What does 'Watch List' mean?

Watch List in the context of Anti-Money Laundering (AML) refers to a curated list of individuals, entities, or organizations that are flagged as potentially high-risk due to involvement in illicit activities, such as money laundering or terrorism financing. These lists often include sanctions lists, politically exposed persons (PEPs), or individuals under investigation by regulatory authorities. AML software integrates watch lists to automatically screen customers, transactions, and activities against these records. If a match is found, the software triggers alerts for further investigation, helping organizations comply with legal requirements and reduce the risk of engaging in illegal financial activities.