High-Risk Banking Glossary
The terms that decide whether your business gets banked, kept, or offboarded. Plain definitions first, then the operator consequence: what each one actually costs or changes for a business like yours.
De-risking
De-risking is a bank’s decision to exit or refuse entire categories of client, rather than assess each business individually, in order to avoid the compliance cost of monitoring them.
EMI (Electronic Money Institution)
An Electronic Money Institution is a regulated entity, licensed separately from a bank, authorized to issue e-money and provide payment accounts and services.
Correspondent Banking
Correspondent banking is the arrangement where one bank holds accounts for and executes payments on behalf of another bank, usually to reach currencies or jurisdictions the first bank cannot access directly.
Segregated Account
A segregated account holds client funds separately from a firm’s own operating capital, so client money is never at risk if the firm becomes insolvent.
SWIFT / SEPA
SWIFT is the global messaging network banks use to instruct cross-border wire transfers; SEPA (Single Euro Payments Area) is the EU scheme for standardized euro transfers between member-state banks, typically same-day or next-day.
Offboarding
Offboarding is a bank or acquirer’s process for closing an existing account, typically triggered by a compliance review, a policy change on the client’s sector, or a ratio breach, rather than a specific fraud finding.
IBAN (International Bank Account Number)
An IBAN is the standardised format for identifying a bank account across borders, encoding the country, bank, and account number in a single string.
IBAN Discrimination
IBAN discrimination is a business rejecting a payment or direct debit because the customer’s IBAN is from a different SEPA country than expected.
Safeguarding
Safeguarding is the regulatory obligation on EMIs and payment institutions to protect customer funds by holding them separately from the firm’s own money, typically in a segregated account at a credit institution or covered by an insurance arrangement, so customers are repaid if the firm fails.
Multi-Currency Account
A multi-currency account holds and transacts in several currencies from a single account, letting a business receive, hold, and pay out in each without a forced conversion on every transaction.
High-Risk Merchant
A high-risk merchant is a business that card networks and acquirers classify as carrying elevated risk of chargebacks, fraud, or regulatory exposure, based on its industry, model, or history.
Pre-Approval
Pre-approval is an informal read on whether an institution is likely to accept an applicant before a formal application is filed, based on the business profile, jurisdiction, and file quality.
De-banking
De-banking is the closure of an individual or business account by a bank that no longer wants the relationship, often for risk or reputational reasons rather than any specific wrongdoing.
Rolling Reserve
A rolling reserve is a percentage of each settlement an acquirer withholds for a set period, typically 90-180 days, to cover potential future chargebacks or refunds before releasing it back to the merchant.
MCC (Merchant Category Code)
A Merchant Category Code is a four-digit number card networks assign to classify what a merchant sells, used by acquirers and issuers to price risk and route transactions.
Acquirer
An acquirer is the bank or financial institution that processes card payments on a merchant’s behalf, settling funds from the card networks into the merchant’s account.
PSP (Payment Service Provider)
A Payment Service Provider aggregates payment processing for merchants, typically holding the direct acquirer relationship itself and onboarding merchants under its own risk appetite, rather than each merchant applying to an acquirer directly.
Settlement
Settlement is the transfer of cleared transaction funds from the card network or payment rail into the merchant’s bank account, net of fees, chargebacks, and any reserve withheld.
MDR (Merchant Discount Rate)
The Merchant Discount Rate is the total percentage an acquirer or PSP charges a merchant on each card transaction, bundling interchange, card-scheme fees, and the processor’s own margin.
Interchange
Interchange is the fee the card-issuing bank charges on each transaction, set by the card networks and passed through to the merchant as part of the processing cost.
3D Secure (3DS)
3D Secure is the authentication layer that verifies a cardholder during an online purchase, through the card networks’ programmes such as Visa Secure and Mastercard Identity Check.
Chargeback Representment
Chargeback representment is the process of contesting a disputed transaction by submitting evidence to the issuing bank that the charge was valid: proof of delivery, authentication records, and terms accepted.
MSB (Money Services Business)
A Money Services Business is a firm that transmits money, exchanges currency, or deals in similar services, subject to registration and AML obligations in most jurisdictions.
Authorisation Rate
Authorisation rate is the share of attempted transactions that issuing banks approve rather than decline.
APM (Alternative Payment Method)
An Alternative Payment Method is any way to pay that is not a traditional card: bank transfers, e-wallets, open banking, vouchers, and local schemes.
VASP (Virtual Asset Service Provider)
A Virtual Asset Service Provider is a business registered or licensed to exchange, custody, or transfer crypto assets on behalf of customers, a classification introduced by the FATF Travel Rule and adopted into national registration regimes across most jurisdictions that touch fiat rails.
CASP (Crypto-Asset Service Provider)
Crypto-Asset Service Provider is the MiCA-era EU term replacing national VASP registrations for firms providing custody, exchange, trading platform, or advisory services on crypto-assets.
