What is a Predicate Crime or Predicate Offence?

In the world of criminal law and financial regulations, the term "predicate crime" or "predicate offense" is frequently used. Understanding what constitutes a predicate crime is essential for grasping the concept of money laundering and its ties to criminal activity.

Understanding the Basics of Predicate Crimes

In its simplest form, a predicate crime is an underlying criminal act that serves as the foundation for money laundering schemes. These offences typically involve illegal activities such as drug trafficking, human trafficking, corruption, fraud, or terrorist financing. The predicate crime itself is distinct from the subsequent act of money laundering, which involves disguising the origin of the illicit funds.

By focusing on the underlying criminal activity rather than the proceeds themselves, authorities can target both the predicate offense and the subsequent act of money laundering. This approach is crucial for effective law enforcement and the prevention of financial crimes.

It is important to note that predicate crimes can vary significantly in complexity and scale. For example, drug trafficking, one of the most common predicate crimes, involves the illegal production, distribution, and sale of controlled substances. The proceeds from drug trafficking are often laundered through legitimate businesses or financial institutions to conceal their illicit origins.

Similarly, human trafficking, another prevalent predicate crime, involves the exploitation and coercion of individuals for forced labour or commercial sex work. The profits generated from human trafficking are frequently laundered through complex networks of shell companies and offshore accounts to evade detection by law enforcement agencies.

The Relationship Between Predicate Crimes and Money Laundering

Money laundering is the process of making illicitly obtained funds appear legitimate by blending them with legal transactions. However, money laundering cannot occur without a predicate offence. The illicit funds generated from crimes need to be washed through various transactions, often in different jurisdictions, to obscure their origin.

For instance, drug traffickers might use shell companies, offshore accounts, or real estate purchases to hide their profits and make them seem legitimate. By using these complex and convoluted techniques, criminals aim to distance themselves from the initial predicate offence, making it difficult for authorities to trace the illegal funds back to their source.

It is important to understand that predicate crimes can vary widely and are not limited to drug trafficking. Other common predicate offences include human trafficking, corruption, fraud, and terrorism. Each of these crimes generates illegal proceeds that criminals seek to legitimize through money laundering.

In recent years, the rise of digital currencies like Bitcoin has added a new layer of complexity to money laundering schemes. Criminals can now easily transfer and conceal funds through anonymous online transactions, making it even more challenging for law enforcement agencies to track and intercept illicit financial flows.

The Role of Predicate Crimes in Organized Crime

Predicate crimes play a significant role in the world of organized crime. Criminal networks and syndicates often rely on these offences to generate vast amounts of illicit proceeds. The revenue gained from predicate offences fuels their illegal operations, including drug trafficking, arms smuggling, and human trafficking.

By engaging in a portfolio of criminal activities, organized crime groups diversify their revenue streams, making it more difficult for law enforcement to disrupt their operations. Moreover, the profits generated from these predicate offences are often used to corrupt officials, fund further criminal enterprises, and exert control in vulnerable communities.

One key aspect of predicate crimes is their ability to provide a steady stream of income for organized crime groups. This financial stability allows these criminal organizations to expand their reach and influence, creating a cycle of criminal activity that can be challenging to break. Additionally, the interconnected nature of predicate crimes means that disrupting one aspect of the operation may not be enough to dismantle the entire network.

Furthermore, the use of technology has enabled organized crime groups to conduct predicate crimes on a global scale, exploiting vulnerabilities in financial systems and communication networks. This international reach makes it increasingly difficult for law enforcement agencies to track and apprehend individuals involved in these illicit activities. As a result, the fight against organized crime requires a coordinated effort at the national and international levels to effectively combat the various predicate offences that sustain these criminal enterprises.

Global Efforts to Combat Predicate Offenses

Recognizing the pervasive threat posed by predicate offences, countries worldwide have implemented measures to combat them effectively. International cooperation and collaboration play a crucial role in addressing this issue, as crime knows no borders. Several organizations have taken the lead in coordinating global efforts to combat predicate crimes and money laundering.

The Financial Action Task Force (FATF), an intergovernmental body, has developed international standards and recommendations to combat money laundering and the financing of terrorism. These standards provide guidance to member countries and set out best practices to prevent and detect predicate offences.

In addition to the FATF, the Egmont Group of Financial Intelligence Units serves as a vital network for information exchange and cooperation among financial intelligence units worldwide. This collaboration enables the timely sharing of intelligence related to predicate offences, enhancing the ability of countries to investigate and prosecute financial crimes effectively.

