable payment activities.

India: Navigating the Regulatory Landscape: India, a burgeoning hub for FinTech innovation and digital payments, has established a robust regulatory framework to ensure the integrity and security of payment services. The Reserve Bank of India (RBI) plays a pivotal role in overseeing and guiding payment processors and aggregators to maintain compliance and uphold consumer protection.

Guidelines for Payment Aggregators and Payment Gateways: In March 2020, the RBI introduced the “Guidelines on Regulation of Payment Aggregators and Payment Gateways,” a comprehensive regulatory framework to govern the operations of payment aggregators and gateways in India. These guidelines are designed to foster transparency, customer security, and effective risk management within the payment processing ecosystem.

Key Features of the Guidelines:

• Registration and Eligibility Criteria: The guidelines mandate that all non-bank payment aggregators must obtain registration from the RBI. These entities are required to be incorporated as companies under the Companies Act, 1956/2013. Additionally, the guidelines set out minimum net-worth requirements for both new and existing payment aggregators.
• Background Checks and Due Diligence: Payment aggregators are now responsible for conducting comprehensive due diligence and background checks on merchants. This measure ensures that merchants adhere to ethical business practices and do not engage in the sale of counterfeit or fraudulent products.
• Governance and Oversight: To ensure sound governance, the guidelines emphasize that payment aggregators must satisfy the “fit and proper” criteria established by the RBI. Additionally, these entities are required to communicate any changes in control or takeover to the RBI.
• Anti-Money Laundering (AML) Compliance: Payment aggregators are obligated to adhere to the RBI’s “Know Your Customer” (KYC) directions, along with AML/CFT (Anti-Money Laundering/Combating the Financing of Terrorism) requirements. This includes verifying customers’ identities, maintaining KYC records, and monitoring transactions for suspicious activities.
• Settlement and Escrow Accounts: Payment aggregators are required to maintain an escrow account with a scheduled commercial bank to facilitate secure fund settlements. The guidelines prescribe the permissible debit and credit transactions that can be executed through this account.
• Technology and Security Standards: The RBI places significant importance on data security and cybersecurity. Payment aggregators are expected to adhere to baseline technology and encryption standards, conduct regular system audits, and implement mechanisms to handle cybersecurity incidents effectively.
• Local Storage of Payment Data: Reflecting the RBI’s data localization mandate, payment aggregators are required to store all payment system data exclusively on servers located within India.
• Consumer Grievance Redressal: The guidelines underscore the importance of effective consumer grievance redressal mechanisms. Payment aggregators are required to establish a framework for addressing customer complaints and concerns promptly.

Conclusion: Empowering Payment Providers with AML/KYC Compliance

India’s regulatory framework for payment processors and aggregators reflects a forward-looking approach that prioritizes consumer protection, data security, and ethical business practices. The RBI’s guidelines empower payment processors to conduct due diligence, enhance risk management, and ensure compliance with AML/CFT norms. As India’s digital payments landscape continues to evolve, payment processors that embrace these regulations position themselves as responsible and trusted partners in the growth of the FinTech ecosystem.

KYC2020’s Merchant Screening Technology: Streamlining AML/KYC Compliance

Within the landscape of payment processor onboarding, KYC2020’s merchant screening technology emerges as a cutting-edge solution, revolutionizing the due diligence process. Our latest release of DecisionIQ is designed with Payment Providers in mind, offering a suite of features to facilitate seamless AML/KYC compliance.

Efficiency through Streamlined Searchability: DecisionIQ enables Payments companies to streamline searchability for businesses and beneficial owners. With the ability to group multiple names under a single ID, the process becomes seamless and efficient. Payment Providers can now effortlessly manage and verify merchant information, ensuring compliance without compromising on speed or accuracy. Welcome your merchants with ease and confidence, knowing that our platform has got you covered every step of the way.

Data Security at the Core: At KYC2020, we take data security seriously. Our ISO27001 certification for information security guarantees that your sensitive data is handled with the utmost care and protection. Moreover, we’ve designed our solution to be GDPR ready, ensuring that your data protection obligations are met with the highest standards. Your peace of mind regarding data security is our priority.

