Money laundering.

AuthorLahey, Helesa K.
PositionSurvey of White Collar Crime
  1. INTRODUCTION II. OVERVIEW OF THE STATUTE A. Section 1956 891 1. Transaction Money Laundering 2. Transportation Money Laundering 3. Sting Operations B. Section 1957 III. ELEMENTS OF THE OFFENSES A. Knowledge Requirement 1. General Knowledge 2. Willful Blindness B. Proceeds Derived From A Specified Unlawful Activity 1. Proceeds a. Scope b. Tracing 2. Specified Unlawful Activity C. Financial Transaction 1. Interstate Commerce 2. Multiple Transactions D. Intent IV. DEFENSES A. Constitutional Vagueness B. Double Jeopardy C. Constitutionally Impermissible V. PENALTIES I. INTRODUCTION

    Money laundering is "the process by which one conceals the existence, illegal source, or illegal application of income, and disguises that income to make it appear legitimate." (1) Laundering criminally-derived proceeds has become a lucra- and sophisticated business (2) and is an indispensable element of organized criminal activities. (3) Money laundering typically is effectuated through a three-step process: (i) the criminally derived money is "placed" into a legitimate enterprise; (ii) the funds are "layered" through various transactions to obscure the original source; and (iii) the newly laundered funds are integrated into the legitimate financial world "in the form of bank notes, loans, letters of credit," or other recognizable financial instruments. (4)

    In recognition of this pervasive problem, Congress passed the Money Laundering Control Act of 1986 (the "Act"), (5) which created liability for any individual who conducts a monetary transaction knowing that the funds were derived through unlawful activity. (6) Unlike earlier unsuccessful efforts to curb the movement of illegal income by requiring financial institutions to comply with currency reporting requirements, (7) the Act targets "the lifeblood of organized crime": (8) the conversion of illegally-derived funds into a "clean" or useable form. (9)

    The Act's expansive definition of "money laundering" allows it to reach the proceeds of a broad range of illicit activities. (10) For instance, the Act encompasses the proceeds of conduct that is characteristic of organized crime, such as narcotics trafficking, certain state offenses, and predicate offenses under the Racketeer Influenced and Corrupt Organizations Act ("RICO"). (11) Moreover, the Act covers proceeds of a wide range of additional criminal offenses including copyright infringement, environmental offenses, espionage, trading with the enemy, and conducting financial transactions with intent to engage in violations of the Internal Revenue Code. (12)

    One of the principal purposes of the Act, embodied in [section] 1957, is to bar all "monetary transactions" in "criminally derived property" which exceed $10,000. (13) In achieving this purpose, the Act targets transactions conducted through financial Institutions (14) and reaches a broad range of routine commercial transactions that affect commerce. (15) Although the seizure of criminal proceeds for use as evidence is nothing new, (16) the Act also makes the subsequent use of criminal proceeds in any transaction illegal in perpetuity, extending well beyond the statute of limitations on the original criminal conduct. (17)

    Beyond the Act, the government also utilizes reporting laws, which forbid exporting more than $10,000 of undeclared cash, to prevent money laundering. (18) The Treasury Department has enacted rules requiring all businesses that wire money internationally to register with the government, file a report for all transactions exceeding $750, report suspicious activity, and furnish the names of both the transferor and the recipient. (19)

    Finally, in the wake of the terrorist attacks of September 11, 2001, Congress acted with renewed focus on the detection, prevention, and prosecution of money laundering. (20) Title III of the USA PATRIOT Act, titled "International Money Laundering Abatement and Anti-Terrorist Financing Act" ("IMLAFA"), aims to combat terrorism by stifling terrorist financial networks. (21) Terrorist financing is a form of reverse money laundering, where illicit funds are covertly transferred to individuals to finance terrorist operations. IMLAFA expands the scope of money laundering laws to cover a broader range of financial institutions within the ambit of money laundering laws and requires such financial institutions to implement programs designed to deter and detect instances of money laundering. (22) IMLAFA amends 18 U.S.C [subsection] 1956, 1957, by expanding the list of predicate offenses that give rise to a money laundering charge, including corruption and export control violations, (23) and establishing the "extra-territorial bite" necessary to combat global terrorism. (24)


