KYC glossary.

The key terms of the Swedish AML Act and the EU AML Regulation. Each entry gives the legal definition with its source, what it means in practice and what changes from 10 July 2027.

Obliged entity (Swedish AML Act)

Legal definition: A natural or legal person that carries out activities covered by this Act (our translation of Chapter 1, Section 8, point 8 of the Swedish AML Act (2017:630)).
Chapter 1, Section 8, point 8 of the Swedish AML Act (2017:630)
What it means: It is anyone covered by the Swedish AML Act, for example a bank, an accounting firm, a real estate agent or a lawyer in certain assignments. The covered activities are listed in Chapter 1, Section 2 of the Act.
Under AMLR: From 10 July 2027 the corresponding term is obliged entity as defined in AMLR, and Article 3 of AMLR sets out who is covered.
See also: Obliged entity (AMLR)Customer due diligence General risk assessment Read the guide: KYC and customer due diligence: a complete guide

Obliged entity (AMLR)

Legal definition: “The following entities are to be considered obliged entities for the purposes of this Regulation: (1) credit institutions; (2) financial institutions; (3) the following natural or legal persons acting in the exercise of their professional activities: […]”
Article 3 of Regulation (EU) 2024/1624 (AMLR)
What it means: This is the AMLR term for anyone covered by the rules. The list in Article 3(3) includes auditors, external accountants and tax advisors, lawyers in certain transactions, and real estate agents.
Under AMLR: The Regulation applies from 10 July 2027, but to football agents and professional football clubs from 10 July 2029 (Article 90 of AMLR).
See also: Obliged entity (Swedish AML Act)Business-wide risk assessment Read the guide: AMLR 2027: what changes in customer due diligence?

Customer due diligence

Legal definition: An obliged entity may not establish or maintain a business relationship or carry out an occasional transaction if it does not have sufficient knowledge of the customer to be able to 1. manage the risk of money laundering or terrorist financing that may be associated with the customer relationship, and 2. monitor and assess the customer's activities and transactions under Chapter 4, Sections 1 and 2 (our translation of Chapter 3, Section 1, first paragraph of the Swedish AML Act (2017:630)).
Chapter 3, Section 1, first paragraph of the Swedish AML Act (2017:630). The Act does not define the term; the measures are set out in Chapter 3, Sections 7 to 13.
What it means: Customer due diligence is the set of measures you take to know who the customer is: identity verification, beneficial ownership, PEP checks, high-risk third country checks, the purpose and nature of the business relationship, and ongoing monitoring. The extent must follow the customer's risk profile (Chapter 3, Section 14).
Under AMLR: From 10 July 2027 Article 20(1) of AMLR lists nine measures, including verifying whether the customer or the beneficial owners are subject to targeted financial sanctions.
See also: Customer Beneficial owner Customer risk profile Simplified due diligence Enhanced due diligence Ongoing monitoring Read the guide: KYC and customer due diligence: a complete guide

Business relationship

Legal definition: A commercial relationship which, when it is established, is expected to have a certain duration (our translation of Chapter 1, Section 8, point 1 of the Swedish AML Act (2017:630)).
Chapter 1, Section 8, point 1 of the Swedish AML Act (2017:630)
What it means: It is a customer relationship intended to last over time, such as an ongoing engagement. Customer due diligence must be applied when the relationship is established (Chapter 3, Section 4, first paragraph).
Under AMLR: From 10 July 2027 the broader AMLR definition applies, which also covers relationships without a written contract and relationships that only later acquire an element of repetition or duration (Article 2(1), point (19), of AMLR).
See also: Occasional transaction Customer Customer due diligence Ongoing monitoring Read the guide: KYC and customer due diligence: a complete guide

