What counts as proceeds of crime?

Proceeds of crime means any benefit, money, property or assets obtained from criminal conduct, whether directly or indirectly.

This is the definition given by FATF, which is used as the blueprint for anti-money laundering laws in every country that’s implemented FATF’s Recommendations.

For regulated professionals, understanding what counts as proceeds of crime is central to recognising risk and deciding when escalation is required.

How FATF defines proceeds of crime

FATF’s Recommendation 3 requires countries to criminalise money laundering in line with the Vienna Convention and the Palermo Convention, both of which centre on the same idea: dealing with property that you know, or ought to know, represents the benefit of criminal conduct.

The FATF glossary defines proceeds as any property derived from or obtained, directly or indirectly, through committing an offence. You benefit from criminal conduct the moment you obtain property as a result of it, or in connection with it. This could be directly, such as stolen funds, or indirectly, such as assets bought using criminal money.

The offence that generates proceeds is called a predicate offence.

What is a predicate offence?

FATF requires countries to apply money laundering laws to a wide range of predicate offences, which can be found in its list of ‘designated categories of offences’ and include:

• organised crime;
• terrorism financing;
• human trafficking;
• drug and arms trafficking;
• corruption and bribery;
• fraud;
• counterfeiting;
• environmental crime;
• tax crimes;
• extortion;
• forgery;
• piracy;
• insider trading and market manipulation.

These standards extend predicate offences to conduct committed abroad too, as long as it would have counted as a predicate offence if it had happened domestically.

What are direct and indirect proceeds of crime?

Direct proceeds are the most obvious category, where the money or asset itself represents the criminal benefit. Examples include:

• money obtained through fraud;
• cash from drug trafficking;
• funds evaded from tax;
• bribes received in a corruption scheme.

Indirect proceeds are a step removed, where property represents that same benefit after it’s changed form. For example:

• fraud proceeds used to buy a property;
• stolen funds invested in a company;
• criminal income converted into shares or cryptoassets.

Even once the original funds have changed form, the asset acquired can still represent the benefit from criminal conduct. This is why tracing and layering matter so much in money laundering cases.

There is no minimum threshold. A small undeclared cash payment, a modest tax evasion or a minor fraud can still generate proceeds of crime. The scale may affect enforcement priorities but it does not affect the definition. And for regulated businesses, the issue is not value but suspicion.

Proceeds of crime and property

Proceeds of crime and property are closely linked but aren’t quite the same.

Proceeds of crime refers to the benefit obtained from criminal conduct. 

Property carrying a criminal origin covers assets of every kind, physical or not, movable or immovable, plus the documents proving title to them.

What matters is whether you know or suspect that the asset in front of you can be traced back to criminal conduct.

How proceeds of crime impact your day-to-day work

For accountants, lawyers, TCSPs, property professionals and high-value dealers, proceeds of crime may appear in everyday work through:

• client funds held in accounts;
• transaction proceeds;
• professional fees paid from suspicious sources;
• asset transfers;
• corporate restructures.

You are not required to prove that funds are proceeds of crime. You are required to recognise when there are reasonable grounds for suspicion.

Red flags such as unexplained source of funds, inconsistent explanations or opaque ownership structures do not automatically mean funds are criminal. They indicate that further enquiry is needed.

If suspicion remains, it is usually necessary to escalate it internally to whoever holds the money laundering reporting function in your business, often called an MLRO.

The role of the risk-based approach

Most countries’ AML framework are built on the risk-based approach set by FATF. You will rarely see obvious evidence that funds are criminal. Instead, you may encounter inconsistencies, gaps in explanation or transactions that do not align with what you know about the client.

The risk-based approach requires you to:

• understand your client and their normal activity;
• question information that does not sit comfortably;
• take reasonable steps to clarify source of funds;
• escalate concerns internally where suspicion remains;
• document how and why decisions were reached.

When your risk assessments, due diligence and escalation processes are linked clearly, decisions about acting on potential proceeds of crime can be made in a proportionate, structured way rather than reactively.

Final thoughts

The definition of proceeds of crime that’s given by FATF is deliberately broad and applies across a wide range of offences.

For regulated professionals, the focus is not on investigating crime. It is on recognising when funds or assets may represent a criminal benefit and responding appropriately.

When your AML framework links risk assessment, source of funds enquiries, internal reporting and audit trails in a structured way, decisions about potential proceeds of crime become clearer, more consistent and easier to evidence.