Predicate Offence definition and meaning | AML glossary
Predicate offence definition: What it means in AML compliance.
A predicate offence refers to a criminal activity that generates illicit proceeds, which can then be laundered through money laundering schemes. Under Anti-Money Laundering (AML) laws, predicate offences are the criminal acts that lay the foundation for money laundering. These offences are often related to drug trafficking, fraud, corruption, or tax evasion. Once illegal funds are generated through these activities, they can be integrated into the financial system through laundering.
Common types of predicate offences.
Some common predicate offences include:
- Drug trafficking: Illicit drugs are produced, distributed, and sold for profit, generating illegal funds.
- Fraud: Financial fraud, such as investment fraud or credit card fraud, creates proceeds that can be laundered.
- Tax evasion: Evading tax obligations generates illegal financial gains that are often laundered.
- Corruption: Bribery, kickbacks, and other corrupt practices generate illegal profits.
- Human trafficking: The exploitation of individuals for forced labour or sexual services produces criminal revenue.
Why predicate offences matter to compliance.
Understanding and identifying predicate offences is crucial for compliance because these criminal activities provide the financial foundation for money laundering. Compliance teams must ensure they are detecting and reporting suspicious activities tied to these offences to:
- Stay compliant: Adhering to AML regulations, which require monitoring and reporting of criminal activities.
- Prevent financial crime: Identifying predicate offences helps prevent money laundering and protects businesses from becoming complicit in criminal activities.
- Avoid legal consequences: Failing to identify predicate offences can lead to fines, legal penalties, and reputational damage.
How technology can help detect predicate offences,
Technology plays a critical role in identifying and addressing predicate offences by enabling businesses to:
- Monitor transactions: Detect unusual or suspicious transactions that may indicate funds linked to criminal activity.
- Client screening: Use automated screening tools to identify individuals and entities involved in predicate offences, including sanctions and watchlists.
- Analyse data: Leverage AI and machine learning to analyse large data sets for patterns that may point to illicit activities linked to predicate offences.
By incorporating advanced technology, businesses can better identify and mitigate risks related to predicate offences and stay compliant with anti-money laundering regulations.
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