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Smile ID's KYC & Compliance Glossary

Unlocking Africa’s digital potential, Smile ID provides key definitions for navigating identity verification and compliance. This concise guide is essential for businesses aiming for secure growth across the continent.

A

Active Liveness

This is a verification process in which the user must perform specific actions, like blinking or turning their head, to prove they are physically present during the verification process. This helps ensure the user isn't just a picture or recording.

Adaptive Compliance

The ongoing process of adjusting compliance practices to keep up with changing regulations. This allows for a more efficient and user-friendly verification process, focusing stricter measures on higher-risk scenarios.

Adverse Media

Negative news or information about an individual or business. AML checks often include screening against adverse media to identify potential risks.

AML Compliance Checklist

A business should follow a list of tasks and procedures to ensure they meet Anti-Money Laundering (AML) regulations. This checklist typically covers customer due diligence (CDD), transaction monitoring, suspicious activity reporting (SAR), and record-keeping requirements.

AML Compliance Program

The set of policies, procedures, and controls a financial institution implement to comply with AML regulations. This program typically includes customer due diligence (CDD), transaction monitoring, suspicious activity reporting (SAR), and employee training.

Anti-Money Laundering (AML)

Regulations and procedures designed to prevent criminals from disguising the origin of illegally obtained funds.

Attribute

A piece of information used to describe an identity, such as name, date of birth, or address.

Audit Trails

A chronological activity record within a digital identity verification system. It tracks user actions, system events, and verification results, providing a detailed log for compliance and security purposes.

Authentication

The process of confirming a user's identity. This is often done through a login process where a user enters a username and password.



C

Cash-Intensive Businesses

Businesses that deal with a large amount of cash in their daily operations. Examples include casinos, pawn shops, and money service businesses. These businesses are considered at higher risk for money laundering due to the difficulty of tracing cash transactions.

CDD (Customer Due Diligence)

It is the process businesses undertake to verify a customer's identity, understand their financial activities, and assess their risk profile.

Central Bank of Kenya (CBK)

Kenya's central bank and main financial regulatory body. It issues guidelines and enforces compliance with AML regulations.

Central Bank of Nigeria (CBN)

Nigeria's central bank and apex monetary authority, established by the CBN Act of 1958. It is responsible for maintaining the country's external reserves, promoting monetary stability and a sound financial environment, and acting as a banker and financial adviser to the federal government.

Channel Risk

The Money laundering (ML) /Terrorist Financing (TF) risk is associated with the way a financial service is delivered (e.g., online banking, money transfer services). For example, internet-based transactions may have a higher risk of identity theft.

Chargeback Fraud

When a customer disputes a legitimate purchase with their bank or credit card company, claiming they didn't make it or are unhappy with the service. This can be a real issue for businesses.

Churn

The rate at which customers stop using a service. A high churn rate can signal problems with your onboarding process or user experience.

Compliance Risk

The risk that a company will fail to comply with relevant laws and regulations, including AML regulations. Compliance risk can lead to financial penalties, reputational damage, and even criminal prosecution.

Continuous Authentication

The ongoing process of verifying a user's identity throughout a session, not just at login. This is becoming increasingly important for high-risk activities.

Counter-Terrorist Financing (CTF)

Refers to the global effort to stop money flow to terrorist organisations and individuals. This includes various strategies employed by governments, financial institutions, and international organisations.




F

Facial Recognition

A biometric technology that identifies or verifies a person by comparing their face to a stored image.

False Acceptance Rate (FAR)

The percentage of unauthorised users who are mistakenly granted system access due to a verification process flaw.

False Positives

Alerts triggered by transaction monitoring systems that turn out to be legitimate transactions and not suspicious activity. While false positives are not ideal, they are better than missing true suspicious activity.

FATF Grey List (Greylisting)

This refers to the Financial Action Task Force's (FATF) designation for countries with strategic deficiencies in their Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) regimes. These countries are placed under increased monitoring and must work to address the deficiencies within a set timeframe to avoid being blacklisted.

Financial Action Task Force (FATF)

An international organisation that sets global standards for AML and combating the financing of terrorists (CFT). FATF recommendations are used by governments and financial institutions around the world to develop and implement AML/CFT regulations.

Fingerprint Biometrics

A biometric authentication technology that uses a person's unique fingerprint pattern for identification or verification. Fingerprint patterns consist of ridges and valleys on the surface of a finger, and these patterns are very unique to each individual.

Friction in Authentication

Challenges users experience during the authentication process, such as remembering complex passwords or answering multiple security questions. Too much friction can lead to user frustration and abandonment.









P

PEP Red Flag Indicators

Warning signs that a customer may be a Politically Exposed Person (PEP) or associated with a PEP. These indicators can include holding high-level government positions, being family members or close associates of PEPs, or having business relationships with PEPs.

Personally Identifiable Information (PII)

Any data that can be used to identify a specific individual.

Phishing

A fraudulent attempt to obtain sensitive information such as usernames, passwords, or credit card details by disguising oneself as a trustworthy entity in an electronic communication (email, text message, etc.).

Politically Exposed Persons (PEPs)

Individuals who hold prominent public functions or have close relationships with those who do. PEPs are considered at higher risk for money laundering due to their access to public funds and potential influence.

Pre-Mortem Risk Assessment

A proactive approach to risk management that involves identifying potential risks before launching a product or initiative, and developing plans to mitigate them.

Proceeds of Crime and Anti-Money Laundering Act (POCAMLA)

The Proceeds of Crime and Anti-Money Laundering Act, the primary legislation against money laundering and terrorist financing in Kenya.

Procurement

The process of acquiring goods, services, or works from an external source. AML considerations are important in procurement to mitigate the risk of corruption or money laundering through vendor relationships.

Progressive Profiling

An onboarding strategy that collects user information incrementally, requesting only what's necessary at each stage. This helps balance security with a smooth user experience.




T

Template

In Biometric technology, a template is a digital representation of a person's unique biological characteristic that is stored in a system for comparison during authentication. It's essentially a compressed file containing the essential data extracted from a biometric scan, rather than a raw image or recording.

Textual Verification

It is the process of verifying an ID number by looking it up in an ID authority database.

Third-Party Due Diligence

It is the process of reviewing and monitoring your third-party partners for potential conflicts of interest or other legal, ethical and compliance issues. The need will typically arise when considering a new vendor or preparing for a merger or acquisition.

Tier 1 Account

It is the most basic type of bank account offered by a bank. It typically comes with lower transaction limits, fewer features, and potentially lower fees compared to other tiers (e.g., Tier 2, and Tier 3 accounts).

Tokenisation

Replacing sensitive data with a unique identifier (token) that can be used for processing without exposing the original data. This helps protect sensitive information like credit card numbers.

Transaction Monitoring

The ongoing process of reviewing customer transactions to identify suspicious activity that may be indicative of money laundering or terrorist financing.

Transaction Risk

The Money Laundering (ML) /Terrorist Financing (TF) ) risk associated with a specific type of transaction. Complex transactions, large cash deposits, or transactions involving virtual currencies are often considered higher risk.

Two-factor authentication (2FA)

A specific type of MFA (Multifactor Authentication) that requires two verification factors, typically something you know (password) and something you have (phone with code).




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