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Designated Categories of Offence

Definition & Overview

The term “designated categories of offence” refers to a defined set of criminal activities which must, at a minimum, be recognised as predicate offences in the context of Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) regimes.

These categories serve as a baseline for jurisdictions to determine which underlying crimes give rise to money laundering, enabling systems to identify the proceeds of criminal conduct and disrupt illicit financial flows.

According to the global standard-setter Financial Action Task Force (FATF), the concept ensures a consistent core of serious offences across jurisdictions. 

In an AML/CFT context, this concept has profound implications.

Financial institutions and designated non-financial businesses and professions (DNFBPs) must structure their risk assessment, customer due diligence and monitoring policies around the recognition that funds derived from these offences are inherently high-risk.

Countries must ensure that their legal frameworks enable the treatment of the full range of these offences as predicates for money laundering.

Detailed Explanation & Key Components

Underlying rationale

The purpose of specifying designated categories of offence is two-fold.

First, it ensures that jurisdictions capture a comprehensive spectrum of serious criminality when defining predicate offences for money laundering.

Second, it provides a global reference point that supports cross-border cooperation, asset recovery, and intelligence sharing.

Without such categories, jurisdictions risk narrowly defining predicate offences and thereby creating loopholes that criminals can exploit.

List of categories

The FATF glossary identifies the following categories (at a minimum) that must be considered designated offences:

  • Participation in an organised criminal group and racketeering 
  • Terrorism, including terrorist financing 
  • Trafficking in human beings and migrant smuggling 
  • Sexual exploitation, including sexual exploitation of children 
  • Illicit trafficking in narcotic drugs and psychotropic substances 
  • Illicit arms trafficking 
  • Illicit trafficking in stolen and other goods 
  • Corruption and bribery 
  • Fraud 
  • Counterfeiting currency 
  • Counterfeiting and piracy of products 
  • Environmental crime (for example, criminal harvesting, extraction or trafficking of protected species, precious metals and stones, other natural resources, or waste) 
  • Murder, grievous bodily injury 
  • Kidnapping, illegal restraint and hostage-taking; robbery or theft 
  • Smuggling (including in relation to customs and excise duties and taxes) 
  • Tax crimes (related to direct taxes and indirect taxes) 
  • Extortion 
  • Forgery 
  • Piracy 
  • Insider trading and market manipulation

The categories are expressed broadly; each country may define its specific offences within each category according to its domestic legal system.

The key is that the offences are serious and capable of generating proceeds requiring laundering or concealment.

Role in the predicate offence framework

‘Predicate offences’ are crimes whose proceeds may later become subject to money-laundering behaviour.

By defining the “designated categories of offence”, jurisdictions set a minimum threshold for which underlying crimes must trigger AML-CFT controls.

If a jurisdiction fails to encompass these categories, it risks non-compliance with international AML/CFT standards, weakening its ability to prevent, detect or prosecute money-laundering effectively.

Regulatory & Compliance Relevance

Regulatory alignment

In jurisdictions that follow the FATF standards, AML/CFT laws must cover all conduct within the designated categories. This enables financial institutions and DNFBPs to apply risk-based measures, recognising that any funds or assets derived from such conduct warrant higher scrutiny.

Customer due diligence and monitoring

When onboarding customers, conducting periodic reviews or monitoring transactions, entities must assess whether the origin or movement of funds may be linked to the proceeds of crimes within these categories. For example, a transaction associated with human trafficking, environmental crime or insider-trading offences automatically triggers heightened risk-based controls given their inclusion.

Legal enforcement and asset recovery

Because designated categories define what must count as predicate offences, they support the initiation of money-laundering investigations, asset-freezing and confiscation processes. If a jurisdiction’s laws recognise each category, then enforcement agencies can pursue the laundering of proceeds tied to any of these offences.

International cooperation

Cross-border investigations frequently depend on alignment in predicate offence definitions. Because the designated categories provide a common language, mutual legal assistance, extradition, and asset-sharing become more practicable. A jurisdiction that lacks equivalent predicate definitions may become a safe haven for criminals exploiting mismatches in enforcement regimes.

Real-world Examples / Applications

Example 1: Fraud-related proceeds: A financial institution identifies that large sums are being transferred from a client’s account. Given the client is under investigation for fraud (one of the designated categories), the institution escalates the case, files a suspicious transaction report, and freezes the funds pending further inquiry.

Example 2: Environmental crime investigation: A country criminalises illegal mining of precious stones under its environmental crime laws. A downstream financial entity carries out due diligence, identifies the customer’s involvement in such mining, recognises this falls under one of the designated categories and applies enhanced monitoring accordingly.

Example 3: Cross-border AML cooperation: Country A investigates organised crime and racketeering that generated illicit assets in Country B. Because both jurisdictions recognise “participation in an organised criminal group and racketeering” as a designated category, Country A requests mutual legal assistance from Country B, facilitating asset recovery and prosecution.

Example 4: Tax crime as predicate offence: A tax-evasion scheme across jurisdictions generates substantial proceeds. Because tax crimes fall under the designated categories (insofar as direct and indirect taxes), a regulated financial firm treats incoming funds from the scheme as high-risk and applies AML escalation measures.

Challenges & Considerations

Variation in domestic definitions

Although the designated categories offer a minimum standard, domestic laws differ in how offences are defined and prosecuted. One jurisdiction may treat a specific environmental offence as minor, while another treats it as serious. This variation complicates international cooperation and comparative risk assessments.

Thresholds of seriousness

The FATF definition emphasises serious offences, but national laws may have varying thresholds for what constitutes “serious”. Firms must assess not only the category but whether the specific offence instance meets the seriousness threshold in the relevant jurisdiction.

Emerging and evolving crime typologies

Criminal behaviours evolve rapidly, especially in areas like cyber-enabled fraud or environmental exploitation. While the designated categories are broad, compliance functions must remain vigilant about new sub-types of crime that may fit within existing categories but present novel risks.

Implementation by smaller firms and DNFBPs

Smaller regulated entities or DNFBPs may struggle to interpret how broad the categories are and may lack resources to apply nuanced risk assessments. Clear internal policies, training and procedures are essential to manage this complexity.

Best Practices & Implementation Insights

  • Map your institution’s risks to the designated categories: Develop a cross-reference table aligning business lines, jurisdictions, transaction types and customer profiles with the designated offence categories to highlight where enhanced diligence is required. 
  • Embed categories into risk-scoring models: Ensure that the scoring of customers, transactions and jurisdictions includes a factor for potential involvement with proceedings linked to the designated categories of offence. 
  • Train staff on categories and red flags: Provide scenario-based training that illustrates how each category might manifest (e.g., environmental crime via illegal timber trade, insider trading via complex corporate structures). 
  • Regularly review and update coverage: Monitor amendments to the FATF glossary and national laws to ensure that internal AML/CFT frameworks remain aligned with the latest formal definitions and recognised predicate offence lists. 
  • Coordinate across functions: Introduce collaboration between legal, compliance, operations and intelligence teams to ensure that the institution’s understanding of designated categories is consistent and actionable across customer-facing, transaction-monitoring and investigative processes. 
  • Document risk assessments and decisions: Maintain audit-ready records of how the institution has interpreted the categories, applied them in customer due diligence, and responded to identified risks, thereby demonstrating governance and adherence to regulatory expectations.

Related Terms

  • Predicate Offence 
  • Predicate Crimes 
  • Proceeds of Crime 
  • AML Risk Framework 
  • Money Laundering Offence 
  • Predicate Offence Framework

References

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