MiCA (Markets in Crypto-Assets)
MiCA is the EU’s harmonized regulatory framework for crypto-assets, covering issuers of asset-referenced and e-money tokens plus CASPs providing exchange, custody, and trading services.
EMI Licence
An EMI licence is the authorisation a regulator grants a firm to operate as an Electronic Money Institution: issuing e-money and providing payment accounts and services.
Payment Institution (PI)
A Payment Institution is a firm licensed to provide payment services, such as executing transfers, acquiring transactions, or issuing payment instruments, without issuing e-money.
Capital Requirement
A capital requirement is the minimum amount of own funds a regulator obliges a licensed payments or e-money firm to hold, sized to its licence type and activity, so it can absorb losses and wind down safely.
FCA (Financial Conduct Authority)
The Financial Conduct Authority is the United Kingdom’s regulator for financial services firms, including EMIs, payment institutions, and many crypto businesses for AML purposes.
MGA (Malta Gaming Authority)
The Malta Gaming Authority is Malta’s regulator for online and land-based gaming, and one of the most widely recognised iGaming licensors.
CySEC (Cyprus Securities and Exchange Commission)
The Cyprus Securities and Exchange Commission is Cyprus’s financial regulator, widely used to license forex and investment firms operating across the EU.
On/Off-Ramp
An on-ramp converts fiat currency into crypto; an off-ramp converts crypto back into fiat.
Stablecoin
A stablecoin is a crypto-asset designed to hold a steady value by referencing a fiat currency or other asset, most commonly the US dollar.
MATCH List (TMF)
MATCH (Mastercard’s Member Alert to Control High-risk Merchants), often called the Terminated Merchant File or TMF, is a shared database acquirers check before onboarding a new merchant.
Chargeback Ratio (VAMP)
Chargeback ratio is the share of transactions disputed by cardholders against total transaction count in a given month.
KYB (Know Your Business)
Know Your Business is the due-diligence process banks, EMIs, and acquirers run to verify a corporate applicant: beneficial ownership, incorporation documents, source of funds, and the nature of the business itself.
Underwriting
Underwriting is the risk-assessment process a bank, EMI, or acquirer runs on an applicant before approval: verifying ownership, source of funds, transaction history, and sector-specific risk factors against the institution’s published or internal risk appetite.
KYC (Know Your Customer)
Know Your Customer is the process of verifying the identity of an individual customer: their name, address, date of birth, and identity documents, before and during a business relationship.
AML (Anti-Money Laundering)
Anti-Money Laundering is the framework of laws, controls, and monitoring a regulated firm must run to detect and prevent the movement of illicit funds.
CDD (Customer Due Diligence)
Customer Due Diligence is the baseline set of checks a regulated firm performs on every customer: verifying identity, understanding the purpose of the relationship, and assessing the risk they present.
EDD (Enhanced Due Diligence)
Enhanced Due Diligence is the deeper set of checks a firm applies to higher-risk customers: politically exposed persons, high-value clients, or those in high-risk jurisdictions.
MLRO (Money Laundering Reporting Officer)
A Money Laundering Reporting Officer is the named individual a regulated firm appoints to oversee its AML programme and file suspicious activity reports with the national financial intelligence unit.
PEP (Politically Exposed Person)
A Politically Exposed Person is an individual entrusted with a prominent public function, along with their close associates and family, who therefore carries a higher risk of bribery or corruption.
UBO (Ultimate Beneficial Owner)
An Ultimate Beneficial Owner is the natural person who ultimately owns or controls a company, typically defined as holding more than 25% of shares or voting rights, or otherwise exercising control.
Source of Funds
Source of funds is the documented origin of the specific money moving through an account: where a given deposit or the working capital actually came from.
Sanctions Screening
Sanctions screening is the checking of customers, counterparties, and transactions against government and international sanctions lists, such as those maintained by the UN, EU, OFAC, and the UK.
Travel Rule
The Travel Rule is a FATF requirement that obliges virtual asset service providers to collect and pass on originator and beneficiary information alongside crypto transfers above a set threshold, mirroring the data long required for traditional wire transfers under FATF Recommendation 16.
SAR (Suspicious Activity Report)
A Suspicious Activity Report is the formal report a regulated firm, through its MLRO, files with the national financial intelligence unit when it suspects a transaction or customer may involve money laundering or other financial crime.
Adverse Media Screening
Adverse media screening is the checking of a customer, owner, or counterparty against negative news sources: reports of fraud, regulatory action, sanctions, or criminal association.
Chain Analytics
Chain analytics is the analysis of blockchain transactions to trace the origin, destination, and risk of crypto funds, using tools that score wallets and flag exposure to sanctioned addresses, mixers, or illicit sources.
FIU (Financial Intelligence Unit)
A Financial Intelligence Unit is the national body that receives, analyses, and acts on suspicious activity reports and other financial-crime intelligence from regulated firms.
These terms show up throughout our writing on banking, processing, and licensing for high-risk operators.
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