Red Flag
A warning signal that should bring attention to a potentially suspicious situation, transaction or activity.
Regulatory Agency
A government entity responsible for supervising and overseeing one or more categories of financial institutions. The agency generally has authority to issue regulations, to conduct examinations, to impose fines and penalties, to curtail activities and, sometimes, to terminate charters of institutions under its jurisdiction. Most financial regulatory agencies play a major role in preventing and detecting money laundering and other financial crimes. Most regulators focus on domestic institutions, but some have the ability to regulate foreign branches and operations of institutions.
Remittance Services
Also referred to as giro houses or casas de cambio, remittance services are businesses that receive cash or other funds that they transfer through the banking system to another account. The account is held by an associated company in a foreign jurisdiction where the money is made available to the ultimate recipient.
Reputational Risk
The potential that adverse publicity regarding a financial institution’s business practices and associations, whether accurate or not, will cause a loss of confidence in the integrity of the institution. Banks and other financial institutions are especially vulnerable to reputational risk because they can become a vehicle for, or a victim of, illegal activities perpetrated by customers. Such institutions may protect themselves through Know Your Customer and Know Your Employee programs.
Respondent Bank
A bank for which another financial institution establishes, maintains, administers or manages a correspondent account.
Risk-Based Approach
The assessment of the varying risks associated with different types of businesses, clients, accounts and transactions in order to maximize the effectiveness of an anti-money laundering program.