Occasional transaction

Legal definition: Where the obliged entity does not have a business relationship with the customer, customer due diligence measures must be applied 1. for occasional transactions amounting to the equivalent of EUR 15,000 or more, 2. for transactions below the equivalent of EUR 15,000 which the obliged entity realises or ought to realise are linked to one or more other transactions and which together amount to at least that amount […] (our translation of Chapter 3, Section 4, second paragraph, points 1 and 2 of the Swedish AML Act (2017:630)).
Chapter 3, Section 4, second paragraph, points 1 and 2 of the Swedish AML Act (2017:630). The term is not defined in the Act or in Article 2 of AMLR.
What it means: It is a transaction with a customer with whom you have no business relationship. Due diligence is required from EUR 15,000, including where several transactions are linked, and other thresholds apply to gambling (Chapter 3, Section 5) and cash trading in goods (Chapter 3, Section 6).
Under AMLR: From 10 July 2027 the threshold falls to EUR 10,000 (Article 19(1)(b) of AMLR), and for cash transactions of EUR 3,000 or more the customer must, as a main rule, at least be identified and have their identity verified (Article 19(4) of AMLR).
See also: Business relationship Customer Customer due diligence Read the guide: KYC and customer due diligence: a complete guide

Customer

Legal definition: Anyone who has entered into, or is about to enter into, a contractual relationship with an obliged entity covered by this Act (our translation of Chapter 1, Section 8, point 4 of the Swedish AML Act (2017:630)).
Chapter 1, Section 8, point 4 of the Swedish AML Act (2017:630)
What it means: The customer is your contracting party, also before the contract is signed. Due diligence must therefore be completed before the business relationship is established or the transaction is carried out (Chapter 3, Section 9).
Under AMLR: AMLR does not define customer in Article 2, but under Article 19(6) certain obliged entities must treat more persons as customers; real estate agents, for example, must treat both parties to the transaction as customers.
See also: Business relationship Occasional transaction Beneficial owner Customer due diligence Read the guide: KYC and customer due diligence: a complete guide

Beneficial owner

Legal definition: A beneficial owner means 1. a natural person who, alone or together with someone else, ultimately owns or controls a legal person, or 2. a natural person on whose behalf someone else is acting (our translation of Chapter 1, Section 3, first paragraph of the Act (2017:631) on the Registration of Beneficial Owners, to which Chapter 1, Section 8, point 6 of the Swedish AML Act (2017:630) refers).
Chapter 1, Section 3, first paragraph of the Act (2017:631) on the Registration of Beneficial Owners; Chapter 1, Section 8, point 6 of the Swedish AML Act (2017:630)
What it means: It is the natural person who ultimately owns or controls the customer. You must establish whether the customer has a beneficial owner, including by searching the register of beneficial owners, and verify that person's identity (Chapter 3, Section 8 of the Swedish AML Act).
Under AMLR: From 10 July 2027 the AMLR threshold for an ownership interest of 25 % or more of the shares, voting rights or other ownership interest applies (Article 52(1) of AMLR), whereas the presumption in Chapter 1, Section 4 of Act 2017:631 refers to more than 25 per cent of the votes.
See also: Alternative beneficial owner Customer due diligence Customer Politically exposed person (PEP)Read the guide: Beneficial ownership: how to identify, verify and document it

Alternative beneficial owner

Legal definition: Where the customer is a legal person and it is clear after the measures under the first paragraph that the legal person has no beneficial owner, the person who is chair of the board, managing director or holds an equivalent position shall be deemed to be the beneficial owner. The same applies where the obliged entity has reason to assume that the person identified under the first paragraph is not the beneficial owner (our translation of Chapter 3, Section 8, third paragraph of the Swedish AML Act (2017:630)).
Chapter 3, Section 8, third paragraph of the Swedish AML Act (2017:630). “Alternative beneficial owner” is an industry expression, not a statutory term.
What it means: The rule is a fallback after an investigation, not a way to skip one, so document why no beneficial owner could be identified. It does not apply to the state, a region or a municipality where the risk is assessed as low (Chapter 3, Section 8 a).
Under AMLR: From 10 July 2027 you must instead record that no beneficial owner was identified and identify all senior managing officials and verify their identity (Article 22(2) of AMLR); the Article does not say that they are to be deemed beneficial owners.
See also: Beneficial owner Customer due diligence Read the guide: Beneficial ownership: how to identify, verify and document it

