Whether you’re new to money laundering prevention or have been involved in it for many years you’ll still likely come across an acronym you’re a little unsure of. We’ve put together this handy reference guide to help you unearth the many mysteries of this specialist subject.
Over the past few years, anti-money laundering regulation has increased in scope and size and with that, a raft of new acronyms have emerged.
4MLD – The fourth money laundering directive
The Fourth Money Laundering Directive was first introduced in 2015 by the European Union and introduced a raft of new legislation to tackle money laundering and terrorist financing.
5MLD – The fifth money laundering directive
The Fifth Money Laundering Directive was introduced in January 2020 and extended the requirements to address changes within the market that could be exploited by criminals and terrorists.
AML – Anti-money laundering
Anti-money laundering is the term used to describe any activity/process which is designed to prevent illegally gained money from entering a legitimate financial system. It is quite a wide umbrella term and covers everything from CDD to source of funds analysis.
BOOM – Beneficial Owners, Officers and Managers
Businesses that fall under AML supervision must go through a rigorous due diligence that includes an assessment of all Beneficial Owners, Officers and Managers.
CDD – Customer Due Diligence
Part 3 of the MLR 2017 is dedicated to Customer Due Diligence and the steps a firm should take to review their customer and business relationship to minimise the risk of money laundering.
CTF – Counter-terrorism financing
Alongside preventing money laundering, regulated firms are also responsible for ensuring they are preventing the financing of terrorist activity through similar checks and the monitoring of their clients.
EDD – Enhanced Due Diligence
Enhanced Due Diligence details additional steps businesses must take when dealing with high-risk individuals, businesses or transactions.
FATF – Financial Action Task Force
The FATF is an intergovernmental organisation founded in 1989 to investigate and develop policies to combat money laundering. Recommendations made by FAFT have strongly influenced and guided much of the AML legislation in the UK and the European Union.
GDPR – General Data Protection Regulation
The General Data Protection Regulation specifies how firms should process personal data. While AML regulation often requires processing and storing personal data, GDPR requirements must also be taken into consideration.
Greylist countries – If a country or jurisdiction is on a FATF greylist it means they currently under review or further observation as their AML legislation and processes are consider adequate. Countries on the greylist are often in consultation with FATF to improve their legislation but should dealt with, with due care.
HMRC – Her Majesty’s Revenue and Customs
Mainly known as the governmental departmental with the responsibility for the collection of taxes, they also act as the supervisory authority for Estate Agents AML regulations.
IDSP – Identity Service Provider
Under the UK DIAFT a company that provides digital identity verification technology will be known as an Identity Service Provider.
IDV / VOI – Identity Verification / Verification of Identity
This is the process of verifying someone is who they say they are. IDV technology can aid in this process by using biometric facial recognition and documentation verification to confirm someone’s ID. Other verified third-party data such as the electoral roll and credit reference agencies, can also be used to add an additional layer of due diligence.
JMLSG – Joint Money Laundering Steering Group
The JMLSG is a private sector body that sets out guidance for the financial sector firms whose trade associations are part of the JMLSG. While the guidance is not legally binding it is HM Treasury approved and has influenced changes to legislation.
KYC / eKYC – Know your Customer / electronic Know Your Customer
KYC is a broad term that embodies a range of activities including customer due diligence across not just anti-money laundering and terrorism financing but other criminal activity. KYC requires ongoing monitoring of a customer to identify any suspicious activity such as changes in ownership or a significant increase in transactions that would require a change in due diligence.
KYCC – Know Your Customer’s Customer
Recently, there has been a lot of emphasis on regulated firms to not only consider who their customers are but also what activities they undertake. Regulated firms are being asked to examine whether their customers deal with high-risk customers or could be part of a web of companies designed to shield the identities of illegitimate firms.
MLR 2017 – The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017
The MLR 2017 came into force in June 2017 and sets out what actions regulated and professional entities must undertake to prevent and tackle money laundering in the UK.