Seamless Integration: We understand that speed is essential for Payment Providers. With our seamless integration capabilities, you can effortlessly integrate our API with your existing systems. This automation simplifies onboarding processes and enhances workflows, making compliance tasks efficient and streamlined. Payment Providers can focus on their core operations while relying on our platform for robust AML/KYC compliance.

Audit-Trail Transparency: KYC2020 offers full audit trail transparency, recording every step of compliance processes in real-time. With detailed logs and timestamps, our solution empowers businesses to demonstrate due diligence, ensure AML/KYC compliance, and easily identify and address potential issues. Trust our platform to enhance your compliance posture and build confidence with regulators and customers alike.

Stay Fully FATF Compliant: As a payment provider, adhering to Financial Action Task Force (FATF) guidelines is crucial. KYC2020’s DecisionIQ ensures robust AML screening, sanction checks, and PEP identification, enabling you to meet FATF’s stringent requirements. Our AI-powered platform empowers your payment processes with real-time data coverage and risk-based monitoring, ensuring airtight compliance and bolstering your reputation.

In conclusion, KYC2020 stands as your trusted ally in navigating the complex regulatory landscape of payment processing. We provide the tools, technology, and expertise you need to ensure compliance, protect your reputation, and continue to drive innovation in the world of payments.

Know Your Customer (KYC)

The first AML best practice for financial institutions is to know your customer (KYC). KYC requires organizations to verify the identity of their customers and collect detailed information about them. This includes collecting basic information such as name, address, and date of birth, but also more sensitive data like source of funds and proof of identity. Additionally, KYC requires organizations to monitor customer activity closely in order to detect any suspicious activities or transactions on their accounts.

Ongoing Monitoring

The second AML best practice for financial institutions is ongoing monitoring. As mentioned above, it’s important to monitor customer activity closely in order to detect any suspicious activities or transactions on their accounts. This means regularly reviewing customer transactions, conducting risk assessments, and staying up to date on current AML regulations so that you can identify red flags quickly.

Transaction Reporting

Another important AML best practice is transaction reporting. Financial institutions are required by law to report any suspicious transactions or activities they detect through their ongoing monitoring process. To ensure compliance with this requirement, organizations should have a system in place for recording and submitting these reports in a timely manner.

Data Security

The fourth AML best practice is data security. Collecting customer information puts an organization at risk of data breaches and other cybercrime threats, so it’s important for them to invest in robust security measures such as encryption technology and access control systems in order protect their customers’ data from unauthorized access or misuse. Additionally, organizations should make sure they are compliant with all applicable data privacy laws when collecting and storing customer information. 

Employee Training     

The fifth AML best practice for financial institutions is employee training. It’s essential that employees understand the importance of following proper procedures when handling customer information and complying with applicable laws and regulations regarding money laundering prevention. Therefore, regular training sessions should be conducted in order to keep employees up-to-date on the latest anti-money laundering policies and procedures within the organization.                                                                   

 Independent Audits

The sixth AML best practice is independent audits conducted by external auditors who specialize in money laundering prevention efforts within the financial services sector.These audits provide an objective assessment of an organization’s current processes related to money laundering prevention as well as recommendations for improvement where necessary.

Having independent audits conducted periodically can help an organization stay ahead of potential issues related to money laundering before they arise.

Implement Compliance Programs

Finally, it’s important to have a robust compliance program in place to ensure that anti-money laundering laws are being followed at all times. Having a compliance program will help ensure that the proper policies and procedures are being followed by both employees and customers alike.

It should include measures such as screening customers for known criminals, conducting regular audits, training staff on AML laws and procedures, creating detailed records for transactions, and having appropriate reporting systems in place for suspicious activities.

How KYC2020 helps you stay compliant and successful

Anti-money laundering best practices are essential for protecting your business from criminal activities such as fraud and terrorism.

KYC2020’s DecisionIQ is an all-in-one platform for compliance that offers the best in class AML Data, Real-Time Screening Decisions, Efficient Case Management and Ongoing Monitoring services to make sure your compliance practices are effective and updated at the most affordable prices across the board.

By implementing a robust compliance program—you can ensure that your business remains compliant with relevant regulations while still providing excellent service to customers.

These procedures include customer due diligence, anti-fraud measures, transaction monitoring, internal controls, reporting requirements, and more.

