Criminal Proceeds

Criminal proceeds are any assets, funds, or property that are derived or obtained, whether directly or indirectly, through the commission of a criminal offence (often referred to as a “predicate offence”).

These proceeds can include cash, tangible property, financial instruments, rights, or services and form the core target of anti-money laundering (AML) laws, since their concealment or conversion enables criminals to benefit from their illegal activities.

Overview

In the AML and counter-financing of terrorism (CFT) landscape, understanding what constitutes criminal proceeds is vital.

Without clearly identifying these proceeds, regulatory frameworks cannot effectively trace, freeze, or confiscate illicit assets.

The term typically covers all forms of property obtained from wrongdoing, including profits made from offences such as drug-trafficking, fraud, corruption, human-trafficking, tax evasion, or contravention of trade-controls.

Most legal frameworks define criminal proceeds broadly so as to capture not only the direct proceeds of crime, but also any property that is derived from those proceeds through subsequent transactions (e.g., reinvestment, purchase of assets) or held abroad.

Key Elements

• Origin in Criminal Activity: The property must be derived from criminal conduct (or a scheduled offence) in that jurisdiction.
• Direct or Indirect Acquisition: It may be obtained directly (e.g., cash from a sale of illicit goods) or indirectly (e.g., an asset purchased using those illicit funds).
• Value Equivalent for Abroad Assets: Some laws include assets held outside the country or their value equivalent if held domestically.
• Wide Scope of Property: The property may be movable or immovable, tangible or intangible (e.g., vehicles, real estate, bank balances, shares, rights, services).

Relevance to AML/CFT Compliance

From a compliance standpoint:

• Financial institutions must be able to identify when a transaction or a customer relationship may involve the movement of criminal proceeds.
• AML systems need to detect placement, layering or integration of these proceeds; for example, large unexplained transactions, complex ownership structures, or assets purchased by entities without legitimate income.
• Regulatory frameworks often make it a money-laundering offence to deal with or assist in disposing of or transferring criminal proceeds.
• Confiscation or seizure frameworks depend on tracing criminal proceeds to ensure that illicit actors cannot retain the benefits of their offences.

Challenges & Risk Indicators

• Obscured Ownership and Complex Structures: Criminals may move proceeds through shell companies, trusts or foreign jurisdictions to hide the beneficial owners.
• Cross-Border Issues: Assets or proceeds held abroad complicate jurisdictional reach and enforcement of domestic laws.
• Misclassification of Legitimate Funds: Sometimes, proceeds may be blended with legitimate income, making detection harder.
• High-Risk Signals: Indicators include unusually high-value purchases relative to declared income, rapid movement between accounts or jurisdictions, and use of sectors known for cash intensity.

Best Practices for Mitigation

• Maintain a robust risk-based AML programme that incorporates scenarios involving criminal proceeds.
• Deploy transaction monitoring systems to flag patterns aligned with proceeds of crime (e.g., structuring, rapid layer transfers).
• Conduct enhanced due diligence (EDD) for customers or entities showing signs of unusual asset accumulation or complex ownership.
• Liaise with law enforcement and asset-recovery agencies to support enforcement and confiscation of criminal proceeds.
• Ensure clear policies and procedures for action when criminal proceeds are suspected—this includes internal escalation, SAR/STR filing, and asset freeze procedures.

Conclusion

Criminal proceeds constitute the ill-gained benefits from criminal acts and are a central focus of AML/CFT frameworks.

Understanding their origin, form, and movement is critical to disrupting financial crime.

Effective compliance requires vigilance, evolving analytical capabilities, and close cooperation with enforcement authorities to ensure that criminals cannot retain or integrate these proceeds into the legitimate economy.

Related Terms

• Proceeds of Crime
• Predicate Offence
• Money Laundering
• Layering
• Asset Forfeiture
• Asset Recovery

References

1. Financial Intelligence Unit-India (FIU-India). What is Money Laundering?
2. United Nations Office on Drugs and Crime (UNODC). Review of definitions of “proceeds of crime”
3. AML Network. What is Proceeds of Crime in Anti-Money Laundering?
4. LegalServiceIndia. Proceeds of Crime under Prevention of Money Laundering Act

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