A good understanding of AML/CTF starts with the terminology. Here are the 22 most common AML acronyms you need to know.
Anti-Money Laundering (AML) refers to part of the AML/CTF Act 2006, and corresponding AML/CTF obligations that businesses and individuals have under the Act, which are in place to detect and deter money laundering. AML is the process of detecting and deterring the laundering of money.
2. AUSTRAC | Australian Transaction Reports and Analysis Centre
The Australian Transaction Reports and Analysis Centre (AUSTRAC) is responsible for overseeing the AML/CTF laws in Australia. As the regulator for over 14,000 entities under Tranche 1, AUSTRAC collects financial information and enforces AML/CTF obligations to detect and deter money laundering and terrorism financing.
3. CDD | Customer Due Diligence
Before conducting business with a customer, Customer Due Diligence (CDD) must be undertaken. This involves identifying and verifying clients, any beneficial owners of the client, and/or anyone acting on behalf of the client (i.e., the person providing instructions). It is also necessary to assess and record the nature and purpose of the business relationship with the client and the level of money laundering risks they pose to the business.
CDD is sometimes used interchangeably with Know Your Customer (KYC).
A Compliance Programme (CP) serves as the framework for identifying and managing the ML/TF risks that a business may face.
5. CTF | Counter-Terrorism Financing
Counter-Terrorism Financing (CTF) is part of the AML/CTF Act 2006, and outlines the policies, procedures, and controls businesses have in place to prevent their products and services being used to finance terrorism. Terrorists need funds to operate and often use businesses to wash their cash to make it appear like it comes from legitimate sources. This is why CTF is incorporated into the AML/CTF regime, as the methods for detecting and deterring terrorism financing are the same as those for preventing money laundering.
6. DBG | Designated Business Group
A Designated Business Group (DBG) is formed when two or more reporting entities choose to collaborate in managing certain aspects of their AML/CTF obligations, such as developing a joint AML/CTF programme or handling record-keeping requirements. While members of the group can carry out responsibilities on behalf of one another, each reporting entity remains individually accountable for complying with its own AML/CTF obligations.
7. EDD | Enhanced Due Diligence
Every client must have their risk level determined as part of CDD/KYC procedures. When a client is a trust, a foreign PEP, or high risk, Enhanced Due Diligence (EDD) must be completed. Additional steps must be undertaken to obtain Source of Wealth / Source of Funds to complete EDD. It is necessary to obtain and verify information relating to the Source of Funds (SOF) and Source of Wealth (SOW) of the customer. The specific circumstances requiring this are outlined in the Act and EDD guidelines. Reasonable steps must be taken to obtain and verify this information, proportionate to the level of risk involved.
8. eIV | Electronic Identity Verification
Electronic Identity Verification (eIV) is a way to verify the identity of customers through electronic means, for example, AMLHUB’s AVID system.
9. EFTI | Electronic Funds Transfer Instructions
An Electronic Funds Transfer Instruction (EFTI) is an instruction to move money on behalf of a customer to another person, where the instruction is transmitted electronically. This transfer can occur either within the same financial institution or between different financial institutions.
10. FATF | Financial Action Task Force
The Financial Action Task Force (FATF) is an international body with over 200 member countries. It is responsible for establishing the international standards set for money laundering and the financing of terrorism. Its role includes developing policies to combat money laundering conducted through regulatory, legal, and operational systems. The FATF sets forward recommendations, mutual evaluations, and maintains the blacklist / greylist.
11. IFTI | International Funds Transfer Instructions
An International Funds Transfer Instruction (IFTI) refers to an instruction involving the movement of money or property across borders - either sent from Australia or another country, or received from overseas into Australia. If your business sends or receives an IFTI, you are required to report the transaction to AUSTRAC within 10 business days.
12. KYC | Know Your Customer
Know Your Customer (KYC) is the process of verifying the identity of a customer before (or during) a business relationship. It enables reporting entities to detect suspicious activity or behaviours that could be linked to money laundering, and report it to AUSTRAC.
KYC is sometimes used interchangeably with Customer Due Diligence (CDD).
13. OCDD | Ongoing Customer Due Diligence
Ongoing Customer Due Diligence (OCDD) is the continuous process of monitoring customer transactions and activities to ensure they remain consistent with the customer’s risk profile, the nature and purpose of the business relationship, and the expected source of funds. It involves regularly reviewing and updating customer information, identifying unusual or suspicious matters, and ensuring that AML/CTF controls remain effective over time.
14. PEP | Politically Exposed Person
A politically exposed person (PEP) is someone identified as having political exposure in offshore jurisdictions. Companies can run their clients through a “PEP Check” and when the person is identified as a PEP, they will need to undergo EDD.
15. RA | Risk Assessment
A Risk Assessment (RA) involves identifying and evaluating risks of ML/TF that a business is reasonably likely to encounter. This process helps determine where the exposure lies and informs the appropriate level of controls needed to mitigate those risks.
16. RBA | Reserve Bank of Australia
The Reserve Bank of Australia (RBA) is the central bank of Australia. It is responsible for the operation of monetary policy and currency. While AUSTRAC is the AML/CTF regulator, RBA plays a broader role in maintaining the stability and integrity of the financial system - which includes contributing to efforts to prevent and detect money laundering.
17. RNP | Remittance Network Provider
A Remittance Network Provider (RNP) is an entity that enables its affiliates to offer remittance services by granting them access to its brand, systems, platforms, or products.
18. Reporting Entity
While not an acronym, a Reporting Entity is a business that is captured under the AML/CTF Act, and is obligated to meet the requirements of the AML/CTF Act and regulations. AUSTRAC has the obligation of ensuring the Reporting Entities are complying and will take enforcement action when required.
19. SMR | Suspicious Matter Report
A Suspicious Matter Report (SMR) is a report that Reporting Entities submit to AUSTRAC which details activities or transactions by a customer that are considered suspicious. An SMR must be submitted to AUSTRAC within 24 hours if it is related to terrorism financing, or within three business days if it’s related to other matters such as money laundering.
20. SOW/SOF | Source of Wealth / Source of Funds
The customer’s Source of Wealth (SoW) is the origin of their entire body of assets. This information gives an indication of the amount of wealth that a customer would be expected to have and a picture of how they acquired it.
The customer’s Source of Funds (SoF) is more narrowly focused. It is the origin of the funds used for the transactions or activities that occur within the business relationship with the reporting entity.
21. TTR | Threshold Transaction Report
A Threshold Transaction (TTR) refers to the transfer of physical currency (cash) amounting to AUD$10,000 or more - or its equivalent in foreign currency - when providing a designated service. This includes both receiving and paying cash. Businesses that offer such designated services are required to report these transactions to AUSTRAC by submitting a Threshold Transaction Report within 10 business days of the transaction. TTRs play a vital role in helping AUSTRAC detect, deter, and disrupt criminal and terrorist activity. Any business involved in transactions at or above the threshold must comply with this reporting obligation. However, if the transaction occurs through a Remittance Network Provider (RNP), the RNP is responsible for submitting the TTR on behalf of its affiliates.
22. VOI | Verification of Identity
Verification of Identity (VOI) is the process of confirming that a person or entity is who they claim to be. You know your customer, and detect any potentially suspicious behaviour or activity that could be an indicator of money laundering or terrorism financing.