Why is AML Compliance Important?

AML compliance is important because it helps protect financial institutions from being used as conduits for illegal activities such as money laundering or terrorist financing. Without proper AML compliance procedures in place, financial institutions could be unwittingly participating in activities that could put them at risk of prosecution or fines from regulators.

Furthermore, having strong AML compliance procedures in place can help protect customers from fraud and abuse by making sure their transactions are monitored and reported when necessary. 

One of the main reasons why businesses should comply with AML regulations is to protect themselves from legal penalties. Noncompliance can result in hefty fines or even jail time for those involved.

Furthermore, companies that fail to comply may also face reputational damage if they are found guilty of not adhering to the regulations put in place by the government.

How does Compliance build Brand Loyalty?

A key feature of AML compliance is the assurance that customer information is kept secure and private, which helps to build customer confidence in a company’s services. Customers will feel more comfortable knowing that their data is safe and secure with a compliant business andthis increased confidence can lead to greater customer loyalty, which could benefit a business in the long run.

Another benefit of complying with AML regulations is that it can help enhance a company’s brand reputation. By demonstrating its commitment to protecting customers’ financial data, a business can increase its visibility and gain trust among potential customers.

This can be especially beneficial for new businesses looking to establish themselves in the marketplace quickly and efficiently without having to worry about damaging their reputation due to noncompliance with laws or regulations. 

Security measures and combatting Financial Crime

By adhering to AML laws, companies are able to strengthen their internal security processes as well as their customer protection policies and practices. This improved security helps protect against potential fraud or money laundering activities while also enhancing overall efficiency within the organization itself by streamlining processes and procedures related to customer data handling or transactions tracking. 

When companies follow AML regulations properly, they are contributing towards fighting financial crime such as money laundering or terrorism financing on a larger scale—not just within their own operations but also across the industry as a whole.

This helps create an environment where illegal activities become far less attractive for criminals who may be targeting legitimate businesses for nefarious purposes instead of taking advantage of loopholes or weak enforcement measures imposed by other organizations or countries worldwide . 

How Can Financial Institutions Ensure They Are Compliant?

Financial institutions can ensure they are compliant with AML regulations by implementing a robust compliance program based on the principles outlined by FinCEN (the U.S. Treasury Department’s Financial Crimes Enforcement Network). This includes detailed customer due diligence processes, anti-fraud measures, transaction monitoring systems, internal controls, reporting requirements, etc.

Additionally, banks should regularly review their internal policies and procedures to make sure they are up to date with any changes in regulation or best practices within the industry.

Ensuring your financial institution is compliant with all applicable Anti-Money Laundering (AML) regulations is essential for protecting your business from legal action or fines from regulators.

By implementing a comprehensive compliance program based on FinCEN guidelines and regularly reviewing your policies and procedures you can ensure that your institution remains compliant with current regulations while also protecting customers from fraud and abuse.

Investing in quality AML compliance solutions now can save you time and money later down the line—so don’t wait! Start building out your AML Compliance program today!

How can KYC2020 help you?

KYC2020 aims to make compliance easy and accessible for organizations of all sizes. Our customizable plans offer on figurable solutions, tailored to your business model at the most affordable price across the industry.

We are an all-in-one platform, where our premier product DecisionIQ  works with your risk-based approach to deliver actionable sanction screening decisions allowing you to screen against 1000’s of news sources and over 1500 Sanction, PEP and Regulatory watchlists to get a screening decisions backed by verifiable and transparent “proof of decision”. Speed up client onboarding and reduce your overall cost of compliance with DecisionIQ.

Sometimes it can feel like AML compliance procedures and regulation are getting more complex by the day. Just trying to keep up with the alphabet soup of AML terms and acronyms, not to mention the assortment of relevant regulatory bodies and organizations, is a dizzying endeavor.

So if you are confused by all the AML jargon, we have created a glossary of the most common acronyms in the world of AML/CFT compliance. This list is primarily for financial institutions and MSBs in the U.S. and Canada. However, we’ll also, give a brief rundown of some of the major regulatory bodies both within North America and abroad.

AML Terms and Abbreviations

A

Adverse Media Screening- Adverse Media screening, also known as Negative News Screening, is a process to detect and prevent sanction and reputation risk of dealing with persons or entities with associations with financial crime or other relevant negative news. It is conducted via smart tools built on AI and NLP to scan through thousands of global news sources.