Politically exposed person (PEP)

Legal definition: A natural person who holds or has held a prominent public function in a state or in an international organisation (our translation of Chapter 1, Section 8, point 5 of the Swedish AML Act (2017:630)).
Chapter 1, Section 8, point 5 of the Swedish AML Act (2017:630)
What it means: You must assess whether the customer or the customer's beneficial owner is a PEP (Chapter 3, Section 10). If so, the measures in Chapter 3, Section 19 apply, including approval from senior management and measures to establish where the assets come from.
Under AMLR: From 10 July 2027 the definition covers, among others, heads of regional and local authorities with at least 50,000 inhabitants (Article 2(1), point (34), of AMLR), and the measures apply until the risk no longer exists but for not less than 12 months after the function ended (Article 45(2)), instead of 18 months under Chapter 3, Section 20 of the Swedish AML Act.
See also: Prominent public function Family member Known close associate Senior decision-maker Enhanced due diligence Read the guide: What is PEP screening and how does it work?

Family member

Legal definition: A family member of a politically exposed person means a spouse, registered partner, cohabiting partner, children and their spouses, registered partners or cohabiting partners, and parents (our translation of Chapter 1, Section 10, first paragraph of the Swedish AML Act (2017:630)).
Chapter 1, Section 10, first paragraph of the Swedish AML Act (2017:630)
What it means: The same measures as for a PEP apply when the customer is a family member of a PEP (Chapter 3, Section 19, second paragraph). Siblings are not included in the Swedish Act's definition.
Under AMLR: From 10 July 2027 siblings also count as family members of heads of state, heads of government, ministers and deputy or assistant ministers, and of equivalent functions at Union level or in a third country (Article 2(1), point (35)(d), of AMLR).
See also: Politically exposed person (PEP)Known close associate Read the guide: What is PEP screening and how does it work?

Known close associate

Legal definition: A known associate of a politically exposed person means 1. a natural person who, as is known or there is reason to suspect, is a joint beneficial owner with a politically exposed person of a legal person or legal arrangement, or who otherwise has or has had close relations with a politically exposed person, and 2. a natural person who is the sole beneficial owner of a legal person or legal arrangement which, as is known or there is reason to suspect, has in fact been set up for the benefit of a politically exposed person. Close relations in the second paragraph, point 1, means close business relations and other relations that may cause the known associate to be associated with an increased risk of money laundering or terrorist financing (our translation of Chapter 1, Section 10, second and third paragraphs of the Swedish AML Act (2017:630)).
Chapter 1, Section 10, second and third paragraphs of the Swedish AML Act (2017:630)
What it means: These are people who own companies together with a PEP or have other close relations with a PEP. The same measures as for a PEP apply (Chapter 3, Section 19, second paragraph).
Under AMLR: From 10 July 2027 the term is person known to be a close associate, and the definition in Article 2(1), point (36), of AMLR is based on what is known, without the Swedish Act's addition of what there is reason to suspect.
See also: Politically exposed person (PEP)Family member Beneficial owner Read the guide: What is PEP screening and how does it work?

Prominent public function

Legal definition: A prominent public function in a state means functions such as 1. heads of state or government, ministers and deputy and assistant ministers, 2. members of parliament and of similar legislative bodies, 3. members of the boards of political parties, 4. judges of supreme courts, constitutional courts or other high-level judicial bodies whose decisions can be appealed only in exceptional cases, 5. senior officials of audit authorities and members of the governing bodies of central banks, 6. ambassadors, heads of mission and high-ranking officers in the armed forces, and 7. persons who are members of the administrative, management or supervisory bodies of state-owned enterprises. A prominent public function in an international organisation means functions such as directors, deputy directors, board members and holders of similar posts (our translation of Chapter 1, Section 9 of the Swedish AML Act (2017:630)).
Chapter 1, Section 9 of the Swedish AML Act (2017:630)
What it means: The functions on the list determine who is a PEP, and a person who has held such a function is also covered (Chapter 1, Section 8, point 5). The measures apply for 18 months after the function ended and after that if the risk is assessed as high (Chapter 3, Section 20).
Under AMLR: From 10 July 2027 each Member State must issue a list of the exact functions that qualify as prominent public functions, and the Commission must publish a single list (Article 43 of AMLR).
See also: Politically exposed person (PEP)Family member Known close associate Read the guide: What is PEP screening and how does it work?

