2.1. Basic concept of money laundering

Criminal activity

Sponsorship, e.g. based upon ideological grounds

Proceeds and the yield of a criminal activity

Reinvestments

Currency, goods and services of monetary value

Goods and currency of insignificant value designated for personal consumption by criminals, e.g.:

• purchasing clothes, food and personal items;

• keeping stolen household goods.

Satisfaction derived by mentally inadequate criminals from violence inflicted upon victims, e.g. rape, molestation.

Public disturbances caused by extremist or terrorist actions sanctioned by sponsors.

Criminals desire to use proceeds from a criminal activity in legal economy, e.g. acquire real estate, transportation or invest in companies which obey the law.

Government enforced AML measures

A necessity to conceal an illicit origin of proceeds

Trying to disguise the origin of proceeds, criminals send them through legal channels:

• use different financial institutions, make multiple financial transactions;

• transfer funds to, through and from different countries, especially offshore financial centers (OFCs);

• establish shell companies;

• use different financial instruments and value-storing assets;

• use other intermediaries, such as financial advisers, realtors, accountants and service providers.

When money is laundered and its illegal origin is disguised, the origins of illicit proceeds appear to look like a legitimate business. The ill-gotten gains of crime have been “legitimized”.

2.2. Predicate offences: the scope and methods of description

Methods of describing predicate offences:

1. All offenses.

2. A threshold approach:

   1. All offences that are designated “serious offences”, for example, indictable offences, felonies and crimes as opposed to misdemeanors.

   2. A ll offences punishable by a minimum penalty of more than six months imprisonment.

   3. A

      The threshold must cover all these categories

      ll offences punishable by a maximum penalty of more than one year imprisonment.

3. A list of predicate offenses.

The 21 designated categories of offences (General glossary):

1. P

   Art. 5 of Palermo Convention

   articipation in an organized criminal group and racketeering.

2. T

   Vienna Convention

   errorism, including terrorism financing.

3. T

   Articles of the Merida Convention:

   15. Bribery of national public officials.

   16. Bribery of foreign public officials and officials of public international organizations.

   17. Embezzlement, misappropriation or other diversion of property by a public official.

   18. Trading in influence.

   19. Abuse of functions.

   21. Bribery in the private sector.

   22. Embezzlement of property in the private sector.

   rafficking in human beings and migrant smuggling.

4. Sexual exploitation, including sexual exploitation of children.

5. I llicit trafficking in narcotic drugs and psychotropic substances.

6. Illicit arms trafficking.

7. Illicit trafficking in stolen and other goods.

8. C orruption and bribery.

9. Fraud.

10. Counterfeiting currency.

11. Counterfeiting and piracy of products.

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. Tax crimes (related to direct taxes and indirect taxes).

18. Extortion.

19. Forgery.

20. P

    Art. 8 of Palermo Convention

    iracy.

21. Insider trading and market manipulation.