AML- Anti-Money Laundering

AML/CTF compliance program- Anti-Money Laundering/Counter-Terrorism Financing compliance program.

A system designed to assist financial institutions, securities dealers and money services businesses in their fight against money laundering, terrorist financing, and other financial crimes. This system generally includes:

• Written internal policies, procedures and controls
• A designated AML compliance officer or team
• Third-party audits
• Comprehensive employee training

AML Compliance Officer- Responsible for the implementation and maintenance of an organization’s AML/CFT compliance program.

AMLA- Anti-Money Laundering Act of 2020

AMLID- Anti-Money Laundering International Database

A compendium of analyses of anti-money laundering laws and regulations, including both domestic laws and international cooperation and information on national contacts and authorities.

ARS- Alternative Remittance System

Any system used for transferring money from one location to another while operating outside of traditional banking channels.

As Soon as Practicable (Canada)- The expected time within which a suspicious transaction report (STR) can be submitted to FINTRAC taking into account the facts and circumstances of the situation.

ASTR (Canada)- Attempted Suspicious Transaction Report

A report that is filed when an individual initiates and then abandons a financial transaction in a way that looks suspicious.

AST- Automated Screening Tool

A sanctions, PEP, and adverse media screening tool powered by AI, natural language processing and machine learning with automated search functionality. ASTs, like our very own SmartScan, offers intelligent search and a scoring engine that works to minimize manual intervention while significantly reducing False Positives.

ATF- Anti-Terrorist Financing

The same thing as Counter Terrorist Financing (CFT) and is often used interchangeably

B

Batch Processing- A type of data processing where related transactions or entries are grouped together and transmitted for structuring and analysis.

Batch Screening- The process of screening an institution’s customer base and other associated entities on a periodic basis. Batch processing, along with API based screening are necessary requirements for modern sanction and PEP screening tools for AML compliance.

Beneficiary- The individual or entity who will ultimately benefit from a transaction and be the final recipient of the funds.

BO- Beneficial Ownership

Beneficial ownership is a term in commercial law which refers to the natural person or persons “who ultimately own or control a legal entity or arrangement, such as a company, a trust, or a foundation”.

BSA- The Bank Secrecy Act

U.S. legislation aimed toward preventing criminals from using financial institutions to hide or launder money. The law requires financial institutions to provide documentation to regulators whenever their clients deal with suspicious cash transactions involving sums over $10,000.

Business Relationship (Canada)- The connection between a reporting entity and a client to conduct financial transactions or provide services related to those transactions. This relationship can be account-based, where the client holds an account with the reporting institution, or non-account-based, but recurring.

C

CAMLO (Canada)- Chief Anti-Money Laundering Officer

Responsible for maintaining and managing records of high risk customers and reporting suspicious activities to the authorities as well as organizing inspections and audits from third-party entities.

CAMS- Certified Anti-Money Laundering Specialist Certification designation from ACAMS.

Cash-Intensive Business- Any business in which customers usually pay with cash for the products or services provided, such as food delivery services and coin-operated machines.

CDD- Customer Due Diligence

The process of assessing customers’ background to determine their identity and the level of risk they possess.

CFT- Counter-Terrorism Financing

CFCS- Certified Financial Crime Specialist designation from ACFCS.

Check Kiting- A form of check fraud that involves taking advantage of the float to make use of non-existent funds in a checking or other bank account. In this way, instead of being used as a negotiable instrument, checks are misused as a form of unauthorized credit.

CIP- Customer Identification Program

Where financial institutions need to verify the identity of individuals wishing to conduct financial transactions with them and is a provision of the USA Patriot Act.

Clarification Request (Canada)- A method used to communicate with money services businesses when FINTRAC needs more information about their registration form. This request is usually sent by email.

Compliance Program (Canada)- All elements a reporting entity is legally required to have under the PCMLTFA and associated regulations, to ensure that the organization meets all reporting, record keeping, client identification, and know-your-client requirements.

CRO- Chief Risk Officer

An executive in charge of managing risks to the company that can be categorized into three groups: technical, regulatory, and competitive.