Senior decision-maker

Legal definition: A board member, managing director or other officer who has sufficient knowledge of the obliged entity's exposure to money laundering and terrorist financing risk and sufficient authority to take decisions affecting its risk exposure (our translation of Chapter 1, Section 8, point 9 of the Swedish AML Act (2017:630)).
Chapter 1, Section 8, point 9 of the Swedish AML Act (2017:630)
What it means: The Swedish Act's term is behörig beslutsfattare. This is the person who must approve, among other things, business relationships with a PEP (Chapter 3, Section 19) and with customers established in a high-risk third country (Chapter 3, Section 17).
Under AMLR: From 10 July 2027 the corresponding term is senior management, which covers the members of the management body in its management function and officers and employees with sufficient knowledge and seniority (Article 2(1), point (40), of AMLR).
See also: Politically exposed person (PEP)High-risk third country Enhanced due diligence Read the guide: What is PEP screening and how does it work?

High-risk third country

Legal definition: An obliged entity must check whether the customer is established in a country outside the EEA that the European Commission has identified as a high-risk third country (our translation of Chapter 3, Section 11 of the Swedish AML Act (2017:630)).
Chapter 3, Section 11 of the Swedish AML Act (2017:630). The Act does not define the term; under Article 29(1) of AMLR the countries are identified by the Commission.
What it means: These are countries outside the EEA that the European Commission has identified as high-risk third countries. If the customer is established in one, you must apply enhanced measures, including approval from senior management (Chapter 3, Section 17).
Under AMLR: From 10 July 2027 the enhanced measures apply to business relationships and occasional transactions involving natural or legal persons from a high-risk third country (Article 29(4) of AMLR), not only where the customer is established there.
See also: Enhanced due diligence Senior decision-maker Customer due diligence Read the guide: Customer due diligence checklist and template

General risk assessment

Legal definition: An obliged entity must assess how the products and services provided in the business can be used for money laundering or terrorist financing and how great the risk is that this happens (general risk assessment) (our translation of Chapter 2, Section 1, first paragraph of the Swedish AML Act (2017:630)).
Chapter 2, Section 1, first paragraph of the Swedish AML Act (2017:630)
What it means: It is the business's own assessment of how it can be misused, and it must be documented and kept up to date (Chapter 2, Section 2). The customer's risk profile and the procedures must build on it.
Under AMLR: From 10 July 2027 it becomes the business-wide risk assessment and must also cover the risks of non-implementation and evasion of targeted financial sanctions (Article 10(1) of AMLR).
See also: Business-wide risk assessment Customer risk profile Obliged entity (Swedish AML Act)Read the guide: Customer risk assessment: method and example

Business-wide risk assessment

Legal definition: “Obliged entities shall take appropriate measures, proportionate to the nature of their business, including its risks and complexity, and their size, to identify and assess the risks of money laundering and terrorist financing to which they are exposed, as well as the risks of non-implementation and evasion of targeted financial sanctions, taking into account at least […]”
Article 10(1) of Regulation (EU) 2024/1624 (AMLR)
What it means: It is the AMLR counterpart of the general risk assessment under the Swedish Act. It must be documented and kept up to date, drawn up by the compliance officer and approved by the management body in its management function (Article 10(2) of AMLR).
Under AMLR: The requirement applies from 10 July 2027 (Article 90 of AMLR).
See also: General risk assessment Obliged entity (AMLR)Targeted financial sanctions Read the guide: AMLR 2027: what changes in customer due diligence?

