Money laundering.

• Author: Aranson, Jill R.
• Position: Ninth Survey of White Collar Crime

MONEY LAUNDERING

1. Background 722 II. Overview of the Statutes 723 A. Section 1956 723 1. Transaction Money Laundering 724 2. Transportation Money Laundering 724 3. Sting Operations 725 B. Section 1957 726 III. Elements of the Offenses 727 A. Knowledge 727 1. Willful Blindness 729 2. Constitutional Vagueness 730 B. Specified Unlawful activity 730 1. Pleading with Particularity 731 2. Double Jeopardy 732 C. Financial Transaction 733 1. Multiple Transactions 735 2. Interstate Commerce 736 D. Proceeds 737 1. Tracing 739 2. Sting Operations 739 E. Intent 740 IV. Penalties 743 V. Sentencing Guidelines 743 A. Section 1956 743 B. Section 1957 744 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 "dirty money" has become a lucrative and sophisticated business in the United States and is an indispensable element of organized crime's activities.(2) Without the ability to move and hide its enormous wealth through laundering techniques, large scale criminal activity could operate only at a small fraction of current levels, and with far less flexibility.(3)

   In recognition of this phenomenon, Congress passed the Money Laundering Control Act of 1986 (the "Act"),(4) holding criminally liable any individual who conducts a monetary transaction knowing or with reason to know that the funds involved were derived from unlawful activity.(5) Unlike earlier unsuccessful efforts to control the movement of illegal income through financial institution reporting requirements,(6) the statute is aimed at "the lifeblood of organized crime" itself(7) - the act of converting funds derived from illegal activities into a spendable or consumable form.(8)

1. Background

   The Money Laundering Control Act of 1986(9) defines and prohibits for the first time a category of activity known as "money laundering."(10) The Act not only reaches the proceeds of conduct characteristic o organized rime such as narcotics trafficking, Racketeer Influenced and Corrupt Organizations Act (RICO)(11) pedicates, of certain state offenses, but also encompasses many additional criminal offenses ranging from espionage, to trading with the enemy, to tax evasion.(12)

   Although the proceeds of crime historically have been subject to seizure by warrant for use as evidence,(13) the Act makes criminal proceeds perpetually illegal. Long after the criminal offense which generated the proceeds has come to an end, those who conduct prohibited financial transactions or transportation of the funds engage in criminal conduct independent of the income-producing original crime.(14) The concept is to bar all "monetary transactions" in "criminally derived property."(15) The Act does not limit itself to transactions conducted through financial institutions,(16) but appears to reach a broad variety of routine commercial transactions which affect commerce.(17)

2. Overview of the statutes

   1. Section 1956

      Section 1956(a) contains ten separate crimes, distinguished by the particular defendant's knowledge and intent,(18) divided into three broad categories. The first subsection of section 1956 prohibits knowing involvement in a wide range of transactions dealing with the proceeds of criminal activity, either (1) with the intent to promote unlawful activity or (2) with the knowledge that the transaction is designed either to conceal some aspect of the funds, such as its ownership, control, or source, or to avoid the currency transaction reporting requirements.(19) Another subsection of section 1956 prohibits the transportation of monetary instruments in foreign commerce with the same intent or knowledge requirements,(20) and the third subsection authorizes the use of government sting operations to expose criminal activity under this section.(21)

      1. Transaction Money Laundering

         The first category of crimes contained in section 1956 may be referred to as transaction money laundering because the prohibited action is the conducting of a financial transaction.(22) The four offenses contained in this subsection result when an individual conducts or attempts to conduct a financial transaction with "dirty" money. The four potential crimes are: (1) conducting a financial transaction with the intent to promote specified unlawful activity;(23) (2) conducting a financial transaction with the intent to engage in 26 U.S.C. section 7201 or section 7206 tax evasion violations;(24) (3) conducting a financial transaction designed to conceal or disguise;(25) and (4) conducting a financial transaction designed to avoid a state or federal reporting requirement.(26)

