trialdex  litigation tools
 

Money Laundering 101

This is one of a series of blog posts surveying federal criminal law topics, grounded for the most part on a study of official federal circuit jury instructions. This one surveys Money Laundering, and introduces the trialdex money laundering tool.

Before we get started, you may wish to look at the previous "101" posts:

Conspiracy
Mail and wire fraud part one (jurisdictional elements)
Mail and wire fraud part two (elements in common)
Obstruction of justice
Hobbs Act
Travel Act

Also, be sure to check out all of the trialdex litigation tools.

Money laundering occurs when a person takes money or property ("proceeds") generated (or represented to be generated) by a "Specified Unlawful Activity" (SUA) and moves, attempts to move, or conspires to move them in a prohibited manner.

The principal federal statutes, 18 U.S.C. §§ 1956 and 1957, define eleven money laundering crimes, which are grouped in four broad categories: domestic money laundering (§ 1956(a)(1)), international money laundering (§ 1956(a)(2)), money laundering stings (reverse money laundering) (§ 1956(a)(3)), and money laundering spending (§ 1957).

You can use the trialdex money laundering tool to identify the specific provision that applies to any particular set of facts. The trialdex money laundering flowchart provides an overview. Before proceeding further, however, you may wish to review the notes below.

All money laundering crimes (except § 1956(a)(2)(B)(ii)) involve "proceeds" of "Specified Unlawful Activities" (SUAs) or, in money laundering stings (reverse money laundering), funds that are represented to be the proceeds of SUAs.

Proceeds are "any property derived from or obtained or retained, directly or indirectly, through some form of unlawful activity, including the gross receipts of such activity." 18 U.S.C. § 1956(c)(9). This provision was enacted in 2009 as a legislative rejection of United States v. Santos, 553 U.S. 507 (2008), where a divided Supreme Court had suggested that proceeds could, at least in some cases, be limited to profits.

Unlawful activity is "activity that constitutes a felony under State, Federal, or foreign law, regardless of whether or not such activity is [an SUA]." 18 U.S.C. § 1956(c)(1).

Specified Unlawful Activity (SUA) is a narrower term, and includes the crimes listed or cross-referenced in 18 U.S.C. § 1956(c)(7). That list includes by reference all of the racketeering predicates listed in 18 U.S.C. § 1961(1). It also includes financial transactions associated with drug crimes, enumerated violent crimes, fraud, smuggling, bribery, sex trafficking; and much more.

In domestic money laundering (§ 1956(a)(1)) cases, the government must prove that there was a financial transaction involving an SUA. A "Financial transaction" is

(A) a transaction which in any way or degree affects interstate or foreign commerce (i) involving the movement of funds by wire or other means or (ii) involving one or more monetary instruments, or (iii) involving the transfer of title to any real property, vehicle, vessel, or aircraft, or (B) a transaction involving the use of a financial institution which is engaged in, or the activities of which affect, interstate or foreign commerce in any way or degree;

18 U.S.C. § 1956(c)(4). Note that this definition adds a commerce element to every money laundering crime involving a financial transaction. "The only serious limitation, in the case law, is that the simple transportation of cash from point A to point B by a single individual may not be a financial transaction. There has to be a transfer or disposition of the cash between two people." The Money Laundering Statutes, U.S. Attorneys' Bulletin 55:5 at 22 (Sept. 2007).

The defendant must know, at the time of the financial transaction, that the money or property represented the proceeds of some form of unlawful activity (as defined in § 1956(c)(1)), but the government need not prove that the defendant knew that the property was an SUA (as defined or cross-referenced in § 1956(c)(7)).

  • If the transaction was conducted with the intent to promote the carrying on of an SUA, the conduct violates § 1956(a)(1)(A)(i).
  • If the transaction was conducted with the intent to engage in conduct constituting a violation of 26 U.S.C. §§ 7201 or 7206 (tax evasion and false returns), the conduct violates § 1956(a)(1)(A)(ii).
  • If the transaction was designed in whole or in part to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of an SUA, the conduct violates § 1956(a)(1)(B)(i).
  • If it was done knowing that the transaction was designed in whole or in part to avoid a transaction reporting requirement under State or Federal law, the conduct violates § 1956(a)(1)(B)(ii).

    "Transaction reporting requirements" include things like Currency Transaction Reports (CTRs) for cash transactions over $10,000, and Reports of International Transportation of Currency or Monetary Instruments (CMIRs) filed by individuals or businesses that transport $10,000 or more in currency or other negotiable instruments into or out of the United States.

Note that the unit of prosecution in money laundering cases is the transaction. The four intents listed above are typically pleaded conjunctively as alternate elements. The Money Laundering Statutes, supra at 26.

