Predicate Offences/Crimes

Predicate Offences are crimes underlying money laundering or terrorist finance activity. Initially, predicate offences were categorized under drug-related offences. Drug-related offences are considered as the primary predicate offences. However, the legislature has broadened the definition of predicate offences to include any serious crime.

Money laundering is the process by which proceeds generated through illegal activities are hidden or disguised.  As such, the money laundering process gets started—for the purposes of criminal prosecution, law enforcement and compliance—only after the commission of some illegal/illicit activity which generates proceeds that need to be laundered.  In legal terms, such illegal activity is termed predicate crime/offence. 

• participation in an organised criminal group and racketeering;
• terrorism, including terrorist financing;
• trafficking in human beings and migrant smuggling;
• sexual exploitation, including sexual exploitation of children;
• illicit trafficking in narcotic drugs and psychotropic substances;
• illicit arms trafficking;
• illicit trafficking in stolen and other goods;
• corruption and bribery;
• fraud;
• counterfeiting currency;
• counterfeiting and piracy of products;
• environmental crime;
• murder, grievous bodily injury;
• kidnapping, illegal restraint and hostage-taking;
• robbery or theft;
• smuggling; (including in relation to customs and excise duties and taxes);
• tax crimes (related to direct taxes and indirect taxes);
• extortion;
• forgery;
• piracy; and
• insider trading and market manipulation. 

Subject to international obligations and legislative and policy prerogatives pertaining to good governance and rule of law, a country can designate its own categories of predicate crimes. For further country specific legislation and resource consult Selected Countries AML-CFT Resource

Illustrative Example:

In the United States, federal criminal money laundering statutes, 18 U.S.C. 1956 and 1957, and to varying degrees several other federal criminal statutes define the offense of money laundering as:

• engaging in a financial transaction involving the proceeds of certain crimes in order to conceal the nature, source, or ownership of proceeds they produced;
• engaging in a financial transaction involving the proceeds of certain crimes in order to promote further offenses;
• transporting funds generated by certain criminal activities into, out of, or through the United States in order to promote further criminal activities, or to conceal the nature, source, or ownership of the criminal proceeds, or to evade reporting requirements;
• engaging in a financial transaction involving criminal proceeds in order to evade taxes on the income produced by the illicit activity;
• structuring financial transactions in order to evade reporting requirements;
• spending more than $10,000 of the proceeds of certain criminal activities;
• traveling in, or use of the facilities of, interstate or foreign commerce in order to distribute the proceeds of certain criminal activities;
• traveling in, or use of the facilities of, interstate or foreign commerce in order to promote certain criminal activities;
• transmitting the proceeds of, or funds to promote, criminal activity in the course of a money transmitting business;
• transmitting funds in the course of an unlawful money transmitting business;
• smuggling unreported cash across a U.S. border;
• failing to comply with the Treasury Department’s anti-money laundering provisions

ENFORCEMENT LANDSCAPE

Based on FATF-GAFI Recommendation 1: Countries should criminalise money laundering on the basis of the United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, 1988 (the Vienna Convention) and the United Nations Convention against Transnational Organized Crime, 2000 (the Palermo Convention). Countries should apply the crime of money laundering to all serious offences, with a view to including the widest range of predicate offences. Predicate offences may be described by reference to all offences, or to a threshold linked either to a category of serious offences or to the penalty of imprisonment applicable to the predicate offence (threshold approach), or to a list of predicate offences, or a combination of these approaches.

Predicate offences for money laundering should extend to conduct that occurred in another country, which constitutes an offence in that country, and which would have constituted a predicate offence had it occurred domestically.

Structure and Mechanism of Legislation, Compliance and Enforcement

Although the initial generation of illicit proceeds and the placement of such proceeds into the financial system occur locally, particularly in today’s world however, the layering and integration of such funds increasingly involve foreign jurisdictions and financial systems. So it is necessary to divide the Requirements and Standards to Combat Money Laundering Combating money laundering into two spheres:

• Domestic
• International

Model Laws, Comprehensive Resources on designing AML-CFT Program and other AML-CFT Program Resources are located on Gobal-FinInt Resources for Effective AML-CFT Program