What are "Pseudonyms" in financial transactions?

Pseudonyms in financial transactions refer to false names used to conceal true identity. This practice is often associated with attempts to obscure the identity of individuals involved in a financial activity, which may be relevant for both legitimate purposes, such as privacy, and illicit purposes, like evading law enforcement. Financial institutions must be diligent in identifying and accurately documenting the true identities of their clients to comply with regulations, such as those set forth by the Bank Secrecy Act.

Using pseudonyms can present challenges in effectively monitoring transactions for suspicious activity, which is why compliance specialists prioritize understanding and identifying these practices. Authentic names of individuals, legally registered names, and public identities do not serve the purpose of masking someone's true identity and are not considered pseudonyms. Therefore, recognizing the use of pseudonyms is crucial in maintaining compliance and preventing financial crimes.