Understanding the Predicate Offences to prevent money laundering

Understanding the Predicate Offences to prevent money laundering

No significant financial crime can be executed without resorting to the smaller crimes, as generally, there exists a network of crime to drive another crime or act as a shield to one another. Various offenses are also part of more significant offenses like money laundering and terrorism financing and help them in a certain way either to achieve the purpose of such offenses or to help the offender from being caught after committing such offenses. These kinds of offenses are known as Predicate offenses.  

Simply put, a predicate offense is an illegal activity that is the foundation or the first crime in the chain of another crime. For example, in money laundering, an illicit act of tax evasion can be construed as a “predicate offense,” as the illegal proceeds generated from tax evasion would be laundered. 

What is Predicate Offense under UAE AML/CFT regulations? 

Under the UAE AML/CFT regulations, the phrase “Predicate Offense” has been defined as under: 

Any act constituting a felony or misdemeanor under laws of the UAE, whether committed inside or outside the UAE, when such act is punishable in both countries – UAE and the other country where the crime has been committed. 

Further, the definition of the term “Crime” in the UAE AML/CFT regulations includes money laundering and related predicate offenses. 

Understanding the Predicate Offences to prevent money laundering

What activities will be considered Predicate offenses? 

Predicate offenses vary in every country and are usually codified in a country’s criminal code, considering the economy and market of the country. 

To include the broadest range of predicate offenses, the FATF has provided that countries should apply the crime of money laundering to all serious offenses. 21 Predicate offenses have been classified by FATF (Financial Action Task Force). These all are criminalized internationally. Note that this list is not a comprehensive list of predicate offenses, as there may be any other act of misdemeanors or felonies, apart from what is mentioned hereunder, which aids the laundering of funds and, thus, be considered as predicate offenses. The 21 Predicate offenses that are provided by the FATF are as follows: – 

  1. terrorism, including terrorist financing 
  2. illicit arms trafficking 
  3. participation in an organized criminal group and racketeering 
  4. trafficking in human beings and migrant smuggling 
  5. sexual exploitation, including sexual exploitation of children 
  6. tax crimes (related to direct taxes and indirect taxes) 
  7. illicit trafficking in stolen and other goods 
  8. corruption and bribery 
  9. forgery 
  10. counterfeiting currency 
  11. insider trading and market manipulation 
  12. environmental crime 
  13. murder, grievous bodily injury 
  14. kidnapping, illegal restraint and hostage-taking 
  15. robbery or theft 
  16. smuggling; (including in relation to customs and excise duties and taxes) 
  17. illicit trafficking in narcotic drugs and psychotropic substances 
  18. extortion 
  19. fraud 
  20. piracy; and 
  21. counterfeiting and piracy of products. 

 For example, a public officer abused public office, resorted to corruption, and used these illegally obtained funds to buy gold and diamond jewellery. In this case, bribery/corruption would be treated as the predicate offense, and the conversion of the funds into precious metals and stones would be the actual money laundering crime (act to conceal the source of proceeds).  

Thus, for predicate offenses, it can be said that the crime of money laundering would not have been possible had there been no funds from the predicate offense of corruption/bribery. 

Why is it essential to fight predicate offense? 

As mentioned above, predicate offenses are the underlying crime that generates the motive – the illegal proceeds, for committing money laundering. Mitigating these crimes at the first stage is pertinent to prevent the large-scale financial crime of money laundering. 

In the above example of corruption and conversion of illegal funds into precious metals/stones, had the corruption crime been identified and prevented, there would not have been any funds for the person to launder.  

Apart from money laundering, such predicate offenses harm society and the economy.  

For example –  

  • Corruption pollutes the government’s work and causes a loss of faith in the country’s bureaucracy, 
  • Arms trafficking creates violence, 
  • Drugs and narcotics have adverse impacts on the health of individuals, 
  • Piracy devalues the original art and demotivates the creator, etc. 

Given the adverse effects of these predicate offenses and the fact that it drives major financial crimes, it is pertinent to target these more minor crimes from the root and cut them off to safeguard the economy and society.  

Regulatory bodies understand the significance of curbing predicate offenses to prevent money laundering. Accordingly, regulatory provisions have been enacted to consider these predicate offenses as crimes and made punishable to safeguard the financial systems. 

Can a person committing a predicate offense be held guilty under UAE AML/CFT regulations? 

The AML/CFT law provides that a person shall be held guilty of committing a predicate offense and be treated as the perpetrator of the money laundering crime if he knows the fact that the associated proceeds have originated from a misdemeanor or felony and intentionally commits any of the following acts:  

  1. Carrying or transmitting the proceeds to hide the illicit source of funds, 
  2. Hiding the actual source, nature, location, ownership, and rights associated with those proceeds, 
  3. Acquisition, possession, or utilization of those illicit proceeds, 
  4. Helping the money launderer or perpetrator of predicate offenses escape punishment. 

The UAE AML/CFT laws provide that the penetrator of predicate offenses will not be saved from the punishment of committing the crime of money laundering, as these two crimes would be treated as independent crimes. Thus, a person guilty of a predicate offense would also be charged with a money laundering crime and punishable under both offenses. 

Companies need skillful and knowledgeable employees to implement a robust AML framework to safeguard the business from being exploited by money launderers.  

AML training brings a consistent understanding, across all levels, of the importance of AML compliance and their role in identifying ML/FT threats to save the company and its reputation. All the employees, including the senior management, stay more aligned with AML-related organizational objectives, resulting in the more successful adoption of the AML/CFT compliance program.  

How can AML UAE assist you?

AML UAE is one of the leading firms providing end-to-end consultancy services around anti-money laundering and combatting terrorism financing. We can assist you in understanding the predicate offenses, how to identify such offenses, and develop a robust AML/CFT framework for your organization to safeguard your business against such crimes.  

All-encompassing AML training for your business just a call away.

Contact us now, and let's get started.

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About the Author

Jyoti Maheshwari

CAMS, ACA

Jyoti has over 6 years of hands-on experience in regulatory compliance, policymaking, risk management, technology consultancy, and implementation. She holds vast experience with Anti-Money Laundering rules and regulations and helps companies deploy adequate mitigation measures and comply with legal requirements. Jyoti has been instrumental in optimizing business processes, documenting business requirements, preparing FRD, BRD, and SRS, and implementing IT solutions.