         The elements of category one crimes are: (1) knowledge that the property involved represents the proceeds of some form of unlawful activity; (2) the property does in fact involve the proceeds of a specified unlawful activity; (3) conducting or attempting to conduct a financial transaction; and (4) requisite intent for the specific crime charged.(27)

         Simply stated, section 1956(a)(1) concerns a person who has dirty money, but who is unsure how the money is dirty. Therefore, to be culpable under this section of the statute, the defendant must engage in a transaction with the intent to promote specified unlawful activity, to commit certain tax offenses, to conceal or disguise, or to avoid a reporting requirement.(28)

      2. Transportation Money Laundering

         Category two of section 1956 contains three separate crimes relating to the transportation of dirty money.(29) The three crimes are: (1) transportation of a monetary instrument into or out of the United States with the intent to promote the carrying on of a specified unlawful activity;(30) (2) transportation of a monetary instrument into or out of the United States knowing it represents the proceeds of some form of unlawful activity, and the transportation is designed to conceal or disguise such proceeds;(31) and (3) transportation of a monetary instrument into or out of the United States knowing it represents the proceeds of some form of unlawful activity, and the transportation is designed to avoid a state or federal transaction reporting requirement.(32) Unlike the crime specified in section 1956(a)(1)(a)(ii), there is no crime resulting from tax evasion in category two.

         Section 1956(a)(2)(B) provides for the case of a transportation sting operation. Pursuant to the Crime Control Act of 1990,(33) the knowledge that the monetary instrument or funds involved in the transportation represent the proceeds of some form of unlawful activity "may be established by proof that a law enforcement officer represented [such] as true, and the defendant's subsequent statements or actions indicate that the defendant believed such representations to be true."(34)

      3. Sting Operations

         Category three was added by the Anti-Drug Abuse Act of 1988.(35) It deals with government sting operations generally, where a financial transaction is conducted with property represented by a law enforcement officer to be the proceeds of specified unlawful activity, or property used to conduct or facilitate the conduct of specified unlawful activity.(36) This section therefore provides for the use of informants.(37)

         The standards of intent which define the category three crimes are the same as those specified for category two crimes. As in category two, there is no crime resulting from tax evasion in category three. Category three creates the following potential crimes from sting operations: (1) conducting a financial transaction involving sting money, with the intent to promote specified unlawful activity;(38) (2) conducting a financial transaction involving sting money, with the intent to conceal or disguise;(39) and (3) conducting a financial transaction involving sting money, with the intent to avoid a state or federal transaction reporting requirement.(40)

   2. Section 1957

      Section 1957 specifies only one potential crime, as compared to the ten crimes found in section 1956. This section provides for the punishment of "[w]hoever ... knowingly engages or attempts to engage in a monetary transaction in criminally derived property that is of a value greater than $10,000 and is derived from specified unlawful activity."(41) The statute does not require that the recipient exchange or launder the funds, that he have knowledge that the funds were proceeds of a specified unlawful activity, nor that he have any intent to further or conceal such an activity.(42) Thus, section 1957 has a much broader reach than section 1956 because of the seemingly "innocent" acts or commercial transactions which it criminalizes.(43)

      The intent of Congress in enacting section 1957 was to dissuade people from conducting even ordinary commercial transactions with people suspected to be involved in criminal activity.(44) Not surprisingly, then, the absence of a criminal intent requirement for a crime under section 1957(45) has led many commentators to criticize the statute for its breadth.(46)

3. Elements of the Offenses

   There are five key elements which are used to determine the criminality of an act under 18 U.S.C. sections 1956 and 1957. Those elements are knowledge, the existence of a specified unlawful activity, a financial transaction, proceeds and intent.

   1. Knowledge

      Knowledge is a requisite element for all of the crimes established by the Money Laundering Control Act, although the exact type of knowledge required varies for different offenses. Both sections 1956 and 1957 require that the property or money in question is the proceeds of a specified unlawful activity. Section 1957 imposes a knowledge requirement that the offender "knowingly engages or attempts to engage in a monetary transaction in criminally derived property."(47) Thus, to be prosecuted under section 1957, a person need not know from what specific activity the property was derived. The only requisite knowledge is the knowledge that the money is the result...