Plain-English definitions and professional explanations of the terms used in KYC, AML, FICA and due-diligence processes — with links to the related GlobalDoc Verify services.
KYC (Know Your Customer)
The process of identifying and verifying a customer before or during a financial or business relationship.
KYC establishes who the customer is, validates the information and documents they provide, and builds an understanding of their profile and expected activity. It spans identity verification, personal and business information checks, and — for corporate customers — ownership verification.
Why it matters: KYC is the foundation of fraud prevention and AML compliance. It ensures an organisation knows who it is dealing with before risk materialises and creates the verification record regulators expect.
The policies, procedures, controls, monitoring and risk-management measures designed to prevent, detect and respond to money laundering and related financial crime.
AML frameworks combine customer identification, risk assessment, PEP and sanctions screening, transaction monitoring, record-keeping and reporting. KYC is a core component of a wider AML programme.
Why it matters: Money laundering disguises the proceeds of crime as legitimate funds. Effective AML controls protect the financial system and shield organisations from severe legal and financial penalties.
South Africa's principal anti-money laundering and counter-terrorist financing legislation, giving KYC obligations statutory force for accountable institutions.
FICA (Act 38 of 2001) obliges accountable institutions to identify and verify clients, understand business relationships, apply a risk-based approach, keep records and report certain activities to the Financial Intelligence Centre.
Why it matters: It defines the compliance baseline for organisations operating in the South African regulatory environment, with enforcement consequences for failures.
The process of understanding a customer, the business relationship, ownership structure, expected activity and the risk the relationship presents.
CDD builds on KYC by adding an assessment dimension: not just who the customer is, but whether the relationship makes sense and what risk it carries, evidenced by verified information.
Why it matters: CDD is the evidential backbone of onboarding and risk decisions, and one of the first areas examined in regulatory enforcement actions.
Additional investigation and verification measures applied where a relationship or transaction presents higher or more complex risk.
EDD involves deeper ownership analysis, closer financial review, more thorough source of funds and wealth assessment, and typically senior approval. Triggers include PEP relationships, higher-risk jurisdictions and complex structures.
Why it matters: Higher-risk situations require a stronger evidence base. EDD ensures such relationships can be assessed fairly and defensibly — a risk classification, not an accusation.
The natural person or persons who ultimately own or control a company or other legal entity.
Where a business is owned by other businesses, ownership is traced through each layer until the individuals at the top are identified, using share registers, statutory records and corporate filings.
Why it matters: Corporate structures can conceal who truly benefits. UBO identification ensures screening and due diligence cover the actual people behind an entity.
An individual who holds or has held a prominent public position, together with their family members and close associates.
PEPs typically include senior government officials, politicians, senior judicial and military figures, and senior state-owned enterprise executives. PEP status reflects position and risk — it does not mean the individual has committed a crime.
Why it matters: PEP relationships warrant enhanced due diligence because of elevated influence and corruption risk, as expected under international AML standards.
Checking relevant individuals, businesses and counterparties against applicable sanctions lists and restrictions.
Effective screening covers customers, UBOs, directors, signatories and transaction parties, with jurisdiction considerations. Potential matches are investigated against identifying details before being confirmed or dismissed.
Why it matters: Dealing with sanctioned parties — even unknowingly — can carry severe legal and financial consequences. Screening is the primary control for avoiding prohibited dealings.
The origin of the particular money involved in a specific transaction.
Source of Funds is transaction-specific: it asks where this specific amount came from, supported by evidence such as bank statements, sale agreements, invoices or investment records.
Why it matters: Confirming that transaction funds have a legitimate, explainable origin is a core due-diligence step for high-value or unusual transactions.
How the customer accumulated their overall wealth over time.
Possible sources include business ownership, employment, investments, property, inheritance, asset sales and dividends. Evidence is assessed for coherence across sources and time periods.
Why it matters: Understanding the customer's broader financial background contextualises individual transactions and supports PEP and high-net-worth due diligence.
A natural person who ultimately owns or controls an entity or benefits from its activity, whether directly or indirectly.
Beneficial ownership can arise through shareholding, voting rights, agreements or other means of control. It is identified through ownership analysis and verified through identity documents.
Why it matters: Beneficial ownership identification prevents corporate structures from being used to hide the people behind a business.
The assessed level of money laundering, terrorist financing or other risk a customer or relationship presents.
Risk assessment considers the customer's profile, jurisdiction, products and services used, ownership complexity, expected activity and screening results. The rating drives the level of due diligence applied.
Why it matters: A risk rating that is accurate and regularly updated ensures due-diligence effort is focused where the risk genuinely lies.
Allocating due-diligence and monitoring effort according to the risk each customer, relationship or transaction presents.
Higher-risk relationships receive enhanced measures; lower-risk relationships receive proportionate ones. The approach is endorsed by the FATF and embedded in FICA and comparable legislation.
Why it matters: Treating every customer identically wastes resources on low risk while under-protecting genuine risk. Proportionality makes compliance both effective and sustainable.
Confirming that a person is who they claim to be, using identity documents and supporting information.
Identity documents undergo integrity analysis, information is cross-checked for consistency, and biometric comparison and issuer confirmation are applied where available.
Why it matters: Identity verification is the entry point of KYC — every downstream control depends on knowing who the customer actually is.
Verifying that a business entity is genuine, correctly registered and accurately represented, including its directors and ownership.
Corporate verification assesses registration documents, statutory records and ownership filings, with registry checks where available.
Why it matters: Business relationships involve entities that can be used to conceal individuals; corporate verification establishes that the entity is what it claims to be.
The assessment of a document's authenticity indicators — structure, security features, consistency and content — with issuer confirmation where available.
Verification combines automated analysis, data cross-checks, and expert review, and reports outcomes with methods and limitations stated. No document is claimed to be '100% authentic' unless the process genuinely supports that conclusion.
Why it matters: Documents are the evidence base of KYC and due diligence; their reliability determines the reliability of everything built on them.
Continuing the due-diligence process after onboarding — keeping information current and reviewing activity throughout the relationship.
Ongoing due diligence includes periodic reviews, event-triggered updates, transaction monitoring and reassessment of risk when circumstances change.
Why it matters: A customer's risk at onboarding is a snapshot. Ongoing due diligence is how institutions notice when the relationship no longer matches their understanding.