19. Glossary¶

Glossary of terms related to the RegTech world.

Virtual Assets: a unit of information that does not represent the holding of any underlying asset at par, and that is univocally identifiable, even fractionally, stored electronically. (i.e bitcoin, ethereum, NFTs, etc).

Self-assessment of risks: internal evaluation of ML/TF Risks carried out by the Entity for each of its business lines, in order to determine its risk appetite and its level of exposure. Evaluate, in addition, the effectiveness of the controls implemented to mitigate the risks identified in relation, at least, to its customers, products and/or services, distribution channels and geographical areas. The risk self-assessment will also include the adequacy of the assigned resources, added to other factors that make up the system as a whole, such as the culture of compliance, demonstrable preventive effectiveness and the adequacy, where appropriate, of the audits and training plans.

Final Beneficiary: the human person(s) that owns at least ten percent (10%) of the capital or voting rights of a legal entity, a trust, a fund of investment, a patrimony of affectation and/or of any other legal structure; and/or to the human person(s) who by other means exercise final control over them.

Due Diligence: refers to a validation process for the organization's internal risk management in terms of prevention of risks associated with money laundering and terrorist financing.

Risk-Based Approach (RBA): The Risk-Based Approach (RBA) is an effective way to combat money laundering and terrorist financing. In this approach, each customer is assigned a risk level and entities are required to subject higher risk customers to more intensive (enhanced) due diligence measures, and they are also required to monitor their subsequent transactions more sensitively. Conversely, a financial institution may apply less intense (simplified) due diligence to lower risk customers, if the relationships with those customers are considered to be lower risk (for example, those who only have lower risk products).

Financing of Terrorism (FT): It is any assistance, support or conspiracy, whether directly or indirectly to collect funds with the intention that they are used in order to commit a terrorist act; either by an individual perpetrator or a terrorist organization. They can be both legal and illegal funds.

KYC: Acronym for Know your Customer. It is the practice that companies have to have as much information of interest to their customers as possible. It is the process that makes the relationship between client and company possible, complying with the regulations that govern this right. The main KYC techniques include extensive onboarding, integration with regulatory information data providers, documentation verification, research by expert analysts, among others.

Money Laundering (ML): It is the process through which the origin of the funds generated through the exercise of some illegal or criminal activities is concealed (for example, drug or narcotic trafficking, arms smuggling, corruption, embezzlement , white collar crimes, extortion, kidnapping, piracy, etc). The objective of the operation, which is generally carried out at various levels, is to make the funds or assets obtained through illegal activities appear as the result of legitimate activities and circulate without problem in the financial system.

Terrorism and Sanctioned Lists: Lists issued by the UN Security Council and by other organizations with a list of entities with which an entity should not do business.

Compliance Officer: Central figure within an entity that carries out compliance with the obligations of the anti-laundering system before the Financial Control Unit of each country.

Unusual Operations: those operations attempted or carried out in an isolated or repeated manner, regardless of the amount, that lack economic and/or legal justification, are not related to the level of risk of the Client or his transactional profile, or that Due to their frequency, regularity, amount, complexity, nature and/or other particular characteristics, they deviate from the uses and customs in market practices.

Politically Exposed Persons (PEP): The definition varies slightly depending on the country, but broadly speaking it is a person who previously held or currently holds a relevant public position or function for the State. For example, an ambassador, the Commander in Chief of the Army of a country or a mayor. The risk of these people is greater since they can abuse their position to commit crimes of money laundering, corruption and bribery.

RegTech: acronym for regulatory technology. It is a term coined to define technology-based products and solutions aimed at meeting and adapting to the regulatory requirements of a sector. They are characterized by the agility and flexibility they offer in the face of any regulatory changes.

Suspicious Operation Report: Reports to the Financial Control Unit on suspicious operations that do not coincide with the lawful activities declared by the client.

Systematic Reports: the information that each Reporting Entity must submit to the FIU, through the reporting regimes established by this Unit.

AML/CFT Risk: is the prospective measure that approximates the possibility that an operation executed or attempted by the Client through a distribution channel, product or service offered by it is used by third parties for criminal purposes of LA/FT.

Screening: Process by which the database of the entity's clients is contrasted with the lists of terrorism, sanctioned and PEPs.

Supervised entities/institutions: Legal or natural person that is subject to the obligations established in the laws for the Prevention of Asset Laundering and Terrorist Financing.