Glossary

The maker-checker principle requires one person to prepare or initiate a transaction or change, and a different person to review and approve it before it takes effect, so that no one acts alone.

A management action plan is management's written commitment to fix an audit or review finding, stating what will be done, who is responsible, and by what date.

Management override of controls occurs when someone in a position of authority bypasses controls that apply to others, to commit fraud, manipulate results or hide problems. Auditors treat it as a risk present in every organisation.

A management representation letter is a signed statement from management to the external auditor confirming key facts and responsibilities, such as having given full access to records and disclosed all known fraud and related parties.

Mandatory disclosure rules require taxpayers or their advisers to report certain tax arrangements, such as aggressive schemes or hidden ownership structures, to the tax authority within a set time.

Maritime sanctions evasion is the use of ship-based methods, such as switching off tracking, false flags and mid-ocean cargo transfers, to hide the origin, destination or owner of sanctioned cargo.

Market abuse is the umbrella term for behaviour that distorts fair trading in financial markets, mainly insider dealing, unlawful disclosure of inside information and market manipulation.

Market integrity is the state in which financial markets operate fairly and openly, without deceit, so that prices reflect genuine supply and demand and no participant gains from cheating or secret advantage.

Market liquidity risk is the chance that an asset cannot be sold quickly enough, or in the size wanted, without pushing its price down noticeably. The loss comes from the exit cost, not from the asset itself.

Market manipulation is deliberate conduct that gives false or misleading signals about the price, supply or demand of a financial instrument, or holds its price at an artificial level, to profit or mislead others.

Market risk is the possibility of loss when market prices or rates move against a position, including share prices, interest rates, exchange rates and commodity prices. It affects anyone who holds assets or liabilities that are revalued daily.

Market surveillance is the monitoring of orders, trades and prices, by exchanges, regulators and firms, to detect market abuse, rule breaches and disorderly trading.

Marketing authorisation is a regulator's formal permission to sell a medicine in a country or region, granted after reviewing evidence on its quality, safety and effectiveness.

MiFID II is the European Union framework governing investment firms, trading venues and the sale of financial instruments, aimed at protecting investors and making markets more transparent. A companion regulation, MiFIR, sits beside it.

A material weakness is a flaw in financial reporting controls, or several smaller flaws together, serious enough that a significant error in the accounts could slip through without being caught in time.

Materiality is the threshold of size or nature above which a mistake or omission would change what readers of a report, such as investors, lenders or regulators, decide.

A materiality assessment is the process a company uses to identify, rank and approve the sustainability topics that matter most, either to its stakeholders, to its finances, or to both, as the basis for reporting.

MTPD is the longest time an activity can be stopped before the harm to the organisation becomes unacceptable, such as threatened survival, major legal breach or loss of customers.

Mens rea is the mental element of a crime: the intention, knowledge or recklessness that the prosecution must usually prove alongside the prohibited act itself.

Merger control is the review by a competition authority of mergers, takeovers and some joint ventures, to decide whether the deal would significantly reduce competition and so should be cleared, changed or blocked.

Minority shareholder protection covers the laws and practices that stop controlling shareholders and managers from using their power to take value from smaller investors or treat them unfairly.

Mis-selling is selling a product or service in a way that is misleading, pressured or unsuitable for the customer, so that they buy something they would not have chosen with fair information.

Misconduct is behaviour by a member of an organisation or profession that breaks its rules, the law or accepted standards, such as fraud, harassment, falsifying records or abuse of position.

Misrepresentation is a false statement of fact, or a misleading silence, that leads another party to enter a contract or make a decision, and which gives that party legal remedies.

Misuse of legal persons and arrangements is the use of companies, partnerships, trusts and foundations to hide who owns or controls assets, so that crime proceeds, tax evasion or sanctioned activity can be concealed.

Model drift is the gradual loss of a model's accuracy because the data or relationships it was built on have changed. Predictions that once worked begin to miss, often without any visible error.

A model inventory is a central register of every model or AI system an organisation uses, recording its purpose, owner, status and risk rating so that none escapes review.

Model risk is the risk of loss or wrong decisions because a model is flawed, built on poor data, or used outside its intended purpose. The idea covers both errors in a model and misuse of it.

Model validation is the independent testing of a model to confirm that it is sound, fits its stated purpose and performs as expected. People who did not build the model carry it out.

Modern slavery is the exploitation of people through forced labour, debt bondage, servitude or trafficking, where someone is controlled by another and cannot freely leave, even though no one legally owns them.

A modified audit opinion is an audit report that is not clean: it is qualified, adverse or a disclaimer, because the statements contain a material misstatement or the auditor could not obtain enough evidence.

Momentum ignition is a manipulation tactic in which a trader places aggressive orders or trades to start a rapid price move, hoping others join in, then trades against the trend they triggered.

Money laundering is the process of disguising money obtained from crime so that it appears to come from a lawful source and can be used without drawing attention to its origin.

The MLRO is the senior person in a regulated firm who receives internal suspicion reports, decides whether to report them to the authorities, and oversees the firm's anti-money laundering arrangements.

A money mule is a person who receives and passes on money for someone else, knowingly or not, often for a small fee, helping criminals move illegal funds through their own bank account.

A money or value transfer service is a business that accepts cash or other value in one place and pays a matching sum to someone elsewhere, by message, transfer or a network it belongs to.

A monitorship is an arrangement, usually imposed in a settlement or order, in which an independent expert reviews a firm's compliance and reports on whether it is fixing the problems that led to enforcement.

Monte Carlo simulation is a technique that runs thousands of trials with randomly drawn inputs to show the range of possible outcomes and how likely each one is.

Moral hazard arises when protection from loss changes behaviour: a party covered against the downside takes chances, or less care, that it would avoid if it paid for failure itself.

A mutual evaluation report is the published result of a peer review in which FATF or a regional body assesses how well a country's laws and institutions fight money laundering and terrorist financing.

Mutual legal assistance is the formal process by which one country asks another to help with a criminal investigation or prosecution, for example by taking evidence, serving documents or freezing assets.