CRS- Common Reporting Standard

The global standard for the automatic exchange of financial account information

CTR- Currency Transaction Reporting

A bank form used in the US to help prevent instances of money laundering. This is a report that U.S. financial institutions are required to file with FinCEN for each deposit, withdrawal, exchange of currency, or other payment or transfer, by, through, or to the financial institution which involves a transaction in currency of more than $10,000.

Currency Smuggling- The illicit movement of large quantities of cash across borders, often into countries without strict banking secrecy, poor exchange controls or poor anti-money laundering legislation.

CVC- Convertible Virtual Currencies

An unregulated digital currency that can be used as a substitute for real and legally recognized currency as defined by the US regulator FinCen in a guidance release May 9, 2020

D

Delisting- When a sanctions target is removed from a sanctions list after the restrictions imposed on them have been lifted

Designated Categories of Offense- Crimes the FATF considers to be money-laundering predicate offenses.

DNFBP- Designated Non-Financial Businesses & Professions

Non-financial businesses and professions designated by the FATF that require extra vigilance, including: casinos, real estate agents, dealers in precious metals, dealers in precious stones, lawyers, notaries, other independent legal professionals and accountants, trusts and company service providers.

DPL- Denied Persons List

A list, published by the Bureau of Industry and Security (BIS), of individuals, entities, or companies that have been denied export privileges, generally due to Export Administration Act violations.

E

EAR- Export Administration Regulations

A set of regulations administered and enforced by the Bureau of Industry and Security, that specifically apply to physical goods or commodities subject to export controls.

EDD- Enhanced Due Diligence

A KYC process that involves the enhanced review of high-risk individuals or companies.

Effectiveness Review- An evaluation conducted at a minimum of every 24 months to test the effectiveness of an organization’s AML compliance program: policies and procedures, risk assessment and ongoing training program. KYC2020 AML Compliance Toolkit can help you manage your Effectiveness Review for FREE.

EIDV- Electronic Identification and Verification

The verification of a person’s identity remotely through digital means

Electronic Funds Transfer Report (Canada)- A report submitted to FINTRAC upon a transmission of instructions for the transfer of CAD 10,000 or more out of or into Canada in a single transaction or in two or more transactions totaling CAD 10,000 or more made within 24 consecutive hours by or on behalf of the same individual or entity.

Embezzlement- The act of taking or misappropriating funds entrusted by an employer or organization for illegal personal use.

Event-Triggered Monitoring- An internal control used to mitigate sanctions risks. Whenever relevant information about an existing customer changes, an interim review of information is conducted prior to a full scheduled review.

Exclusions List- A list of names or entries that are to be excluded from the sanctions screening process.

F

F2R- A secure application accessed over the internet that lets reporting entities manually enter and correct reports, such as STRs and LCTRs, individually (Canada)

False Negative- A hit that is flagged during the screening process as a possible alert, but is subsequently dismissed, yet there is actually a missed match on a sanctions list, or screening activity that is inappropriately calibrated in such a way that the suspicious activity itself is missed.  AI based decision systems can help eliminate false positives and speed up customer onboarding and ongoing monitoring.

False Positive- A hit flagged during the screening process as a possible alert, but upon review is found to not be a match to a target named on a sanctions list.

FATCA- The Foreign Account Tax Compliance Act

Passed as part of the HIRE Act, generally requires that foreign financial Institutions and certain other non-financial foreign entities report on the foreign assets held by their U.S. account holders or be subject to payment withholding.

FBAR- Foreign Bank and Financial Accounts

Under the Bank Secrecy Act, foreign financial accounts, such as bank accounts, brokerage accounts and mutual funds, must be reported to the Treasury Department and reporting institutions must keep certain records of those accounts.

FCCR- Financial Crime Country Risk

FFI- Foreign Financial Institution

A Foreign Financial Institution that has registered and agreed to adhere to the requirements set forth by FATCA.

FMSB- Foreign money services business (Canada)

A money services business, that operates outside of Canada, that does not operate a physical location in Canada, yet directs MSB services to persons or entities in Canada.

G

GRC- Governance, Risk & Compliance

An organization’s approach across these three practices: governance, risk management, and compliance

Gatekeepers- Professionals such as lawyers, notaries, accountants, investment advisors, and trust and company service providers who assist in transactions involving the movement of money, and are deemed to have a particular role in identifying, preventing and reporting money laundering.

