What do all these acronyms mean? KYC? EDD? What the FATF?

Core AML Terms

AML/CTF - Anti-Money Laundering and Counter-Terrorism Financing The laws, regulations, and procedures designed to prevent criminals from disguising illegally obtained funds and financing terrorism.

ML/TF - Money Laundering and Terrorism Financing The two primary risks that AML/CTF programs are designed to prevent.

Designated Service - A specific type of service or transaction that triggers AML/CTF obligations. For Tranche 2, this includes services like property transactions, legal services for transactions, and certain accounting services.

Reporting Entity - A business or individual that is required to register with AUSTRAC and comply with AML/CTF obligations because they provide designated services.

Reporting Group - A group of related entities that can consolidate their AML/CTF reporting and compliance obligations under a single registration (replacing the previous term "designated business group").

Risk Assessment - A documented evaluation of the money laundering and terrorism financing risks your business faces based on factors like customer types, services offered, delivery channels, and geographic locations.

Source of Funds - Documentation or evidence that shows where money used in a transaction came from (e.g., savings, property sale, inheritance, loan).

Source of Wealth - Documentation or evidence that shows how a person has accumulated wealth and assets over time that is being used in a transaction (e.g., career as a surgeon, ownership of a business, family trust distributions, long-term investments)

Starter Kits - Comprehensive guidance documents being released by AUSTRAC to help Tranche 2 businesses understand and implement their AML/CTF obligations.

Watchlists - Official lists of individuals and entities that are subject to sanctions, suspected of money laundering or terrorism financing, or otherwise flagged by government authorities for monitoring.

Customer Due Diligence

CDD - Customer Due Diligence The process of verifying who your clients are, understanding their business purpose, and assessing their money laundering risk.

KYC - Know Your Customer The process of identifying and verifying the identity of clients (often used interchangeably with CDD).

VOI - Verification of Identity The specific process of confirming a person is who they claim to be using acceptable identification documents.

EDD - Enhanced Due Diligence More rigorous verification and ongoing monitoring required for higher-risk clients, transactions, or relationships.

OCDD - Ongoing Customer Due Diligence Continuous monitoring of the customer relationship to ensure information remains current and transactions stay consistent with the customer profile.

Tipping Off - Illegally informing someone (directly or indirectly) that a Suspicious Matter Report has been or will be submitted about a person. This is a criminal offense.

Beneficial Ownership

BO - Beneficial Owner The natural person(s) who ultimately owns or controls a client (anyone with 25%+ ownership or control).

UBO - Ultimate Beneficial Owner The individual(s) at the top of the ownership chain (used interchangeably with BO).

Reporting

SMR - Suspicious Matter Report A 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 A report to AUSTRAC of physical currency transactions of A$10,000 or more (applies to certain industries like casinos and bullion dealers).

IFT - International Funds Transfer Instruction A report to AUSTRAC of instructions to transfer money or property to or from Australia (applies to certain financial institutions).

Regulatory Bodies

AUSTRAC - Australian Transaction Reports and Analysis Centre Australia's financial intelligence unit and AML/CTF regulator. The government agency that enforces AML/CTF laws.

FATF - Financial Action Task Force The global inter-governmental body that sets international standards for combating money laundering and terrorist financing.

AFP - Australian Federal Police Federal law enforcement agency that receives intelligence from AUSTRAC for investigation.

DFAT - Department of Foreign Affairs and Trade Australian government department that maintains the Consolidated List of sanctions targets.

PEXA - Property Exchange Australia. An online platform for property settlements and lodgements in Australia.

Business Terms

RE - Reporting Entity A business or person that provides designated services and must comply with AML/CTF obligations.

DNFBP - Designated Non-Financial Businesses and Professions Businesses outside the financial sector that must comply with AML/CTF obligations (lawyers, accountants, real estate agents, dealers in precious metals and stones).

PEP - Politically Exposed Person An individual who holds or has held a prominent public position (government official, senior political figure) and may pose a higher corruption risk.

Programs and Legal

AML/CTF Act - Anti-Money Laundering and Counter-Terrorism Financing Act 2006 The primary Australian legislation governing AML/CTF obligations.

AML/CTF Rules - Anti-Money Laundering and Counter-Terrorism Financing Rules Detailed regulations made under the AML/CTF Act.

AML Program - Anti-Money Laundering and Counter-Terrorism Financing Program The documented policies, procedures, and systems a reporting entity must have to comply with AML/CTF obligations.

Tranche 1 - First phase of AML/CTF regulation Covers financial services, gambling, remittance, and bullion (commenced 2006).

Tranche 2 - Second phase of AML/CTF regulation Covers real estate, lawyers, accountants, and other DNFBPs (commencing 1 July 2026).

Pre-commencement rules - Rules that apply to contracts or agreements entered into before new legislation takes effect (in this case, before 31 March 2026). These contracts may be exempt from the new AML/CTF requirements.

Risk Assessment

ML/TF Risk Assessment - Money Laundering and Terrorism Financing Risk Assessment Assessment of the specific money laundering and terrorism financing risks facing your business (required for all reporting entities).

NRA - National Risk Assessment Assessment of money laundering and terrorism financing risks at a country level (conducted by the Australian Government).

Financial Terms

SOF - Source of Funds Where the money for a specific transaction comes from (required for Enhanced Due Diligence).

SOW - Source of Wealth How a person accumulated their overall wealth (required for Enhanced Due Diligence).

Sanctions Terms

Consolidated List - DFAT Consolidated List Australia's official list of individuals and entities subject to targeted financial sanctions (maintained by DFAT).

Common Industry-Specific Terms

FI - Financial Institution Banks, credit unions, and other financial service providers (Tranche 1 reporting entities).

VASP - Virtual Asset Service Provider Businesses dealing with cryptocurrencies and other digital assets (subject to enhanced AML/CTF obligations from 31 March 2026).