Glossary

Financial Crime Fighter’s Acronyms and Definitions

Looking to learn frequently used lingo associated to financial crime risk management and compliance? Whether you’re a crime fighter working in a financial institution, managing regulatory compliance, or simply want to understand common fraud and anti-money laundering terms, you’re at the right place. This comprehensive glossary can serve as your go-to source.

Below is a list of frequently used acronyms and terms, along with their definitions. Financial crime is a dynamic industry, so we’re adding new definitions regularly. Bookmark this page to check out new terms.

A

Account takeover (ATO) - Account takeover, one of the fastest-growing cybersecurity threats today, is a type of identity theft where a victim's account access is compromised by a malicious third party who takes over account control online.

Anti money laundering (AML) - Anti money laundering is defined as the rules, laws, regulations, and procedures aimed at discovering illicit funds disguised as legitimate income.

Application fraud - Application fraud is a type of identity theft where a criminal applies for credit cards, bank accounts, loans, or tax rebates using a stolen identity.

Asset misappropriation - Asset misappropriation is when an employee, or other person entrusted to manage assets and interests of a company, steals assets from a business. Common asset misappropriation schemes are skimming, which is when cash is stolen before it enters the company's accounting system, offering false discounts to customers and pocketing excess funds, or theft of goods that could be anything from office supplies to expensive equipment.

Automated Clearing House (ACH) - The automated clearing house (ACH), run by Nacha (formerly known as the National Automated Clearinghouse Association), is an electronic funds-transfer system that facilitates financial transactions in the U.S.

B

Bank Secrecy Act (BSA) - The Bank Secrecy Act (BSA), also known as the Currency and Foreign Transaction Reporting Act of 1970, required banks to keep certain records and report large currency transactions, but over time, it's been amended to include requirements to report suspicious activity to detect and deter illicit finance, track criminal activity, and secure the financial system's safety.

Batch Processing - Batch processing is when transactions are processed in a group or batch without user interaction. This makes batch processing different from transaction processing, which requires a user processing a transaction one at a time. Unlike real-time processes that must occur immediately, administrators can postpone batch processes.

Batch Screening - The ability to screen multiple customers in one batch, ideally having the ability to screen a customer base using different search parameters based on the risks they pose without increasing false positives or misidentifying risk.

Beneficial Ownership and Ultimate Beneficial Owner (UBO) - A beneficial owner, including ultimate beneficial owner (UBO), is a person or group of individuals with the power to vote or influence decision-making regarding a security (such as shares of a company.) They enjoy the benefits of ownership, though the title to their property is often in another name.

Blacklist - In finance, blacklist is a list of people, organizations or countries, either individuals or groups, who may have defaulted their debts after a series of nonpayment, making it more difficult for them to apply for financial services. Banks or financial institutions will deny credit and loans to anyone blacklisted.

Business Email Compromise (BEC) fraud - Business email compromise (BEC) is a type of email cybercrime scam where criminals gain access to critical business information or take money through email-based fraud. A common scam is "CEO fraud" where an employee receives a fake email from the CEO requesting funds be transferred to an account immediately.

C

Cardholder - The person who has a credit or debit card is considered the cardholder.

Cash-Intensive Business - Businesses that receive a significant amount of receipts in cash, such as a restaurant, grocery, or convenience store, is a cash-intensive business.

Compliance - For financial institutions, compliance is following a set of internal and external regulatory rules at national and global levels to stop crimes, avoid penalties, and maintain business reputation.

Compliance risk - Compliance risk is the level of threat posed to a company's earning or capital due to violation or nonconformance with laws, regulations, or prescribed practices, which can result in fines, payment for damages, and voided contracts.

Conflicts of Interest - A conflict of interest occurs when an individual or entity has a clash between self-serving interests and their professional duties or responsibilities, which can affect judgment and influence decision-making. Alternately, it is incompatible concerns and aims between two different parties, such as elected officials and corporate lobbyists.

Control Effectiveness - Sometimes referred to as preventative controls, the term control effectiveness (CE) is the total effectiveness of all controls acting on a particular risk, including specific controls affecting the likelihood of the risk.

Correspondent Banking - Correspondent banking allow domestic and foreign banks in different countries to provide payment services to each other, making it easier to move funds. Correspondent banks are a liaison between two respondent banks who may not have a formal relationship with one another.

Currency Transaction Report (CTR) - The currency transaction report, or CTR, is a mandatory report that U.S. financial institutions must file with Financial Crimes Enforcement Network (FinCEN) that outlines deposits, withdrawals, exchange of currency, or other payment or transfer, by, though or to the financial institution when the transaction exceeds more than $10,000.

Customer due diligence (CDD) - Customer due diligence (CDD) involves doing a series of background checks and screening processes to verify a customer's identity and create a risk profile.

