# Glossary

Plain definitions of the terms compliance teams at payment service providers and e-money institutions use every day. Each entry starts with a one- or two-sentence definition, then explains why the term matters, what the law says (with exact article references), and — where it applies — what ProofVolt does.

## Due diligence

- [KYB (Know Your Business)](/glossary/kyb/) — customer due diligence for a business customer: the entity, the people acting for it and its beneficial owners.
- [KYC (Know Your Customer)](/glossary/kyc/) — identifying a customer and verifying that identity; in EU law, customer due diligence.
- [Customer due diligence (CDD)](/glossary/customer-due-diligence/) — the measures an obliged entity must apply to know its customer (AMLR Art. 20).
- [Enhanced due diligence (EDD)](/glossary/enhanced-due-diligence/) — the extra scrutiny required when risk is higher (AMLR Art. 34).
- [Simplified due diligence (SDD)](/glossary/simplified-due-diligence/) — reduced measures where risk is demonstrably low (AMLR Art. 33).
- [Risk-based approach (RBA)](/glossary/risk-based-approach/) — controls in proportion to assessed risk.
- [Ongoing monitoring](/glossary/ongoing-monitoring/) — keeping the relationship and the customer file under review (AMLR Art. 26).

## Ownership and control

- [Beneficial owner (UBO)](/glossary/beneficial-owner/) — the natural person who ultimately owns (25 % or more) or controls an entity.
- [Senior managing official](/glossary/senior-managing-official/) — the executive manager recorded when no beneficial owner can be identified.
- [Central beneficial ownership register](/glossary/central-beneficial-ownership-register/) — the official UBO register, and the duty to report discrepancies.

## People and risk signals

- [Politically exposed person (PEP)](/glossary/politically-exposed-person/) — a person entrusted with a prominent public function.
- [Relatives and close associates (RCA)](/glossary/relatives-and-close-associates/) — a PEP's family members and close associates.
- [Sanctions screening](/glossary/sanctions-screening/) — checks against targeted financial sanctions, including the 50 % test.
- [Adverse media](/glossary/adverse-media/) — credible public reporting relevant to ML/TF risk.
- [Source of funds](/glossary/source-of-funds/) — where the money in the relationship comes from.
- [Source of wealth](/glossary/source-of-wealth/) — how the customer's total wealth was built.
- [High-risk third countries](/glossary/high-risk-third-countries/) — non-EU jurisdictions listed for strategic AML/CFT deficiencies.

## Reporting and governance

- [MLRO](/glossary/mlro/) — the officer who runs AML controls and reports suspicions; the AMLR's "compliance officer".
- [Suspicious activity report (SAR/STR)](/glossary/suspicious-activity-report/) — the report to the financial intelligence unit (AMLR Art. 69).
- [Tipping-off](/glossary/tipping-off/) — the prohibition on disclosing a report or analysis (AMLR Art. 73).
- [Four-eyes principle](/glossary/four-eyes-principle/) — a second authorised approval before a decision takes effect.

## The rulebook

- [AMLR](/glossary/amlr/) — Regulation (EU) 2024/1624, the EU AML single rulebook, applicable from 10 July 2027.
- [AMLA](/glossary/amla/) — the EU Anti-Money Laundering Authority, Regulation (EU) 2024/1620.
- [AMLD6](/glossary/amld6/) — Directive (EU) 2024/1640 on registers, FIUs and supervision (not the 2018 "6AMLD").
- [EU AI Act (for compliance tools)](/glossary/eu-ai-act/) — Regulation (EU) 2024/1689, as amended in 2026.

## Guides

- [AMLR 2027 readiness for payment service providers](/guides/amlr-2027-readiness-payment-service-providers/)
- [KYB for merchant onboarding: what a PSP must verify](/guides/kyb-merchant-onboarding-psp/)
- [Beneficial-ownership verification in the EU: registers, discrepancies and evidence](/guides/beneficial-ownership-verification-eu/)
- [What an auditor asks about AI in compliance (EU AI Act + AML)](/guides/auditor-questions-ai-in-compliance/)

Canonical: https://proofvolt.eu/glossary/