Money laundering.

• Jurisdiction: United States
• Author: Kaufman, Max
• Date: 01 January 1997

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

   According to one former federal prosecutor, "the white collar crime of the 1990's is here and it is money laundering."(1) 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.(2) 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.(3) 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.(4)

   In recognition of this phenomenon, Congress passed the Money Laundering Control Act of 1986,(5) 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.(6) Unlike earlier unsuccessful efforts to control the movement of illegal income through financial institution reporting requirements,(7) the statute is aimed at "the lifeblood of organized crime:"(8) the act of converting funds derived from illegal activities into a spendable or consumable form.(9)

   The Money Laundering Control Act of 1986 (the "Act") 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 original criminal offense which generated the proceeds has come to an end, those who conduct prohibited financial transactions or transportation of these proceeds 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) Furthermore, 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 non-monetary property derived from the specified unlawful activities.

   1. Section 1956

      Section 1956(a) consists of three subdivisions. First, [sections] 1965(a)(1) prohibits participation in transactions with knowledge that the transaction involves the proceeds of criminal activity.(18) Second, [sections] 1956(a)(2) prohibits the transportation of monetary instruments in foreign commerce with knowledge that such instruments are associated with unlawful activity.(19) Finally, [sections] 1956(a)(3) explicitly authorizes the use of government sting operations to expose criminal activity under this section.(20) Each of these subsections is described in more detail below.

      1. Transaction Money Laundering

         Offenses referred to in [sections] 1956(a)(1) fall under the rubric of "transaction money laundering" because the prohibited action is the financial transaction itself.(21) The offenses contained in this subsection result when an individual conducts or attempts to conduct a financial transaction with criminally derived money.(22) 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(24) or [sections] 7206(25) tax evasion violations;(26) (3) conducting a financial transaction designed to conceal or disguise the nature, location, source, ownership, or control of the proceeds of specified unlawful activity;(27) and (4) conducting a financial transaction designed to avoid a state or federal reporting requirement.(28)

      2. Transportation Money Laundering

         Section 1956(a)(2) contains three separate offenses relating to the transportation, transmission, or transfer of criminally derived proceeds.(29) The three offenses are the transportation, transmission, or transfer of a monetary instrument into or out of the United States (1) with the intent to promote the carrying on of a specified unlawful activity;(30) (2) when it is known that the monetary instrument represents the proceeds of some form of unlawful activity, and the transportation is designed to conceal or disguise such proceeds;(31) and (3) when it is known that the monetary instrument 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

         Section 1956(a)(3) criminalizes three activities conducted during 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)

         Under the sting provisions of [sections] 1956, it is illegal to conduct a financial transaction involving property represented by a law enforcement officer to be the proceeds of a specified unlawful activity with the intent (1) to promote specified unlawful activity;(35) (2) to conceal or disguise the nature, location, source, ownership, or control of the proceeds of specified unlawful activity;(36) or (3) to avoid a state or federal transaction reporting requirement.(37)

   2. Section 1957

      Section 1957 provides for the punishment of one who knowingly engages or attempts to engage in a monetary transaction in criminally derived property, which has a value greater than $10,000 and is derived from specified unlawful activity.(38) It is not required that the recipient actually 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 broad enough 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) Nevertheless, the intent of Congress in enacting [sections] 1957 was 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 the Act. 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 with the specific offense. 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 engage or attempt 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 criminal activity the property was derived-merely that it was derived from 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."(45) Section 1956(c)(1) defines "some form of unlawful activity" to mean some form of felonious conduct,(46) so under [sections] 1956, the offender must know that the property consists of the proceeds of a felony. However, [sections] 1956(c)(1) also makes it clear that the offender need not know the specific criminal activity from which the proceeds are derived.(47)

         Section 1956 contains a secondary knowledge requirement related to the defendant's intent. Sections 1956(a)(1)(B) and (a)(2)(B) require that one take action knowing that the transaction or transportation is designed to conceal information about the proceeds of specified criminal activity, or knowing that it is intended to avoid a transaction reporting requirement under state or federal law.(48) Under this secondary requirement, the knowledge referred to is that of the person who designed the transaction. However, if the designer and the defendant are two different people, the defendant can still be found to have the requisite knowledge of what the transaction was designed to do.(49)

         Determining how knowledge may be proven and at what point a person has attained the requisite...