Greylist- A list of entities that present a higher risk for causing a negative impact to an organization.

H

HIO (Canada)- Head of an International Organization

HNWI- High-net-worth individual

A person with more than US$1 million in liquid assets

I

IBC- International Business Company

An offshore company that is registered in a tax neutral setting

ID&V- Identification & Verification

Inherent Risk- The level of sanctions risks along four categories: customers, products and services, countries, and delivery channels. Inherent risk examines the likelihood and impact of noncompliance prior to considering any controls within the risk management processes.

Internal Evasion- When an organization’s employee commit or facilitate a sanctions violation.

IVTS- Informal Value Transfer System

Any system, mechanism, or network of individuals that receives money for the purpose of making the funds or an equivalent value payable to a third party in another geographic location.

K

KYC- Know Your Customer

AML policies and procedures a financial services institution or MSB must act on to verify the identity, suitability, and risks involved with maintaining a business relationship with a particular customer.

KYE- Know Your Employee

AML policies and procedures for acquiring a better knowledge and understanding of an organization’s employees for the purpose of detecting conflicts of interests, money laundering, past criminal activity and suspicious activity.

KYM- Know Your Member

Common in the Credit Union space where customers are members of the Credit Union

L

LCT- Large Cash Transaction (Canada)

Any cash transactions valued at CAD 10,000 or more (or the equivalent in a foreign currency) that take place within the same 24 hour period for the same customer.

LCTR- Large Cash Transaction Report (Canada)

A report that is filed with FINTRAC when a large cash transaction has taken place.

Listed Person (Canada)- Anyone on a list published in the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism issued under the United Nations Act. You can consult that list of names via the Office of the Superintendent of Financial Institutions.

A listed person includes an individual, a corporation, a trust, a partnership or fund or an unincorporated association or organization that is believed to:

• have carried out, attempted to carry out, participated in or facilitated a terrorist activity; or
• be controlled directly or indirectly by, be acting on behalf of, at the direction of, or in association with any individual or entity conducting any of the above activities.

M

Mandatory Sanctions Lists- International sanctions lists, such as those including targets designated by the United Nations Security Council Resolutions (UNSCR), which must be screened against.

Ministerial Directives (Canada)- The authority to issue directives that require reporting entities to apply measures (which this document calls “countermeasures”) to transactions originating from or destined to designated foreign jurisdictions and entities; and the authority to recommend that the Governor-in-Council issue regulations limiting or prohibiting reporting entities from entering into a financial transaction originating from or destined to designated foreign jurisdictions and entities.

MLRO- Money Laundering Reporting Officer (Canada)

The individual who manages an organization’s AML systems and acts as a focal point for related inquiries.

ML- Money Laundering

The process of taking money obtained by committing a crime and disguising the source to make it appear legitimate

Money Mule- A person who transfers money acquired illegally on behalf of others.

MSB- Money Service Business

A business that transmits or converts money, foreign exchange, remittance and/or that issues or redeems monetary instruments

N

Name Screening- The process of matching an internal record or batch of records against sanctioned list records, either manually or through an automated screening tool.

O

OFC- An offshore Financial Center

A country or jurisdiction that provides financial services to nonresidents on a scale that is incommensurate with the size and the financing of its domestic economy

Ongoing Monitoring- An AML control process that involves monitoring high-risk customers on a periodic basis based on their risk profile.

Operational Risk– The risk of direct or indirect loss of operations due to inadequate or failed internal processes, people or systems, or as a result of external events.

P

Partial Match- When an entity being screened is similar to a sanctioned entity and potentially shares identifying factors, such as date of birth. Partial matches require further human intervention to determine whether the match is a true match.

PEP- Politically Exposed Person

An individual who, through their prominent position or influence, is more susceptible to bribery or corruption and thus presents a higher risk as a customer

PEDP- Politically Exposed Domestic Person (Canada)

PEFP- Politically Exposed Foreign Person (Canada)

PIN- Purpose and Intended Nature [of a Business Relationship] (Canada)

A record that documents the purpose and intended nature of a business relationship, and includes information that would help an organization anticipate the types of transactions and activities the client may conduct.