Customer fraud - Customer fraud is when fraudsters pose as customers and deceive a business to commit a financial crime, such as using forged currency or another person's payment card to buy goods and services or to get a line of credit they use without intending to pay back.

Customer Relationship - Customer relationship is the end-to-end process that includes all interactions between a business and its customers.

D

Designated Categories of Offense - Designated categories of offence include participation in organized crime, racketeering, terrorism, human or wildlife trafficking, narcotics or other illicit activity that violates the laws of governments.

Detection Management Capabilities - The ability to manage all financial traffic from a single consolidated interface; a central monitoring point for compliance officers and auditors.

Domestic Transfer - A domestic transfer is any wire transfer where both the originator and beneficiary are located in the same jurisdiction at the time of transfer initiation.

Dual-Use Goods - Dual-use goods are heavily regulated items that can be use for both civilian and military applications.

E

Electronic Funds Transfer (EFT) - Any transfer of funds other than a transaction from a paper instrument such as check or draft that is initiated through an electronic terminal, phone, computer, or magnetic tape and authorizes a financial institution to debit or credit an account is an electronic funds transfer.

Electronic Money (E-Money) - Electronic money, or E-money, is an electronic payment product stored in banking computer systems that is backed by fiat currency (unlike cryptocurrency) that is used in place of physical currency, such as PayPal or Square.

Enhanced Due Diligence (EDD) - Enhanced due diligence is a holistic, risk-based monitoring process that exposes third-party risks across Political, Economic, Socio-cultural, Technological, Legal and Environmental (PESTLE) categories.

F

FedNow - FedNow is the instant payment service that enables financial institutions of any size in the U.S. to provide safe and efficient instant payment services in real time, 24/7 year-round.

Fiat money - Fiat money is a national currency whose value is not from physical commodities like gold or silver, rather, it is derived from a country's promise to pay it back.

Financial Action Task Force (FATF) - The Financial Action Task Force (FATF) is an inter-governmental policymaking body that combats money laundering and the financing of terrorism by establishing international standards, and developing and promoting policies on nation and international levels.

Financial Intelligence Unit (FIU) - A financial intelligence unit is an investigative unit established by individual countries that centralizes the gathering of suspicious activity reports related to financial crime activity that's shared with relevant government agencies.

Financial Statement Fraud - Financial statement fraud is when an individual deliberately alters a company's financial statements to mislead investors regarding a company's financial position, performance, or cash flow, also known as "cooking the books."

Fraud detection - Fraud detection is the act of identifying actual or attempted fraud within an organization.

Fraud management - Fraud management includes the methods used to detect and prevent fraud, from identifying where fraud can occur and assessing risk tolerance to deploying systems to mitigate fraudulent activities.

Fraud prevention - Fraud prevention is a firm's process or activities they implement to deter, detect, and resolve fraudulent incidents.

G

Gatekeepers - In financial context, a gatekeeper is a specialist advisor who facilitates financing solutions between businesses and investors.

General Data Protection Regulation (GDPR) - The General Data Protection Regulation (GDPR) is a law approved by the European Union (EU) that sets guidelines for the collection and processing of personal information. It establishes data privacy as a human right (including the right to access, correct, erase, or port personal data), baseline requirements for data protection, and provides standardized application of data protection rules across the EU.

Governance - Governance is the way a company collects, manages, monitors, and controls financial information, including how to track transactions, manage performance and control data, compliance, operations, and disclosures.

I

Identity fraud and identity theft - Identity fraud is using stolen information to conduct fraudulent transactions. Identity theft is the act of stealing personal, private, or financial information to construct the fake identity subsequently used to commit fraud.

Integration phase (of AML) - The integration stage is the final step of a money laundering process where money from illicit activities is reintroduced to the legal economy.

International Monetary Fund (IMF) - The international monetary fund (IMF) is an international financial institution consisting of 190 countries and major financial agency of the United Nations that's headquartered in Washington D.C. It's mission is to foster global monetary cooperation, increase financial stability, facilitate trade, and reduce poverty.

K

Know Your Customer (KYC) - Know your customer (KYC) is a set of guidelines firms are required to follow that involve verifying the identity, suitability, and risks involved with maintaining a business relationship with a customer.

Know Your Employee (KYE) - Know your employee (KYE) is a set of actions where management determines an employee's background to identify if their history relates to money laundering activities.

L

Layering phase (of AML) - In this second stage of money laundering, the layering phase, money illicitly obtained is moved and mixed with legitimate funds, hiding its origin.

Limited Liability Company (LLC) - A common business structure in the U.S., a limited liability company, or LLC, protects owners from personal responsibility for its debts or liabilities. It's easier to set up than a corporation while providing more flexibility and protection for its investors.

M

Memorandum of Understanding (MOU) - A memorandum of understanding, or MOU, is a formal document outlining an agreement between two or more parties.