MLRO – Money Laundering Regulations Officer
The MLRO ultimately responsible for money-laundering related activity such as setting policies / procedures and working with regulatory authorities.
NCA – National Crime Agency
The NCA is a UK’s specialist agency set up to tackle organised crime such as human trafficking, drug trade and economic crime. The NCA deals with all SARs and will investigate money laundering claims.
OFC – Offshore Financial Centres
OFCs are countries or jurisdictions that offer financial services to individuals or firms who originate outside of their territory on a scale that is far beyond their domestic limits. Colloquially they are usually referred to as tax havens and are not all necessarily offshore such as Delaware or South Dakota.
OCGs – Organised Crime Groups
The Crown Prosecution Service defines an OCG as three or more people who agree to act together to carry out criminal activity on a continued basis. Colloquially, influenced heavily by the media these groups are referred to the mafia or the mob, though this is American nickname for certain OCGs.
PEPs – Politically Exposed Persons
As part of a firm’s CDD, they may have to identify whether someone is regarded as a politically exposed person and therefore presents a higher risk to the firm. A Politically Exposed Person usually works within a position of authority and/or is closely related to someone who does. There is no single PEPs list, with each country holding their own databases with varying degrees of data quality.
POCA – Proceeds of Crime Act 2022
The Proceeds of Crime Act governs how law enforcement can investigate and prosecute individuals believed to have benefited from criminal activity and money laundering. The act does not just target those that take part in and benefit directly from criminal activity but also those that support and enable money laundering to take place.
PSC – Person(s) with Significant Control
Under legislation introduced in 2016, all companies registered in the UK must identify and inform Companies House of any individual or firm that holds a controlling stake in the business. This legislation was introduced to aid in the transparency of business ownership and allow more thorough due diligence.
RCA – Relative/Close Associate
This is someone related to or closely associated with a PEP and requires enhanced due diligence to be applied.
SARs – Suspicious Activity Reports
If regulated entities such as estate agents and solicitors have a suspicion that a client or supplier may be involved in money laundering or other financial crimes, they must submit a Suspicious Activity Report to the National Crime Agency. Failure to disclose a suspicion may result in prosecution under section 330 of POCA if you work within a regulated sector.
SoF – Source of Funds
Due diligence is required to identify the source of funds used for large purchases such as property which could include proceeds from a property sale, savings, or a gift. Depending on the source of funds further checks may be required to satisfy sufficient due diligence has taken place.
SoW – Source of Wealth
SoW is considered an element of enhanced due diligence that explores how an individual accumulated their wealth overall rather than specifically in relation to the transaction. For example, if the Source of Funds reveals that the individual is using £70,000 for their personal savings, a Source of Wealth check would challenge how they managed to save that amount in the first place.
SDD – Simplified Due Diligence
A firm can conduct simplified due diligence when dealing with a low-risk individual, business and/or transaction such as an AML-regulated firm or a public body.
TBML – Trade Based Money Laundering
TMBL is a method of money laundering that utilises the movement of goods to disguise the integration of illicit funds. This can be achieved by over or under quoting the price, quantity or quality of goods masking the transfer of illegitimate funds moving between organisations.
UBO – Ultimate Beneficial Owner
UBO refers to the person(s) or entities who are the true owner(s) of a business; owning more than 25% of company shares. While a PSC may control the specified registered entity the PSC itself may be controlled by another entity. Identifying a UBO can be a difficult task with a web of ownership spanning multiple countries and registrars.
UK DIATF – UK Digital Identity & Attributes Trust Framework
The UK DIATF is a new, developing standard to define how identity service providers need to operate and what standards they must meet in order to protect the consumer.
UWO – Unexplained Wealth Orders are vital tool used by the NCA to help tackle anti-money laundering. Essentially, it gives the power to place assets under control until the owner is able to sufficiently prove how obtained the wealth for said assets. Since their inception the NCA have utilised UWOs to take control of assets with a combined value of £143 million.