R

Reasonable Measures (Canada)- Steps organizations must take to collect certain information but it is not mandatory, such as, asking the client, conducting open source searches, or consulting commercially available information.

Red Flag- A warning signal that should bring attention to a potentially suspicious situation, transaction or activity.

Reputational Risk- The potential that adverse publicity involving a financial institution’s business practices and associations, whether accurate or not, will cause a loss of confidence in the integrity of the institution.

Risk Appetite- The amount of risk that an organization is comfortable accepting in the pursuit of value or opportunity

Risk Assessment- A tool that allows an organization to identify and assess its potential risks and vulnerabilities.  Try the KYC2020 Risk Assessment tool for FREE

RBA- Risk-Based Approach

The process of assessing of the various risks associated with different types of businesses, clients, accounts and transactions in order to maximize the effectiveness of an AML/CFT regime.

RCA- Relative or Close Associate

Sometimes referred to as “PEPs by association,” RCAs are individuals related to or who have a close connection to a PEP, such as spouses, friends and business partners.

RGS- Reasonable Grounds to Suspect (Canada)

A suspicion of corruption that is not biased or prejudiced, but is based on an assessment of facts, context, and AML/CTF indicators

Reporting Entity- Entities regulated by the PCMLTFA that must report certain transactions to the FINTRAC, such as accountants, life insurance companies, brokers and agents, MSBs, real estate brokers and securities dealers (Canada)

S

Safe Harbor-  A legal provision to reduce or eliminate legal or regulatory liability for financial institutions, and their directors, officers and employees, if they report their suspicions in good faith to the Financial Investigation Unit (FIU).

Sanctions- Restrictive measures taken by individual countries, regimes, or coalitions with the goal of provoking a change in behavior or policy. Sanctions can restrict trade, financial transactions, diplomatic relations, and movement.

Sanctions List- A document or database listing individuals, legal entities, and countries with whom it is illegal to do business.

Sanctions Screening- Sanctions screening is a process employed within financial institutions to detect, prevent and manage sanctions risk. It is conducted via automated screening tools and manual processes.

SAR- Suspicious Activity Report

A report made by a financial institution about suspicious activity.

SCO- Sanctions Compliance Officer

The individual responsible for oversight of the sanctions compliance program. The SCO conducts ongoing monitoring for sanctions compliance, including sample testing and a review of exception reports, to enable the escalation of identified noncompliance or other issues to senior management.

SCP- Sanctions Compliance Program

A system designed to assist financial institutions in their sanctions compliance and to manage their sanctions risk.

SDD- Sanctions Due Diligence

A process that focuses on the risks specific to sanctions, while taking into account governance and risk assessment

SDN List- The Specially Designated Nationals and Blocked Persons List

A United States government sanctions/embargo measure targeting U.S.-designated terrorists, officials and beneficiaries of certain authoritarian regimes, and international criminals

SIE- Special Interest Entity

SIEs are high-risk organizations that are involved in criminal activities or are suspected of being involved in criminal activities

SIP- Special Interest Person

High risk individuals similar to PEPs, who have a history of involvement or alleged involvement in crime

Shell Bank- A foreign financial institution that does not have a physical presence in a foreign country.

Smurfing- A common money laundering method involving multiple individuals and/or multiple transactions for making cash deposits, buying monetary instruments or bank drafts in amounts under the reporting threshold

SRB or SRO- Self-Regulatory Body or Organisation (Canada)

A body that represents a profession (e.g. lawyers, notaries, other independent legal professionals or accountants), and which is made up of members from the profession and has the role of performing certain supervisory/monitoring functions of standards that are maintained by the professions.

Structuring- Illegal act of splitting cash deposits or withdrawals into smaller amounts, or purchasing monetary instruments, to stay under a currency reporting threshold.

Suspicious Activity– Unusual or questionable customer activity that may be related to a money laundering or other criminal offense, or to the financing of a terrorist activity

T

Target Match- Identification of an individual or entity as matching one named on a sanctions list, also referred to as a true match

Tax Haven- Countries that offer special tax incentives or tax avoidance to foreign investors and depositors

Terrorist Financing- The manner by which terrorists fund their operations in order to perform acts of terrorism

TMP- Transaction Monitoring and Filtering Program

A system required of financial institutions to monitor transactions after their execution for compliance with the Bank Secrecy Act and AML laws and regulations.