Customer risk profile

Legal definition: An obliged entity must assess the risk of money laundering or terrorist financing that may be associated with the customer relationship (the customer's risk profile) (our translation of Chapter 2, Section 3, first paragraph of the Swedish AML Act (2017:630)).
Chapter 2, Section 3, first paragraph of the Swedish AML Act (2017:630)
What it means: The risk profile is based on the general risk assessment and what you know about the customer, and it determines how extensive due diligence must be (Chapter 3, Section 14). It must be followed up and changed when there is reason to do so (Chapter 2, Section 3, third paragraph).
Under AMLR: From 10 July 2027 the decision on the risk profile to be attributed to the customer may not be outsourced (Article 18(3)(c) of AMLR).
See also: General risk assessment Simplified due diligence Enhanced due diligence Customer due diligence Read the guide: Customer risk assessment: method and example

Simplified due diligence

Legal definition: Where the risk of money laundering or terrorist financing that may be associated with the customer relationship is assessed as low, the obliged entity may apply simplified customer due diligence measures. Simplified customer due diligence means that checks, assessments and investigations under Sections 7, 8 and 10 to 13 may be more limited in scope and carried out in a different way (our translation of Chapter 3, Section 15 of the Swedish AML Act (2017:630)).
Chapter 3, Section 15 of the Swedish AML Act (2017:630)
What it means: At low risk the measures must still be applied, but they may be more limited in scope and carried out in a different way. The assessment that the risk is low must be reflected in the customer's risk profile.
Under AMLR: From 10 July 2027 identity verification at low risk may be postponed to no later than 60 days after the business relationship is established (Article 33(1)(a) of AMLR), whereas the Swedish Act requires verification no later than when the relationship is established (Chapter 3, Section 9).
See also: Enhanced due diligence Customer risk profile Customer due diligence Read the guide: Customer risk assessment: method and example

Enhanced due diligence

Legal definition: Where the risk of money laundering or terrorist financing that may be associated with the customer relationship is assessed as high, particularly extensive checks, assessments and investigations under Sections 7, 8 and 10 to 13 must be carried out. In such a case the measures must be supplemented by the additional measures required to counter the high risk of money laundering or terrorist financing. Such measures may involve obtaining additional information on the customer's business or financial situation and information on where the customer's funds come from (our translation of Chapter 3, Section 16 of the Swedish AML Act (2017:630)).
Chapter 3, Section 16 of the Swedish AML Act (2017:630)
What it means: At high risk the checks must be particularly extensive and supplemented by additional measures. Enhanced measures are always required for PEPs (Chapter 3, Section 19) and for customers established in a high-risk third country (Chapter 3, Section 17).
Under AMLR: From 10 July 2027 Article 34(4) of AMLR lists measures that may be included, such as senior management approval and information on the source of funds and source of wealth of the customer and of the beneficial owners.
See also: Simplified due diligence Customer risk profile Politically exposed person (PEP)High-risk third country Source of funds Read the guide: Customer risk assessment: method and example

Ongoing monitoring

Legal definition: An obliged entity must, on an ongoing basis and as needed, follow up ongoing business relationships in order to ensure that its knowledge of the customer under Sections 7, 8 and 10 to 12 is up to date and sufficient to manage the assessed risk of money laundering or terrorist financing (our translation of Chapter 3, Section 13, first paragraph of the Swedish AML Act (2017:630)).
Chapter 3, Section 13, first paragraph of the Swedish AML Act (2017:630)
What it means: Your knowledge of the customer must be kept up to date for as long as the business relationship lasts. The extent of the follow-up is determined by the customer's risk profile (Chapter 3, Section 14).
Under AMLR: From 10 July 2027 the period between updates of customer information may not exceed 1 year for higher risk customers subject to enhanced measures and 5 years for all other customers (Article 26(2) of AMLR).
See also: Customer due diligence Business relationship Customer risk profile Read the guide: Periodic and event-driven review: how often and when?

