---
title: "Glossary: Key Terms & Definitions"
description: A guide to key AML/CTF terms, acronyms and concepts for Australian businesses navigating Tranche 2.
---

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# Glossary: Key Terms & Definitions

## A guide to key AML/CTF terms, acronyms and concepts for Australian businesses navigating Tranche 2.

### Overview

A plain-English guide to the key terms, acronyms and concepts Australian businesses meet under Tranche 2, grouped by theme.

### Core AML terms

**AML/CTF** - Anti-Money Laundering and Counter-Terrorism Financing. The laws, regulations and procedures designed to prevent criminals disguising illegally obtained funds and financing terrorism.  
**AML/CO** - Compliance Officer. The person legally responsible for ensuring the AML/CTF program is followed.  
**ML/TF** - Money Laundering and Terrorism Financing. The two primary risks AML/CTF programs are designed to prevent.  
**Designated Service** - a specific service listed in the AML/CTF Act (e.g. conveyancing, managing client funds) that triggers the obligation to comply.  
**Reporting Entity (RE)** - a business or individual required to register with AUSTRAC and comply because it provides designated services.  
**Reporting Group** - related entities consolidating their AML/CTF obligations under a single registration (replaces the former "Designated Business Group").  
**DNFBP** - Designated Non-Financial Businesses and Professions: non-financial businesses captured by AML/CTF (lawyers, accountants, real estate agents, dealers in precious metals and stones).  
**Risk Assessment** - a documented evaluation of the ML/TF risks your business faces, based on customer types, services, delivery channels and geography.  
**Watchlists** - official lists of individuals and entities subject to sanctions or otherwise flagged by authorities.

### Customer due diligence

**CDD** - Customer Due Diligence: identifying a customer, understanding their business purpose, and assessing their ML risk.  
**KYC** - Know Your Customer: verifying the identity of an individual client, including a sole trader (often used interchangeably with CDD).  
**KYB** - Know Your Business: verifying a legal entity (company, trust, partnership, SMSF) is genuine and active, and identifying its controllers and ultimate beneficial owners.  
**VOI** - Verification of Identity: confirming a person is who they claim to be using acceptable ID.  
**EDD / ECDD** - Enhanced (Customer) Due Diligence: stricter verification and monitoring for higher-risk clients, transactions or relationships (e.g. PEPs).  
**OCDD / ODD** - Ongoing (Customer) Due Diligence: keeping customer information current and monitoring transactions throughout the relationship.  
**PDD** - Personal Due Diligence: assessing the integrity of internal employees or agents performing AML/CTF roles.  
**Reliance** - where one reporting entity relies on another's CDD checks.  
**Tipping Off** - the criminal offence of informing someone, directly or indirectly, that a Suspicious Matter Report has been or will be submitted about them.

### Beneficial ownership

**BO** - Beneficial Owner: the natural person(s) who ultimately own or control a client (25%+ ownership or control).  
**UBO** - Ultimate Beneficial Owner: the individual(s) at the top of the ownership chain (used interchangeably with BO).  
**Shell Company** - a legal entity with no active operations, used to move money and hide true ownership.  
**Structuring** - deliberately breaking up large cash transactions to avoid reporting thresholds.

### Reporting

**SMR** - Suspicious Matter Report: a mandatory, confidential report to AUSTRAC when you form a suspicion on reasonable grounds that a transaction or activity involves proceeds of crime or terrorism financing.  
**TTR** - Threshold Transaction Report: required for physical currency (cash) transactions of A$10,000 or more.  
**IVTS (formerly IFTI)** - International Value Transfer Service: an instruction to move money or property into or out of Australia (usually reported by banks, relevant if you manage client funds).

### Regulatory bodies

**AUSTRAC** - Australian Transaction Reports and Analysis Centre: Australia's financial intelligence unit and AML/CTF regulator.  
**FATF** - Financial Action Task Force: the global body that sets international AML/CTF standards, which Australia follows.  
**AFP** - Australian Federal Police: receives intelligence from AUSTRAC for investigation.  
**DFAT** - Department of Foreign Affairs and Trade: maintains the Consolidated List of sanctions targets.  
**PEXA** - Property Exchange Australia: the online platform for property settlements and lodgements.

### Financial and sanctions terms

**Source of Funds (SoF)** - evidence of where the money for a specific transaction came from (e.g. salary, property sale, inheritance, loan).  
**Source of Wealth (SoW)** - evidence of how a person accumulated their overall wealth over time (e.g. career, business ownership, trust distributions, long-term investments).  
**Sanctions List / Consolidated List** - Australia's official DFAT list of individuals and entities subject to targeted financial sanctions.  
**PF** - Proliferation Financing: providing funds or services for the manufacture or acquisition of nuclear, chemical or biological weapons.

### People and roles

**PEP** - Politically Exposed Person: someone holding (or who has held) a prominent public position, and their close family and associates, posing a higher corruption risk.

### Programs and legislation

**AML/CTF Act** - the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, the primary legislation.  
**AML/CTF Rules** - detailed regulations made under the Act.  
**AML Program** - the documented policies, procedures and systems a reporting entity must maintain to comply.  
**Tranche 1** - the first phase of regulation (financial services, gambling, remittance, bullion; commenced 2006).  
**Tranche 2** - the second phase (real estate, lawyers, accountants and other DNFBPs; commencing 1 July 2026).  
**Pre-commencement rules** - rules applying to agreements entered before the new legislation takes effect, which may be exempt from new requirements.  
**Starter Kits** - AUSTRAC guidance documents helping Tranche 2 businesses implement their obligations.

### Risk assessment terms

**ML/TF Risk Assessment** - assessment of the ML/TF risks facing your business (required for all reporting entities).  
**NRA** - National Risk Assessment: a country-level assessment conducted by the Australian Government.

### Industry terms

**FI** - Financial Institution: banks, credit unions and other financial providers (Tranche 1 entities).  
**VASP** - Virtual Asset Service Provider: a business dealing in cryptocurrencies and other digital assets (enhanced obligations from 31 March 2026).

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