    The Money Laundering Control Act consists of 18 U.S.C. [section] 1956, which addresses the knowing and intentional transportation or transfer of monetary funds derived from specified unlawful activities, and 18 U.S.C. [section] 1957, which covers transactions involving property exceeding $10,000 derived from the specified unlawful activities. (25)

    1. Section 1956

      The three subdivisions of [section] 1956 address: (i) domestic money laundering and participation in transactions involving criminal proceeds, (26) (ii) international money laundering and transportation of criminally derived monetary instruments in foreign commerce, (27) and (iii) the use of government sting operations to expose criminal activity. (28)

      1. Transaction Money Laundering

        Offenses under [section] 1956(a)(1) are commonly known as "transaction money laundering" because the prohibited act is the financial transaction itself. (29) The four prohibited activities are financial transactions (i) conducted with the intent to promote specified unlawful activity; (30) (ii) conducted with the intent to engage in 26 U.S.C. [subsection] 7201 and 7206 (31) tax evasion violations; (32) (iii) designed to conceal or disguise the nature, location, source, ownership, or control of the proceeds of specified unlawful activity; (33) and (iv) designed to avoid a state or federal reporting requirement. (34)

      2. Transportation Money Laundering

        Section 1956(a)(2) specifies three separate offenses associated with the transportation, transmission, or transfer of criminally derived proceeds (35) into or out of the United States. The three offenses are: (i) "the intent to promote the carrying on of specified unlawful activity," (36) (ii) the transportation of a monetary instrument that represents the proceeds of some form of unlawful activity designed to conceal or disguise that instrument, (37) and (iii) the transportation of the monetary instrument that represents the proceeds of some form of unlawful activity designed to avoid a state or federal transaction reporting requirement. (38)

      3. Sting Operations

        Section 1956(a)(3) authorizes the government to utilize sting operations. Under the sting provisions of [section] 1956, it is illegal to conduct, or attempt to conduct, a financial transaction involving property that a law enforcement officer represents (39) to be the proceeds of a specified unlawful activity with the intent to: (i) promote specified unlawful activity; (40) (ii) conceal or disguise the nature, location, source, ownership, or control of the proceeds of specified unlawful activity; (41) or (iii) avoid a state or federal transaction reporting requirement. (42) Because this section requires only that a defendant believe that the money in question is criminally derived, informants and undercover officers are able to use money that is not actually criminally derived during sting operations. (43)

    2. Section 1957

      Section 1957 prohibits knowingly engaging, or attempting to engage, in monetary transactions involving criminally-derived property that has a value greater than $10,000 and is derived from specified unlawful activity. (44) Because the recipient need not actually exchange or launder the funds or have any specific intent to further or conceal unlawful activity, (45) [section] 1957 potentially criminalizes seemingly "innocent" acts or commercial transactions. (46) In enacting [section] 1957, Congress intended to dissuade people from engaging in even ordinary commercial transactions with people suspected to be involved in criminal activity. (47) However, [section] 1957 does require that the violator "knowingly" engage in a transaction involving criminally-derived property. (48)


    The government must prove four elements to obtain a conviction under the Act: (i) knowledge, (ii) the existence of proceeds derived from a specified unlawful activity, (iii) a financial transaction, and (iv) intent. (49)

    1. Knowledge Requirement

      Although knowledge is an element for all crimes prohibited by the Act, the type of knowledge required varies with the specific offense. The language of the Act suggests the government must prove either knowledge of a monetary transaction in illegally derived property (50) or knowledge of a specified unlawful activity. (51) In some circuits, however, it is sufficient to prove that the defendant was willfully blind to the specified unlawful activity, easing the government's burden of proof. (52)

      1. General Knowledge

        Sections 1956 and 1957 require that the defendant know the property or money in question is the proceeds of a predicate unlawful activity. Under [section] 1956 the offender must have knowledge "that the property involved in a financial transaction represents the proceeds of some type of unlawful activity." (53) Section 1956(c)(1) defines "some form of unlawful activity" to mean felonious conduct. (54) Section 1956(c)(1), however, makes it clear that the offender need not know the specific criminal activity from which the proceeds are derived. (55) At least one circuit has explicitly rejected the notion that the defendant must know that criminal conduct constituted a felony rather than a misdemeanor. (56)

        Section 1957...

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