Money laundering.

• Author: Schuck, Jason
• Position: Eleventh Survey of White Collar Crime

1. INTRODUCTION II. OVERVIEW OF THE STATUTE

   1. Section 1956

      1. Transaction Money Laundering

      2. Transportation Money Laundering

      3. Sting Operations

   2. Section 1957 III. ELEMENTS OF THE OFFENSE

   1. Knowledge

      1. General Knowledge Requirement

      2. Willful Blindness

   2. Specified Unlawful Activity

   3. Financial Transaction

      1. Multiple Transactions

      2. Interstate Commerce

   4. Proceeds

      1. Tracing

      2. Sting Operations

   5. Intent IV. DEFENSES

   1. Constitutional Vagueness

   2. Double Jeopardy V. PENALTIES

   1. Section 1956

   2. Section 1957

1. 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.' Laundering criminally derived proceeds 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,(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":(7) the act of converting funds derived from illegal activities into a spendable or consumable form.(8)

   The Money Laundering Control Act of 1986 (the "Act")(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 of organized crime such as narcotics trafficking, Racketeer Influenced and Corrupt Organizations Act ("RICO")(11) predicates, or certain state offenses, but also encompasses a wide range of additional criminal offenses including espionage, trading with the enemy, and conducting financial transactions with intent to engage in violations of the Internal Revenue Code.(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 STATUTE

   The Money Laundering Control Act consists of two sections. Section 1956 addresses the knowing and intentional transportation or transfer of monetary funds derived from certain unlawful activities specified in the statute. In contrast, [sections] 1957 addresses transactions involving property-as opposed to funds-derived from the specified unlawful activities.

   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 [sections] 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, (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 (3) to avoid the currency transaction reporting requirements.(19) The second subsection of [sections] 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 [sections] 1956 may be referred to as "transaction money laundering" because the prohibited action is the conducting of a financial transaction.(22) The offenses contained in this subsection result when an individual conducts or attempts to conduct a financial transaction with criminally derived 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. [sections] 7201 or [sections] 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 transaction money laundering crimes are (1) knowledge that the money involved represents the proceeds of some form of unlawful activity; (2) the money 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, [sections] 1956(a)(1) applies to a person who has criminally derived proceeds, 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 offences, to conceal or disguise, or to avoid a reporting requirement.(28)

      2. Transportation Money Laundering

         Category two of [sections] 1956 contains three separate crimes relating to the transporta- tion, transmission, or transfer of criminally derived proceeds.(29) The three crimes are: (1) transportation, transmission, or transfer 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, transmission, or transfer 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, transmission, or transfer 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)

      3. Sting Operations

         Category three deals with government sting operations. Generally, sting operations involve a financial transaction 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.(33) This section therefore provides for the use of informants.(34)

         The standards of intent required by the category three crimes are the same as those specified for category two crimes. Category three criminalizes the following activities of a target during sting operations: (1) conducting a financial transaction involving sting money, with the intent to promote specified unlawful activity;(35) (2) conducting a financial transaction involving sting money, with the intent to conceal or disguise;(36) and (3) conducting a financial transaction involving sting money, with the intent to avoid a state or federal transaction reporting requirement.(37)

   2. Section 1957

      In contrast to [sections] 1956, [sections] 1957 specifies only one potential crime. This section provides for the punishment of one who 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.(38) Section 1957 does not require that the recipient exchange or launder the funds, nor that he have any specific intent to further or conceal unlawful activity. It has been suggested that the scope of [sections] 1957 is so broad as to criminalize seemingly "innocent" acts or commercial transactions.(39) However, [sections] 1957 does require that the violator "knowingly" engage in a transaction involving criminally-derived property.(40) The intent of Congress in enacting [sections] 1957 was nevertheless to dissuade people from conducting even ordinary commercial transactions with people suspected to be involved in criminal activity.(41)

3. ELEMENTS OF THE OFFENSES

   There are five elements which must be established to obtain a conviction under 18 U.S.C. [subsections] 1956 and 1957. These elements are (1) knowledge, (2) the existence of a specified unlawful activity, (3) a financial transaction, (4) proceeds and (5) intent.(42)

   1. Knowledge

      1. General Knowledge Requirement

         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 [subsections] 1956 and 1957 require that the property or money in question be 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.(43) Thus, to be prosecuted under [sections] 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 of some form of criminal conduct.(44)

         Section 1956 has a comparatively specific knowledge requirement. Under [sections] 1956, the offender must have knowledge "that the property involved in a financial transaction represents the proceeds of some form of unlawful activity...