Money laundering.

Author:Driggers, Anna
Position:Twenty-Sixth Annual Survey of White Collar Crime
 
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  1. INTRODUCTION II. OVERVIEW OF THE STATUTE A. Section 1956 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 can be a lucrative and sophisticated business (2) and is an indispensable element of organized criminal activities. (3)

    Though anti-money laundering efforts were initially aimed at thwarting the proceeds of illegal narcotics trafficking, (4) today, a range of profitable criminal activities are targeted including the illegal sales of weapons, human trafficking, fraud, political corruption, the financing of terrorism, and child pornography. (5)

    Regardless of the crime, money launderers typically resort to a three-step process when converting illicit proceeds into apparently legal monies or goods: (i) placement: the criminally derived money is placed into a legitimate enterprise; (ii) layering: the funds are layered through various transactions to obscure the original source; and (iii) integration: 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." (6)

    In recognition of this pervasive problem, Congress passed the Money Laundering Control Act of 1986 (the "Act"), (7) which created liability for any individual who conducts a monetary transaction knowing that the funds were derived through unlawful activity. (8) Unlike earlier unsuccessful efforts to curb the movement of illegal income by requiring financial institutions to comply with currency reporting requirements, (9) the Act targets "the lifeblood of organized crime": (10) the conversion of illegally derived funds into a clean or useable form. (11)

    The Act's expansive definition of "money laundering" allows it to reach the proceeds of a broad range of illicit activities. (12) 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"). (13) 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. (14)

    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. (15) In achieving this purpose, the Act targets transactions conducted through financial institutions (16) and reaches a broad range of routine commercial transactions that affect commerce. (17) Although the seizure of criminal proceeds for use as evidence is nothing new, (18) the Act also makes the subsequent use of criminal proceeds in any transaction illegal in perpetuity, extending well beyond the statute of limitations for the original criminal conduct. (19)

    Beyond the Act, the government also utilizes reporting laws, which forbid exporting more than $10,000 of undeclared monies, to prevent money laundering. (20) 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. (21)

    Finally, after the terrorist attacks of September 11, 2001, Congress acted with renewed focus on the detection, prevention, and prosecution of money laundering recognizing that the techniques used to launder money are essentially the same as those used to conceal the sources of terrorist financing. (22) Terrorist financing is a form of reverse money laundering, where funds originating from legitimate sources, criminal activities or both are covertly transferred to individuals to finance terrorist operations. (23) Title III of the USA PATRIOT Act, entitled "International Money Laundering Abatement and Anti-Terrorist Financing Act" ("IMLAFA"), aims to combat terrorism by stifling terrorist financial networks. (24) IMLAFA expands the scope of money laundering laws to cover a broader range of financial institutions than those covered by traditional money laundering laws and requires such financial institutions to implement programs designed to deter and detect instances of money laundering. (25) IMLAFA amends 18 U.S.C [section][section] 1956 and 1957 by expanding the list of predicate offenses that give rise to a money laundering charge, including corruption and export control violations, (26) and establishing the "extra-territorial bite" necessary to combat global terrorism. (27)

    This Article will discuss the elements of the Money Laundering Control Act. Section II will provide an overview of the offenses covered under the Act. Section III will provide an analysis of the elements of the offenses. Section IV will provide an overview of the Constitutional theories used to attack prosecutions under the Act. Section V will provide a discussion of criminal and civil penalties under the Act.

  2. OVERVIEW OF THE STATUTE

    The Money Laundering Control Act consists of two sections: 18 U.S.C. [section] 1956 addresses prohibited financial transactions, prohibited financial transportation, and authorizes government sting operations, while 18 U.S.C. [section] 1957 covers transactions involving property exceeding $10,000 derived from the specified unlawful activities.

    1. Section 1956

      The three subdivisions of [section] 1956 address: (i) domestic money laundering and participation in transactions involving criminal proceeds, (28) (ii) international money laundering and transportation of criminally derived monetary instruments in foreign commerce, (29) and (iii) the use of government sting operations to expose criminal activity. (30)

      1. Transaction Money Laundering

        Offenses under [section] 1956(a)(1) are commonly known as "transaction money laundering" offenses because the prohibited act is the financial transaction itself. (31) The four prohibited financial transactions are: (i) transactions conducted with the intent to promote specified unlawful activity; (32) (ii) transactions conducted with the intent to engage in 26 U.S.C. [section][section] 7201 and 7206 (33) tax evasion violations; (34) (iii) transactions designed to conceal or disguise the nature, location, source, ownership, or control of the proceeds of specified unlawful activity; (35) and (iv) transactions designed to avoid a state or federal reporting requirement. (36)

      2. Transportation Money Laundering

        Section 1956(a)(2) specifies three separate offenses associated with the transportation, transmission, or transfer of criminally derived proceeds (37) into or out of the United States. The three offenses are: (i) "the intent to promote the carrying on of specified unlawful activity," (38) (ii) the transportation of a monetary instrument that represents the proceeds of some form of unlawful activity designed to conceal or disguise that instrument, (39) 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. (40)

        In Cuellar v. United States, (41) the Supreme Court held that the government need not prove that the defendant attempted to make illegal funds appear legitimate to satisfy the "designed ... to conceal" element, (42) but that it must prove that the defendant did more than merely hide the funds during transport, even if it can show that a defendant expended substantial effort to conceal the money. (43) To sustain a conviction, the government must prove that a defendant knew that a purpose of the transportation was to conceal or disguise the "nature, the location, the source, the ownership, or the control" of funds. (44)

      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 (45) to be the proceeds of a specified unlawful activity with the intent to: (i) promote specified unlawful activity; (46) (ii) conceal or disguise the nature, location, source, ownership, or control of the proceeds of specified unlawful activity; (47) or (iii) avoid a state or federal transaction reporting requirement. (48) 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. (49)

    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. (50) Because the recipient need not actually exchange or launder the funds or have any specific intent to further or conceal unlawful activity, (51) [section] 1957 potentially criminalizes seemingly "innocent" acts or commercial transactions. (52) In enacting [section] 1957, Congress intended to dissuade people from engaging in even ordinary...

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