Predicate crimes, also called predicate offences, are the underlying criminal acts that generate proceeds which may then be laundered. FATF’s glossary says criminal activity means all criminal acts that would constitute a predicate offence for money laundering in a country, or at minimum those offences required by FATF Recommendation 3. UNODC similarly explains that a predicate offence is an offence whose proceeds may become the subject of money-laundering offences.
Key Takeaways
- Predicate Crimes Are the Underlying Offences That Generate Criminal Proceeds
- Money Laundering Depends on the Existence of Illicitly Derived Property
- Fraud Is a Major Predicate Crime for Money Laundering
- Bribery and Corruption Can Generate Launderable Proceeds
- Drug Trafficking Remains a Significant Predicate Offence
- Human Trafficking and Smuggling Can Generate Criminal Proceeds
- Tax Crimes Can Act as Predicate Offences
- Environmental Crime Can Feed Money Laundering Networks
- Market Manipulation and Securities Fraud Can Generate Illicit Proceeds
- Cybercrime Can Create Proceeds That Subsequently Require Laundering
- Predicate Offence Coverage Determines the Breadth of an AML Framework
- FATF Standards Require Broad Coverage of Serious Predicate Offences
- Predicate Crime Intelligence Helps Explain the Source of Suspicious Funds
- Different Predicate Crimes Produce Different Financial Behaviour
- Customer, Product and Geographic Risk Influence Predicate Crime Exposure
- Transaction Monitoring Should Reflect Relevant Predicate Crime Typologies
- Identifying the Predicate Offence Can Strengthen Financial Investigations
- Multiple Predicate Crimes Can Converge Within the Same Criminal Network
- Predicate Crime Analysis Connects Fraud, AML and Wider Financial Crime Controls
- Effective AML Requires Understanding the Criminal Activity Behind the Money
In the financial crime environment, predicate crimes matter because money laundering does not exist in isolation. There must first be criminal property or illicit proceeds to launder. Fraud, corruption, trafficking, tax crimes, environmental crime, market manipulation, and many other offences can all serve as the source of dirty money. FATF Recommendation 3 requires countries to apply the crime of money laundering to all serious offences and, at minimum, to offences within the designated categories of offence.
Watch on YouTube: Predicate Crimes
From a professional perspective, predicate crimes are important because they determine what kinds of criminal proceeds an AML framework is trying to detect and disrupt. If a jurisdiction defines predicate offences too narrowly, serious criminal conduct may generate proceeds that fall outside the money laundering regime. FATF’s standards are designed to avoid that gap by requiring broad coverage of serious criminal conduct rather than limiting AML exposure to a few traditional offences.
This is why predicate crimes are central to AML risk assessment. A firm is not only looking for “money laundering” in the abstract; it is trying to identify funds that may derive from some underlying offence. In practice, that means AML controls should be informed by the typologies of the underlying crimes most relevant to the institution’s customers, products, and geographies. UNODC’s explanation of money laundering as the processing of criminal proceeds to disguise their illegal origin supports this connection directly.
What Financial Institutions Should Consider
- Map Relevant Predicate Crimes to the Institution’s Risk Profile
- Incorporate Predicate Crime Typologies Into AML Risk Assessments
- Align Transaction Monitoring With Relevant Underlying Offences
- Integrate Fraud Intelligence With AML Monitoring
- Use Corruption Indicators to Strengthen Money Laundering Detection
- Incorporate Tax Crime Risk Where Legally Relevant
- Monitor Proceeds Linked to Cybercrime Typologies
- Assess Environmental Crime Exposure in Higher-Risk Sectors
- Connect Market Abuse Intelligence With AML Investigations
- Analyse Customer Activity for Signs of Underlying Criminal Conduct
- Integrate Predicate Offence Intelligence Into Customer Risk Scoring
- Use Network Analytics to Identify Connected Criminal Activity
- Review Source of Funds for Potential Criminal Origins
- Strengthen Source of Wealth Analysis in Higher-Risk Cases
- Conduct Retrospective Reviews When New Predicate-Offence Intelligence Emerges
- Share Relevant Intelligence Across Fraud, AML and Investigations Teams
- Escalate Suspicious Activity Even Where the Predicate Crime Is Uncertain
- Maintain Typology Libraries Covering Major Predicate Offences
- Train Investigators to Look Beyond the Immediate Transaction Pattern
- Treat Predicate Crime Understanding as a Core Component of Effective AML
Ultimately, predicate crimes are the criminal source of laundered funds. They are significant in the financial crime environment because they link the underlying offence to the later laundering process and define the scope of conduct that AML laws and controls are meant to address. Without predicate crimes, there are no criminal proceeds to launder; without broad predicate-offence coverage, the AML framework is incomplete.