Mirror Trading - Mirror trading is a type of automated trade that removes emotion from trading and replicates or reflects the strategy of a specific trader, copying (e.g., mirroring) their trading strategies.

Monetary Instruments - Monetary instruments, such as stocks, bonds, debentures, treasury bills, checks and money orders, are securities and negotiable instruments in bearer form where ownership is conveyed via physical possession.

Money Laundering - Money laundering is a financial crime and illegal process of making money generated by illegal activity appear to come from a legitimate source, so "dirty" money is made "clean" in the money laundering process.

Money Laundering Reporting Officer (MLRO) - The money laundering reporting officer (MLRO) oversees a financial institution's compliance with Financial Conduct Authority (FCA) rules on money laundering.

Money mules - Money mules are people who knowingly or unknowingly transfer or move money illegally on behalf of someone else. Money mules are commonly use in money laundering.

Money Order - A money services business (MSB) is an organization that transmits or converts money, such as currency exchange, check cashing, issuing traveler's check or wiring money.

Money Services Business (MSB) - Monitoring in the financial sector is periodic tracking of an activity's progress by gathering and analyzing data collected on a daily, weekly, monthly, quarterly, or annual basis.

Monitoring - Monitoring in the financial sector is periodic tracking of an activity's progress by gathering and analyzing data collected on a daily, weekly, monthly, quarterly, or annual basis.

N

Nested Account - Nested accounts are foreign bank accounts residing within another foreign bank account and tied to a corresponding U.S. account. Nesting is a common practice, for example, a U.S. bank may have an established correspondent account with a service provider foreign bank.

Non-Governmental Organization (NGO) - A non-governmental organization (NGO) is a legally constituted organization that functions independently of any government, usually a non-profit entity such as civil society organizations.

O

Offshore - Offshore is a common term used in banking and financial sectors to indicate a location outside of one's home country that might have different regulations to meet, generally an island nation.

Operational Risk - Operational risk is the summary of uncertainties and hazards a company faces when conducting daily business activities.

Originator - The primary source of financing that can be a person or entity, for example, a bank is the originator of a mortgage loan.

P

Payment fraud - Payment fraud is an illegal transaction where victims are manipulated into sharing personal payment information or it's stolen, allowing criminals control to divert money or payments.

Payment Screening - Unlike name screening, payment screening is focused on screening current customer payment messages before processing them using predefined templates, codes, and acronyms to describe specific information.

Phishing scams - Phishing is a type of social engineering attack where a criminal deceives targets into revealing information, such as passwords and credit card numbers, to steal or damage sensitive data. There are several types of this scam: spear phishing that targets one person in a business, malware phishing where scammers plant malware disguised as a trustworthy attachment like a bank statement in an email, and smishing, where a scammer sends a text message that looks like it’s from a trusted source, such as FedEx or Amazon, to get information.

Placement phase (of AML) - The placement phase in anti-money laundering- (AML) is the first stage of money laundering where funds from a crime are entered into a legitimate financial system.

Politically Exposed Person (PEP) - In financial regulation, a politically exposed person (PEP) is someone who is entrusted with a high-profile public function that represents a higher risk, as they could be potentially involved in bribery and corruption due to their position or influence that they have. Examples are elected officials or world leaders.

Ponzi Scheme - Named after 1920s businessman Charles Ponzi, this form of investment fraud targets investors who are led to believe in the success of a nonexistent enterprise offering the promise of quick returns and low risk, where new income is marked as profit from legitimate transactions. New funds are used to pay original investors returns to delay discovery. Ponzi schemes can run undetected for years until a large numbers of investors attempt to cash out or the criminal disappears with funds.

Predicate Crimes - In financial context, predicate crimes are offenses that generate monetary proceeds and are part of a larger crime. An example is money laundering to finance terrorist activities.

Promotional abuse - Promotional abuse is a type of online fraud where customers take advantage of promotional offers from businesses, such as a sign-up bonus where a customer uses multiple accounts to get multiple bonuses, referral bonus where they refer 'friends' (themselves) many times to receive the awards, and vouchers where fraudsters break the simple discount code to receive multiple discounts.

R

Real Time Gross Settlement Systems (RTGS) - Real-time gross settlement (RTGS) systems are specialist funds transfer systems where money or securities transfers take place from one bank to any other bank in real-time and on a gross basis, so settled on a one-to-one basis without a wait time or bundling with any other transaction.

Real-Time processing - Real-time processing is data processing occurring as a user inputs a command or data.

Red Flag - Generally, a red flags is a method of identifying or drawing attention to a problem that must be dealt with, but in anti-money laundering terminology, a red flag is a warning sign that indicates a potentially suspicious or risky transaction or activity.

Reputational Risk - Anything that threatens a company's public perception, their good name or standing, is considered reputational risk. Examples include negative publicity, data breaches, exposed unsafe practices or policies, or other disclosures that can result in fines or penalties, profit loss, or customer churn.

