Predicate offence
Also called predicate crime, underlying offence, specified unlawful activity
A predicate offence is the underlying crime that generates the money later laundered. Fraud, drug trafficking and tax evasion are common examples. Money laundering charges depend on showing that funds came from criminal conduct, so the predicate offence defines what counts as criminal proceeds.
How it works
Countries define predicate offences in one of two main ways. Some list specific crimes or set a penalty threshold. Others, including the UK, treat any criminal conduct as a predicate, known as the all crimes approach. FATF sets a minimum range of designated categories of offences, which has included tax crimes since 2012. Banks map these categories into risk assessments and typologies.
The scope of predicate offences sets the scope of a firm's reporting duties. A wider list means more activity can amount to laundering and more suspicions fall to be reported. Cross-border cases add complexity, because conduct abroad can still create criminal property under UK law. Firms train staff to recognise the proceeds of crime, not to prove the original offence.
The rules
Requires countries to criminalise money laundering and apply it to the widest range of predicate offences, covering at least the FATF designated categories of offences.
All FATF member jurisdictionsSets a harmonised list of 22 categories of predicate offences, including environmental crime and cybercrime, with transposition due by 3 December 2020.
EU member statesDefines criminal property as the benefit from any criminal conduct, so any offence can serve as a predicate offence for money laundering.
Any person in the UKCriminalises laundering the proceeds of specified unlawful activity, the defined list that serves as the US set of predicate offences.
Persons subject to US jurisdictionCommon questions
Does a firm need to prove the predicate offence to report?
No. Reporting duties turn on knowledge or suspicion that funds are criminal property. A firm does not need to identify the exact predicate crime before filing a suspicious activity report with the financial intelligence unit.
Is tax evasion a predicate offence?
Yes, in most jurisdictions. FATF added tax crimes to its designated categories of offences in 2012. The UK and EU both treat tax evasion as a predicate offence for money laundering.
What is the all crimes approach?
Under an all crimes approach, any criminal conduct can generate laundered proceeds. The UK uses this model. Other countries use a list of offences or a threshold based on the penalty, such as crimes punishable by more than one year in prison.