Furthermore, regional organizations such as the European Union Agency for Law Enforcement Cooperation (Europol) and the Asia/Pacific Group on Money Laundering (APG) play significant roles in facilitating cross-border investigations and operations to combat predicate offences. These organizations provide platforms for law enforcement agencies and financial intelligence units to work together, pooling resources and expertise to tackle money laundering and related crimes on a global scale.

FATF Predicate Offences

While the specific predicate crimes may vary from one jurisdiction to another, the FATF has identified a range of offences that commonly serve as predicates for money laundering. These include drug trafficking, corruption, fraud, tax evasion, environmental crimes, and illegal arms trading, among others.

Here's the complete list:

• Arms Trafficking   
• Corruption & Bribery
• Counterfeiting Currency
• Counterfeiting Products
• Drug Trafficking
• Environmental Crime
• Extortion
• Forgery
• Fraud
• Human Trafficking / Migrant Smuggling
• Insider Trading & Market Manipulation
• Kidnapping, Illegal Restraint, and Hostage-taking
• Organized Crime / Racketeering
• Piracy
• Robbery or Theft
• Sexual Exploitation
• Smuggling
• Terrorism/Terrorist Financing
• Trafficking in Stolen Goods
• Violent Crime (Murder & Grievous Bodily Injury)    

By establishing a common understanding of predicate crimes, the FATF helps nations harmonize their legislation, enhance international cooperation, and promote the sharing of financial intelligence. This shared approach strengthens the global fight against both predicate offenses and money laundering.

Predicate Crimes in the Philippines Under AMLA

The Anti-Money Laundering Act (AMLA) in the Philippines recognizes specific offenses as predicates for money laundering. These include kidnapping for ransom, illegal gambling, smuggling, terrorism, and bribery, among others. The inclusion of these offenses as predicate crimes empowers law enforcement agencies to take proactive measures against individuals involved in such activities and seize the proceeds derived from them.

Here's the complete list of predicate crimes under the AMLA:

• Kidnapping for ransom
• Drug trafficking and related offences
• Graft and corrupt practices  
• Plunder    
• Robbery and Extortion
• Jueteng and Masiao
• Piracy
• Qualified theft
• Swindling
• Smuggling
• Violations under the Electronic Commerce Act of 2000
• Hijacking; destructive arson; and murder, including those perpetrated by terrorists against non-combatant persons and similar targets
• Fraudulent practices and other violations under the Securities Regulation Code of 2000
  Felonies or offences of a similar nature that are punishable under the penal laws of other countries.
• Terrorism financing and organizing or directing others to commit terrorism financing (R.A. 10168).
• Attempt/conspiracy to commit terrorism financing and organizing or directing others to commit terrorism financing (R.A. 10168).
• Attempt/conspiracy to commit dealing with property or funds of a designated person.
• Accomplice to terrorism financing or conspiracy to commit terrorism financing.
• Accessory to terrorism financing

AMLA has strengthened the country's ability to combat money laundering by creating a comprehensive legal framework to investigate, prosecute, and convict those involved in predicate offences. The legislation also enables authorities to freeze and forfeit the assets and funds associated with these crimes, thereby disrupting the illicit financial flows linked to predicate offences.

Identifying Money Laundering and Predicate Crimes with Technology

As technology continues to evolve, so do the methods employed by criminals to launder money. To counter these evolving threats, financial institutions and authorities are harnessing the power of technology to detect and prevent money laundering and trace the origins of predicate crimes.

Advanced analytics, artificial intelligence, machine learning, and data mining techniques are employed to identify suspicious transactions and patterns indicative of money laundering. By analyzing vast amounts of data in real-time, these technological solutions assist investigators in connecting the dots between predicate crimes and the subsequent money laundering activities.

By understanding the nature of predicate crimes, their relationship to money laundering, and global efforts to combat these offences, we can work towards creating a safer and more transparent financial system. Through continued collaboration, the identification of predicate crimes can lead to robust enforcement actions, disrupting criminal networks and protecting the integrity of our global economy.

As the financial landscape continues to evolve, so does the sophistication of predicate crimes and money laundering techniques. In this ever-changing environment, it's crucial for financial institutions to stay ahead of criminals. Tookitaki's FinCense is a cutting-edge solution designed to empower fintechs and traditional banks with an end-to-end operating system for anti-money laundering and fraud prevention.

Our platform, integrated with the AFC Ecosystem and utilizing a federated learning model, is uniquely capable of identifying and notifying financial institutions about unique and often overlooked financial crime attacks. Don't let predicate crimes disrupt the integrity of your financial operations. Talk to our experts today and take a proactive step towards a more secure and transparent financial future.