Risk Appetite - The type and amount of risk a person or an organization is willing to pursue, retain, or take is risk appetite.

Risk Assessment - Risk assessment is a systematic process to evaluate the risks involved with a project activity or undertaking.

Risk-Based Approach - A risk-based approach is identifying and prioritizing risks to your organization to inform compliance controls, policies, and procedures.

S

Sanctions - Sanctions are penalties for disobeying a law or rule. Financial sanctions are applied by governments to restrict or prohibit trade with companies or individuals who are engaged in breaches of international law, human rights abuses, or other forms of crime such as cyberattacks.

Sanctions Compliance - Sanctions compliance is adhering to sanctions rules by knowing who your company conducts business with and avoiding selling goods and services to anyone who is sanctioned.

Sanctions List - Sanctions Lists are official government lists of persons and entities subject to restrictive or comprehensive measures under international and domestic sanctions regimes. These lists are updated regularly to address the ever-changing sanctions landscape, and financial institutions are required to check them to avoid conducting business with sanctioned people or entities.

Shell Bank - A shell bank is a domestic or foreign bank that doesn't have a physical address or location in a country where it is incorporated.

Shell Company - A shell corporation is a type of corporation that doesn’t have active business operations or significant assets. Shell companies are not illegal, but they can be used to disguise business ownership from law enforcement or the public.

SIM swap scam - The SIM swap scam is an account takeover fraud also known as port-out scam, SIM splitting, Smishing and simjacking, and SIM swapping. This scam targets weaknesses in two-factor authentication or two-step verification processes where the second step is a text message or call to a mobile phone.

Social engineering - A type of fraud where the perpetrator uses deception to manipulate individuals into divulging personal, sensitive, and confidential information, then uses it for fraudulent purposes. Common types of social engineering scams are baiting, scareware, quid pro quo, and multiple phishing scams.

Structuring - Structured finance is a complex, more risky financial instrument offered by a few lenders that is used by sophisticated borrowers to borrow money in situations where a simple, straightforward loan will not suffice.

Suspicious Activity - In finance, suspicious activity is when a financial institution suspects that attempted or conducted transactions might involve funds acquired through illegal activity or meet conditions that indicate attempts to hide assets, evade law, or subvert reporting requirements.

Suspicious Activity Report (SAR) - The suspicious activity report is a standard tool provided under the Bank Secrecy Act (BSA) of 1970 that monitors suspicious activities not flagged in other reports. Financial institutions, and anyone associated with their business, must file a SAR with the Financial Crimes Enforcement Network (FinCEN) whenever there's a suspected case of money laundering or fraud.

Suspicious Transaction Activity Reporting (STAR) - The suspicious transaction activity report (STAR) is another name for Suspicious Activity Report (SAR), a document that used by financial institutions to report suspicious activity to the Financial Crimes Enforcement Network (FinCEN).

Synthetic fraud or synthetic identity fraud - A common form of identity theft, synthetic fraud is when a perpetrator combines real information obtained illicitly and combines it with fake information to create a new, false identity that can be used to execute scams, such as borrow money or make purchases.

T

Tax Fraud - This type of fraud is when an individual or entity deliberately falsifies information on a tax return to limit their tax liability, often to avoid paying the full tax obligation.

Transaction Monitoring - Financial institutions monitor transactions made by customers, in real-time or on a daily basis, using tools or processes as part of their transaction monitoring program that not only looks at current transactions, but also analyzes a customer's historical information and account profile to spot atypical behavior, assess risk level, or predict future activity.

Transaction Monitoring and Filtering Programs (TMPs) - Transaction Monitoring and Filtering Programs (TMPs) combine transaction monitoring with a watch list filtering program, enabling financial institutions to monitor transactions while also scanning source data against published watch lists to avoid conducting business for or with sanctioned entities.

Typology - In terms of anti-money laundering and fraud, typologies are the techniques, methods, and schemes that criminals will use to execute scams and conceal, launder, or move illicit funds.

U

USA PATRIOT Act - The USA PATRIOT Act, "Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001", is a law passed on October 26, 2001, expanding authority of federal officials to fight terrorism. The Act's purpose is to deter and punish terrorist acts in the United States and enhance law enforcement investigatory tools. Sections of the USA PATRIOT Act affect financial institutions, from Section 311 to 362.

V

Virtual Currency - A subset of digital currencies, virtual currency (VC)is a largely unregulated, digital representation of value that is stored and transacted through designated software, mobile or computer applications. Available only in electronic form, virtual currency is issued by private parties or groups and transacted over secure, dedicated networks.

W

Wire Transfer - Electronic transfer of funds via a network of banks or transfer agencies located around the world. The sender initiates the transfer of funds to a receiver through a secure system such as Fedwire or SWIFT.