International money laundering (§ 1956(a)(2)) differs from domestic money laundering because it does not require a "financial transaction," substituting as the actus reus that the transaction flows from a place in the United States to or through a place outside the United States or to a place in the United States from or through a place outside the United States

It requires proof that the defendant transported, transmitted, or transfered (or attempted or conspired to do so) a monetary instrument or funds. A monetary instrument is "(i) coin or currency of the United States or of any other country, travelers' checks, personal checks, bank checks, and money orders, or (ii) investment securities or negotiable instruments, in bearer form or otherwise in such form that title thereto passes upon delivery." 18 U.S.C. § 1956(c)(5).

There are three international money laundering crimes, determined by the defendant's intent:

  • If the transaction was done with the intent to promote the carrying on of an SUA, the conduct violates § 1956(a)(2)(A).
  • If the transaction involved the proceeds of unlawful activity, knowing that the transaction was designed in whole or in part to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of an SUA, the conduct violates § 1956(a)(2)(B)(i). "Designed" means that the transaction itself was intended to avoid the detection of the funds. Cuellar v. United States, 553 U.S. 550 (2008).

  • If the transaction involved the proceeds of unlawful activity, knowing that the transaction was designed in whole or in part to avoid a transaction reporting requirement under State or Federal law, the conduct violates § 1956(a)(2)(B)(ii).

There is a separate group of money laundering sting (sometimes called "reverse money laundering") provisions that cover circumstances where representations about purported SUA money or property are made by law enforcement officers or cooperators. The representation must be "made by a law enforcement officer or by another person at the direction of, or with the approval of, a Federal official authorized [in 18 U.S.C. § 1956(e)] to investigate or prosecute violations of [18 U.S.C. § 1956]." 18 U.S.C. § 1956(a)(3). As with normal domestic money laundering, the defendant must conduct (or attempt or conspire to conduct) a financial transaction as defined in § 1956(c)(4).

There are three money laundering sting crimes, determined by the defendant's intent:

  • If the transaction was done with the intent to promote the carrying on of an SUA, the conduct violates § 1956(a)(3)(A).
  • If it was done knowing that the transaction was designed in whole or in part to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of an SUA, the conduct violates § 1956(a)(3)(B).
  • If it was done knowing that the transaction was designed in whole or in part to avoid a transaction reporting requirement under State or Federal law, the conduct violates § 1956(a)(3)(C).

The final provision is § 1957, the money spending crime. It must be shown that the defendant knowingly conducted (or attempted or conspired to conduct) a monetary transaction involving money or property derived from an SUA of a value greater than $10,000. "Section 1957 may be used to prosecute someone for using SUA proceeds to buy a car, to invest in securities, or simply to make a deposit into a bank." The Money Laundering Statutes, supra at 29.

A "monetary transaction" is not the same thing as a "financial transaction." It is the "deposit, withdrawal, transfer, or exchange, in or affecting interstate or foreign commerce," of funds or a monetary instrument by, through, or to a financial institution, "including any transaction that would be a financial transaction" but does not include "any transaction necessary to preserve a person's right to representation as guaranteed by the sixth amendment to the Constitution." The principle distinction is that financial transactions require interstate commerce, and monetary transactions require the use of a financial institution. All "financial transactions" are monetary transactions, except those meeting the Sixth Amendment exception.

The defendant must know that the money or property involved in the transaction represented the proceeds of "criminally derived property," that is, "any property constituting, or derived from, proceeds obtained from a criminal offense." 18 U.S.C. § 1957(f)(2). But the government need not prove that the defendant knew it was proceeds of an SUA.

In addition, the transaction must have taken place in the United States, the special maritime and territorial jurisdiction (SMTJ) of the United States, or, if outside the United States or SMTJ, the defendant must have been a "United States person" as defined by 18 U.S.C. § 3077 (excluding § 3077(2)(D))].

"The transaction that created the criminally-derived property must be distinct from the charged money laundering transaction, because § 1957 criminalizes transactions in criminally-derived property, not the transactions that create the property—the latter transactions comprise the underlying specified activity itself." Fed. Crim. Jury Instr. 7th Cir. 18 U.S.C. § 1957 Definitions Comment (2018).

Conspiracies to violate §§ 1956 and 1957 may be charged under 18 U.S.C. §§ 371 or 1956(h). If charged under § 1956(h), proof of an overt act in furtherance of the conspiracy is not required. Whitfield v. United States, 543 U.S. 209, 210 (2005).

Section 1956 crimes are twenty year felonies. Section 1957 crimes are ten year felonies. The Sentencing Guidelines range can be readily ascertained by using the Federal Sentencing Guidelines Calculator.

(11/10/19)

 
 
home . about . faq . links . blog . contact

© trialdex 2018 all rights reserved