Money laundering

Legal definition: In this Act, money laundering means measures relating to money or other property derived from crime or criminal activity which 1. may conceal the property's connection with crime or criminal activity, 2. may promote someone's possibilities to appropriate the property or its value, 3. may promote someone's possibilities to evade legal sanctions, or 4. mean that someone acquires, possesses, claims a right to or uses the property. For the purposes of this Act, measures involving property that are typically suited to conceal that someone intends to enrich themselves or someone else through a future criminal act are to be treated as money laundering (our translation of Chapter 1, Section 6 of the Swedish AML Act (2017:630)).
Chapter 1, Section 6 of the Swedish AML Act (2017:630)
What it means: The definition covers measures that may conceal that property comes from crime or help someone appropriate it. If you have reasonable grounds to suspect money laundering, you must report to the Swedish Police Authority without delay (Chapter 4, Section 3).
Under AMLR: From 10 July 2027 the AMLR definition applies, which refers to Article 3(1) and (5) of Directive (EU) 2018/1673 and expressly includes aiding and abetting, inciting and attempting (Article 2(1), point (1), of AMLR).
See also: Terrorist financing Customer due diligence Read the guide: KYC and customer due diligence: a complete guide

Terrorist financing

Legal definition: In this Act, terrorist financing means such collection, receipt or provision of money or other property as referred to in Section 6 of the Terrorist Offences Act (2022:666) (our translation of Chapter 1, Section 7 of the Swedish AML Act (2017:630)).
Chapter 1, Section 7 of the Swedish AML Act (2017:630)
What it means: The definition refers to Section 6 of the Swedish Terrorist Offences Act. Suspicions must be reported to the Swedish Police Authority in the same way as for money laundering (Chapter 4, Section 3).
Under AMLR: From 10 July 2027 the AMLR definition applies, which refers to Article 11 of Directive (EU) 2017/541 and expressly includes aiding and abetting, inciting and attempting (Article 2(1), point (2), of AMLR).
See also: Money laundering Targeted financial sanctions Read the guide: KYC and customer due diligence: a complete guide

Targeted financial sanctions

Legal definition: “both asset freezing and prohibitions to make funds or other assets available, directly or indirectly, for the benefit of designated persons and entities pursuant to Council Decisions adopted on the basis of Article 29 TEU and Council Regulations adopted on the basis of Article 215 TFEU”
Article 2(1), point (49), of Regulation (EU) 2024/1624 (AMLR). The term is not defined in the Swedish AML Act.
What it means: These are asset freezes and prohibitions on making funds available to persons and entities on the EU sanctions lists. In customer due diligence this means checking the customer and the beneficial owners against those lists.
Under AMLR: From 10 July 2027 verifying whether the customer or the beneficial owners are subject to targeted financial sanctions is part of customer due diligence (Article 20(1)(d) of AMLR), and the business-wide risk assessment must cover the risks of non-implementation and evasion of those sanctions (Article 10(1) of AMLR).
See also: Customer due diligence Business-wide risk assessment Terrorist financing Read the guide: Sanctions screening: what is required and how does it work?

Source of funds

Legal definition: Such measures may involve obtaining additional information on the customer's business or financial situation and information on where the customer's funds come from (our translation of Chapter 3, Section 16, second paragraph of the Swedish AML Act (2017:630)).
Chapter 3, Section 16, second paragraph of the Swedish AML Act (2017:630). The term is not defined in the Act or in Article 2 of AMLR.
What it means: It concerns where the money used in the business relationship or transaction comes from. The information may form part of enhanced measures and is always required for PEPs (Chapter 3, Section 19, point 1) and for customers established in a high-risk third country (Chapter 3, Section 17).
Under AMLR: From 10 July 2027 AMLR distinguishes between source of funds and source of wealth (Articles 34(4)(c) and 42(1)(b) of AMLR), and the source of funds forms part of ongoing monitoring where necessary (Article 20(1)(f) of AMLR).
See also: Enhanced due diligence Politically exposed person (PEP)Ongoing monitoring Read the guide: KYC for real estate agents

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