TBML- Trade-Based Money Laundering

A financial crime that involves hiding the proceeds of a crime by moving the funds to a specific destination via trade transactions

Third-Party Database- A database made up of data collected by an entity that does not have a direct relationship with the user. Examples of third-party databases include rating agencies, stock exchanges, and legal databases.

U

UBO- Ultimate Beneficial Owner

The person or entity that is the ultimate beneficiary when an institution initiates a transaction.

USA PATRIOT Act- The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001. The historic legislation brought about significant changes to the field of AML, including more than 50 amendments to the Bank Secrecy Act.

UTR- Unusual Transaction Report (Canada)

An internal form that is used to record the details of any transactions (attempted or completed) that is suspected of being related to money laundering or terrorist financing.

V

VIR- Voluntary Information Report

A report that is filed, by non-reporting entities, when there is suspicion of money laundering or terrorist financing.

W

Whitelist- A list of individuals and entities that trigger an alert by an AST, but who are later cleared as not to being a match.

Willful Blindness- A legal principle defined as the deliberate avoidance of knowledge of the facts or purposeful indifference to a money laundering transaction.

AML Organizations, Associations and Regulatory Bodies

ACAMS- Association of Certified Anti-Money Laundering Specialists

The largest international membership organization dedicated to advancing the professional knowledge, skills and experience of those dedicated to the detection and prevention of money laundering around the world, and to promote the development and implementation of sound anti-money laundering policies and procedures

ACFCS- Association of Certified Financial Crime Specialists

A leading association and provider of practical tools and knowledge to help professionals improve results in financial crime detection and prevention.

BCBS- Basel Committee on Banking Supervision

The Basel Committee on Banking Supervision is the primary global standard setter for the prudential regulation of banks and provides a forum for regular cooperation on banking supervisory matters.

BIS- The Bureau of Industry and Security

An agency of the United States Department of Commerce that deals with issues involving national security and high technology

CAFC- Canadian Anti-Fraud Centre

The Canadian Anti-Fraud Centre collects information on fraud and identity theft. They provide information on past and current scams affecting Canadians.

EGFIU- Egmont Group of Financial Intelligence Units

An international organization that facilitates cooperation and intelligence sharing between national financial intelligence units to investigate and prevent money laundering and terrorist financing.

FATF- The Financial Action Task Force on Money Laundering

An intergovernmental organization founded on the initiative of the G7 to develop policies to combat money laundering.

FinCEN- The Financial Crimes Enforcement Network

A bureau of the United States Department of the Treasury that collects and analyzes information about financial transactions in order to combat domestic and international money laundering, terrorist financing, and other financial crimes

FIRA- Financial Industry Regulatory Authority

Dedicated to protecting investors and safeguarding market integrity in a manner that facilitates vibrant capital markets.

FIU- Financial Intelligence Unit

A central agency that is responsible for receiving, analyzing, and transmitting disclosures on suspicious transactions to the relevant authorities.

FINTRAC- Financial Transactions and Reports Analysis Centre of Canada

Canada’s financial intelligence unit and regulator for AML and CTF

IIROC- Investment Industry Regulatory Organization of Canada

A non-profit, national self-regulatory organization. Established through the merger of the Investment Dealers Association of Canada and Market Regulation Services Inc. on June 1, 2008, IIROC oversees all investment dealers and trading activity on debt and equity markets in Canada.

OFAC- Office of Foreign Asset Control

Part of the U.S. Department of the Treasury, OFAC administers and enforces economic and trade sanctions based on US foreign policy and national security goals.

OSFI- Office of the Superintendent of Financial Institutions

The primary agency regulating financial institutions in Canada

Wolfsberg Group- An association of thirteen global financial institutions that have worked to develop global anti-money laundering guidelines for international private banks

This glossary of AML terms and acronyms as well as regulatory bodies and organizations, like the field of AML/CTF, will evolve over the coming months and years, so be sure to check back for updates.

Alternatively, if you are looking for an even more comprehensive glossary of AML acronyms, definitions and industry jargon, head over here.