ACCOUNT – A formal relationship to provide services or financial transactions.
AML – Anti-Money Laundering (AML) procedures, laws or regulations designed to stop the practice of making money that comes from illegal or unethical sources, look like it came from legal or legitimate sources. AML is a term mainly used in the financial and legal industries to describe the legal controls that require financial institutions and other regulated entities to prevent, detect and report money laundering activities. AML guidelines came into prominence globally as a result of the formation of the Financial Action Task Force (FATF) and the promulgation of an international framework of AML standards.
CDD – Customer Due Diligence (CDD) refers to the process of obtaining certain information about a prospective or existing customer to determine customer risk and monitor a customer’s activity for potential suspicious activity. It provides the complete lifecycle assessment and re-assessment of a customer’s risk as part of the know your customer (KYC) on-boarding process and the ongoing customer due diligence processes to allow firms to better identify, manage and mitigate customer-related risks.
CONTROLLING PARTIES – Individuals or entities with direct or indirect control over the account or the customer. For KYC purposes, examples of control parties are authorised signatories, power of attorney, executive management (eg., CEO and CFO), board of directors, guarantors, general partners for LLCs/LLPs, investment manager and/or fund sponsor for funds and trustees for trusts.
CUSTOMER (CLIENT) – An individual or legal entity such as a corporation, partnership, trust, estate or any other entity recognised as a legal person.
FI – Financial Institution (FI) including: foreign banks, savings associations and credit unions, securities broker-dealers, futures commission merchants and their introducing brokers, mutual funds, currency dealers or exchangers, money transmitters organised under foreign law.
EDD – Enhanced Due Diligence (EDD) refers to customers who pose higher money laundering or terrorist financing risks and therefore present an increased risk exposure to banks. Due diligence policies, procedures and processes should be enhanced as a result. EDD for higher-risk customers is especially critical in as far as understanding their anticipated transactions and implementing a suspicious activity monitoring system that reduces the bank’s reputation, compliance and transaction risks. Higher-risk customers and their transactions should be reviewed more closely at the account opening stages and more frequently throughout the term of their relationship with the bank.