FATF ¦ R.3 Mon­ey Laun­der­ing Of­fence

Recommendation 3: Criminalising Money Laundering for Modern Financial Crime Control

Recommendation 3 of the FATF Standards is the cornerstone for building robust anti-money laundering (AML) frameworks worldwide. It requires countries to criminalise money laundering in line with two global instruments: the 1988 Vienna Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, and the 2000 Palermo Convention against Transnational Organized Crime. These conventions define the international baseline for what constitutes money laundering and establish the obligation to prosecute it, ensuring that national laws are harmonised enough to cooperate across borders.

Broad Coverage: Applying the Offence to All Serious Crimes

Under Recommendation 3, the crime of money laundering must apply to all serious offences, not just drug trafficking. This is essential because criminals launder proceeds from a wide range of activities — fraud, corruption, tax offences, human trafficking, environmental crime, cybercrime, and more. To achieve breadth and legal clarity, countries may define “predicate offences” (the underlying crimes generating illicit proceeds) in one of several ways:

• A universal approach that references all offences.
• A threshold based on categories of serious offences or on the maximum term of imprisonment (e.g., more than one year).
• A minimum threshold approach in systems that define minimum penalties (e.g., more than six months).
• A specific list of predicate offences.
• A combination of these approaches.

Whichever approach is used, the intent is the same: include the widest practical range of predicate offences so money laundering cannot hide behind technical gaps.

Bastian Schwind-Wagner_Follow "Recommendation 3 ensures money laundering is criminalised comprehensively and consistently across jurisdictions, anchored in the Vienna and Palermo Conventions. Its broad scope, evidentiary flexibility, and sanctions for both individuals and legal persons make AML enforcement more practical and deterrent."

Thresholds and Minimum Standards

For countries using a threshold approach, Recommendation 3 sets concrete minimums: predicate offences should include all crimes that qualify as “serious” under national law, or those punishable by more than one year’s maximum imprisonment. In systems that use minimum penalty thresholds, the baseline is more than six months’ imprisonment. These thresholds prevent overly narrow definitions and ensure that common profit-driven crimes fall within scope.

Property, Proceeds, and Proof

The offence of money laundering must cover any type of property — tangible or intangible — regardless of its value, if it directly or indirectly represents the proceeds of crime. This prevents loopholes where launderers shift funds into assets like crypto-assets, luxury goods, IP rights, or complex claims to evade detection. Importantly, prosecutors do not need a prior conviction for the predicate offence to prove that the property is criminal proceeds. This allows authorities to act on strong evidence of illicit origin even when the underlying crime occurred elsewhere or when the principal offender is unavailable or unknown.

Cross-Border Predicate Offences

Recommendation 3 recognises the global nature of financial crime. Predicate offences for money laundering must include conduct that occurred outside the prosecuting country, provided the conduct is an offence in the foreign jurisdiction and would be an offence domestically if it had happened at home. Countries may adopt a streamlined rule that focuses solely on whether the conduct would have been a predicate offence domestically. This supports international cooperation and prevents safe havens where criminals exploit differences in legal definitions.

Exceptions for Self-Laundering Based on Fundamental Principles

Countries may choose to exclude the person who committed the predicate offence from liability for laundering the same proceeds — commonly known as “self-laundering” — but only if this is required by fundamental principles of domestic law. While some jurisdictions criminalise self-laundering to close a major enforcement gap, others maintain constraints to protect legal doctrine. The FATF accommodates both, provided the overall AML framework remains effective.

Mental Element and Evidentiary Standards

To make prosecution practical, intent and knowledge for money laundering can be inferred from objective factual circumstances. This allows courts to rely on patterns, red flags, and contextual evidence — such as structuring transactions, use of nominees, unexplained wealth, and deliberate obfuscation — to establish the mental element without demanding direct admissions or implausibly precise proof of intent.

Sanctions for Natural and Legal Persons

Recommendation 3 requires effective, proportionate, and dissuasive criminal sanctions for individuals convicted of money laundering. Just as crucial, it mandates liability for legal persons (companies and other entities), either criminal or, where criminal liability is incompatible with national legal principles, civil or administrative. Countries may run parallel proceedings — criminal, civil, and administrative — against legal persons where permitted. These sanctions must be meaningful enough to deter corporate complicity, with penalties that reflect the scale of harm and the benefits derived from the crime.

Ancillary Offences to Strengthen Enforcement

To close enforcement gaps, Recommendation 3 calls for appropriate ancillary offences linked to money laundering, including participation, association or conspiracy, attempt, aiding and abetting, facilitating, and counselling. Unless prohibited by core legal principles, these offences enable authorities to pursue enablers who design, promote, or support laundering schemes — even when they are one step removed from the principal act.

What This Means for Policymakers and Practitioners

• Legislators should ensure national AML laws align with Vienna and Palermo, cover all serious crimes, and avoid narrow or outdated lists of predicate offences.
• Prosecutors need clear powers to prosecute laundering without a prior conviction for the predicate offence, including when the underlying conduct occurred abroad.
• Regulators and enforcement agencies must be equipped to pursue both individuals and legal persons, with sanctions that deter repeat offences and strip illicit gains.
• Courts should be able to infer intent from objective facts, reinforcing practical prosecution of sophisticated laundering schemes.
• The legal framework must capture modern asset classes and complex ownership arrangements to reflect how criminals actually move and store value.

In short, Recommendation 3 sets a comprehensive and pragmatic blueprint for criminalising money laundering. By widening the net of predicate offences, allowing evidentiary inference of intent, enabling cross-border application, and imposing meaningful sanctions on both individuals and entities, it ensures that AML laws are fit for contemporary financial crime threats.

Dive deeper

• FATF ¦ The FATF Recommendations ¦ Link