AML glossary
The vocabulary of compliance, in plain English.
The terms that come up in AML, KYC and Source of Wealth work, defined without the jargon.
- AML
- Anti-Money Laundering: the controls and checks a firm must perform to prevent it being used to launder the proceeds of crime.
- Audit trail
- A time-stamped, tamper-evident record of who did what and when on a matter: the evidence that a check was performed and reviewed.
- CDD
- Customer Due Diligence: identifying and verifying a client and understanding the purpose of the business relationship.
- COLP
- Compliance Officer for Legal Practice: the person accountable for a law firm's regulatory compliance.
- EDD
- Enhanced Due Diligence: the deeper checks applied to higher-risk clients, such as PEPs or complex Source of Wealth.
- KYC
- Know Your Customer: verifying who a client is and assessing the risk they present before and during a relationship.
- LSAG
- Legal Sector Affinity Group. Issues the AML guidance for the UK legal sector that supervisors expect firms to follow.
- MLR 2017
- The Money Laundering Regulations 2017: the UK rules setting out CDD, record-keeping and reporting obligations for regulated firms.
- MLRO
- Money Laundering Reporting Officer: the nominated person responsible for a firm's AML response and for signing off checks.
- PEP
- Politically Exposed Person: someone entrusted with a prominent public function, who may carry higher money-laundering risk.
- SDD
- Simplified Due Diligence: a lighter level of checks permitted where the assessed risk is demonstrably low.
- SoF
- Source of Funds: where the specific money for a transaction came from (e.g. the bank account funding a purchase).
- SoW
- Source of Wealth: how a client accumulated their overall wealth (e.g. business sale, inheritance, salary over time).
- UBO
- Ultimate Beneficial Owner: the natural person who ultimately owns or controls a client entity.