Glossary

A facilitation payment is a small, unofficial payment made to a public official to speed up or secure a routine action the payer is already entitled to, such as processing a visa or releasing goods.

FMEA is a step-by-step method for listing every way a process, product or system could fail, then ranking each failure by severity, likelihood and how easily it would be detected.

A failure to prevent offence makes a company criminally liable when someone connected to it commits bribery, fraud or tax evasion for its benefit, unless it can show it had reasonable procedures in place.

Fair lending is the principle, backed by law in many countries, that credit must be offered and priced on the borrower's creditworthiness and not on protected traits such as race, sex, religion or age.

Fair value measurement values an asset or liability at the price it could be sold for, or a liability transferred at, in an ordinary transaction between willing market participants on the reporting date, rather than at historical cost.

Fairness in AI means that a system's decisions do not unjustly disadvantage people or groups, particularly on protected characteristics such as sex, race, age or disability.

False billing is a scheme in which fake, inflated or duplicate invoices are submitted to obtain payment for supplies that were never delivered or were worth far less than billed.

A false negative is a case where a test, model or control says nothing is wrong when something actually is, so a real problem goes undetected.

A false positive is an alert raised by a test, model or control when nothing is actually wrong, which costs reviewers time and can delay legitimate activity.

The FATF Recommendations are the international standards for fighting money laundering, terrorist financing and proliferation financing, which countries adopt in law and which are assessed in peer reviews.

FATF-style regional bodies are regional organisations that apply the FATF standards among their members, run mutual evaluations and give technical help, extending FATF's reach to countries that are not FATF members.

Fault tree analysis starts from one undesired event and works backwards, using logic gates to map every combination of faults that could cause it.

The FCPA is a United States law, passed in 1977, that bans paying bribes to foreign officials to win or keep business and requires listed companies to keep accurate books and sound internal controls.

A fiduciary duty is a legal obligation to act in the best interests of another person who trusts you with power or property, placing their interests above your own and avoiding conflicts.

Financed emissions are the greenhouse gas emissions of the borrowers and investees that a bank, insurer or investor funds, assigned to the financial institution in proportion to its share of the financing.

The FATF is the intergovernmental body that sets global standards against money laundering, terrorist financing and proliferation financing, and checks how well countries apply them.

The financial close and reporting process is the set of steps finance teams follow at each period end to finalise the books, check balances and produce accurate financial statements for management, owners and regulators.

Financial crime compliance is the function and set of controls through which a firm prevents, detects and reports money laundering, terrorist financing, sanctions breaches, fraud, and bribery and corruption.

Financial inclusion means that individuals and small businesses, including poorer and remote ones, can reach useful and affordable financial products such as accounts, payments, credit, insurance and savings.

A financial intelligence unit is a national agency that receives, analyses and passes on reports from banks and other businesses about suspected money laundering, terrorist financing and the proceeds of crime.

Financial materiality is the test of whether a sustainability matter could reasonably affect a company’s cash flows, access to finance or value, and therefore whether investors would want to know about it.

A financial ombudsman is an independent body that resolves disputes between customers and financial firms, usually free to the customer, with decisions that bind the firm or carry strong regulatory weight.

Financial risk is the possibility of losing money or value through the way an organisation lends, invests, trades or funds itself. Credit, market and liquidity risk are its main forms.

Financial sanctions are legal restrictions on financial dealings with a target, such as freezing assets, banning loans or investment, or cutting off access to banking and capital markets.

Financial statement fraud is the deliberate misstatement or omission of figures or disclosures in a company's accounts to mislead investors, lenders, regulators or other users about its real performance or position.

Fit and proper criteria are the tests used to decide whether a person is suitable to be a director or senior officer, looking at honesty, integrity and reputation, competence and experience, and financial soundness.

Force majeure is a contract clause, or in some legal systems a doctrine, that excuses or delays a party’s performance when an extraordinary event beyond its control, such as flood or war, prevents it from performing.

Forced labour is work extracted from a person by coercion, such as violence, debt, confiscated documents or threats of dismissal or deportation, when the person has not freely agreed to do it.

FATCA is a United States law that requires non-US financial institutions to identify accounts held by US taxpayers and report them to the US tax authority, or face a withholding tax on US-source payments.

Foreign direct investment is money that an investor from one country puts into a business in another, intending to stay and to have a real say in how that business is run.

Foreign exchange risk is the chance of gain or loss from changes in exchange rates, affecting the value of money received or owed in a foreign currency, or of assets and liabilities held abroad.

An FFI is a financial firm based outside the United States, such as a bank, custodian, broker, fund or certain insurer, that must follow FATCA rules on identifying and reporting US account holders.

A foreign public official is anyone serving a foreign state, whether in its parliament, civil service, courts or a public agency, and often staff of state-owned companies. Anti-bribery laws treat payments to them with special strictness.

Forensic accounting applies accounting, auditing and investigative skills to financial records to establish facts about fraud or disputes, in a form that can be used in court, regulatory action or negotiation.

Forgery is the making, altering or using of a false document, signature or object so that it appears genuine, with the intention of deceiving someone or causing a loss.

Fourth-party risk is the risk that comes from the subcontractors and suppliers a firm's own vendors rely on, with whom the firm has no contract and often little visibility.

Fraud is dishonest deception, by a false statement, concealment or abuse of position, carried out to gain money or advantage for oneself or others, or to cause loss to another.

Fraud awareness training teaches staff, agents, customers or the public how fraud schemes work, what warning signs look like and how to report concerns, so that fewer deceptions succeed.

Fraud detection is the process of identifying suspected fraudulent activity after or while it happens, using rules, statistical models, data analysis, alerts and human reports, so that cases can be investigated.

A fraud risk assessment is a structured exercise that identifies where and how fraud could occur in an organisation, rates the likelihood and impact, and tests whether existing controls address those risks.

A fraud risk governance framework is the set of roles, policies, controls and reporting through which a board and management oversee, prevent, detect and respond to fraud across the whole organisation.

The fraud triangle is a model saying that people commit workplace fraud when three conditions meet: pressure to act, a perceived opportunity, and a way to justify the act to themselves.

A fraudulent conveyance is a transfer of assets made to keep them from creditors, or made for far less than their worth while insolvent, which a court can undo so that creditors can reach the property.

Free trade zone risk is the exposure to money laundering, sanctions evasion and customs fraud that arises because goods and companies in free trade zones face lighter customs, tax and oversight rules.

A front company is a real, trading business that is used to mix criminal funds with its genuine takings, or to give a legitimate appearance to illegal activity run behind it.

Front running is trading ahead of a client’s or the firm’s own large order, using knowledge of it, so as to profit from the price move the order is expected to cause.

The Fundamental Review of the Trading Book is the Basel Committee's redesign of capital rules for market risk, changing the line between trading and banking books and how trading losses are measured.

Funding liquidity risk is the risk that an institution cannot raise cash or refinance debts when needed, or can only do so at a very high cost, and so cannot meet its payments as they fall due.

A funnel account is a bank account that collects deposits from many people or places, often far from where the account is held, and from which the money is quickly moved on to another destination.