FIFinancial Institution
Any entity that provides financial services, such as banks, credit unions, broker-dealers, insurers, money services businesses, payment institutions, e-money issuers and fintechs. Which entities count as financial institutions for AML/CFT purposes, and which obligations apply to them, is set by the law of each jurisdiction.
Why it matters
Whether a business is legally a financial institution decides whether it must run an AML/CFT program. In the US, the Bank Secrecy Act lists the covered categories in 31 U.S.C. 5312, from insured banks and broker-dealers to money transmitters and casinos. In the EU, the Anti-Money Laundering Regulation sets out the obliged entities, and FATF standards define financial institutions by the activities they carry out rather than by their license type.
Once in scope, an institution must typically identify and verify customers, assess customer and business risk, monitor transactions, screen against sanctions lists, keep records and report suspicious activity to the national financial intelligence unit.
The perimeter keeps widening. Payment firms, embedded finance providers and crypto-asset service providers are now covered in most major jurisdictions, so many newer financial institutions face bank-grade monitoring expectations without bank-sized compliance teams.
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