Predicate Offence

A suspicious transaction or account activity needs to be reported within the given timeframe as a precaution to stop crime. In practice, this means a regulated entity, such as a bank, must file a suspicious activity report (SAR). Companies use AML software to track changes in customer risk profiles and receive alerts in real time if the system spots transactions or behaviour that may be tied to a predicate offence. 

In essence, SARs help authorities trace the illegal money back to the original crime.

AML compliance is built around the knowledge, recommendations and strict requirements that help regulated companies prevent illicit activities. Predicate offences create the illegal money that criminals later try to launder. 

AML compliance requires companies to:

• Prevent financial crime and identify predicate offences to block money laundering 
• Detect and report suspicious activity linked to predicate offences

Since money laundering is the essence of predicate offences, it’s also tightly linked to AML compliance in general. 

If a customer shows signs of involvement in activities linked to drug trafficking, corruption, fraud, or other predicate offences, the business must apply enhanced due diligence (EDD). 

This can include EDD measures like:

• Collecting additional documentation
• Verifying beneficial ownership
• Checking the source of funds (SOF)

That’s why due diligence requirements are shaped by predicate offences and AML red flags that can occur after onboarding the client and throughout the whole business relationship, not just the initial account opening stage.