MONEY LAUNDERING

MONEY LAUNDERING

I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1223

II. OVERVIEW OF THE STATUTE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1225

A. Section 1956. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1225

1. Transaction Money Laundering . . . . . . . . . . . . . . . . . . . . 1225

2. Transportation (or International) Money Laundering. . . . . 1227

3. Sting Money Laundering (Sting Operations) . . . . . . . . . . 1228

B. Section 1957. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1229

III. ELEMENTS OF THE OFFENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1230

A. Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1230

B. Proceeds Derived From a Specif‌ied Unlawful Activity. . . . . . . 1232

1. Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1232

2. Specif‌ied Unlawful Activity . . . . . . . . . . . . . . . . . . . . . . 1236

C. Financial Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1237

1. Interstate Commerce. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1239

2. Multiple Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . 1241

D. Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1241

IV. DEFENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1244

A. Constitutional Vagueness . . . . . . . . . . . . . . . . . . . . . . . . . . . 1244

B. Double Jeopardy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1245

C. Constitutionally Impermissible. . . . . . . . . . . . . . . . . . . . . . . . 1245

V. PENALTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1246

A. Criminal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1246

B. Civil. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1248

I. INTRODUCTION

The Treasury Department def‌ines “money laundering” as “the process of mak-

ing illegally-gained proceeds (i.e., ‘dirty money’) appear legal (i.e., ‘clean’).”

1

Money laundering typically follows a three-step process: (i) placement—the laun-

derer places criminally derived money into a legitimate enterprise; (ii) layering—

the launderer places the money in various pretextual transactions to obscure the

original source; and (iii) integration—the launderer transforms the funds into non-

cash instruments recognized in the legitimate f‌inancial world, such as bank notes,

loans, letters of credit, or any number of recognizable f‌inancial instruments.

2

Once

1. U.S. Dep’t of the Treasury, History of Anti-Money Laundering Laws, FIN. CRIMES ENF’T NETWORK, https://

www.f‌incen.gov/history-anti-money-laundering-laws (last visited Nov. 1, 2020).

2. See Teresa E. Adams, Tacking on Money Laundering Charges to White Collar Crimes: What Did Congress

Intend, and What Are the Courts Doing?, 17 GA. ST. U. L. REV. 531, 535–38 (2000) (describing the money

laundering process).

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the money is in these accepted forms, criminals can effectively use the funds to

f‌inance illicit activities such as illegal narcotics traff‌icking,

3

illegal weapons sales,

human traff‌icking, fraud, political corruption, child pornography, and terrorism.

4

Recognizing this problem, Congress has passed several regulatory measures in

the civil code, starting with the Bank Secrecy Act of 1970 (“BSA”), which forbids

the export of more than $10,000 of undeclared monies, requires f‌inancial institu-

tions to have adequate anti-money laundering (“AML”) programs, and requires f‌i-

nancial institutions to f‌ile suspicious activity reports (“SARs”), among other

requirements.

5

Subsequent amendments allowed the Treasury Department to enact

additional rules, such as 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 re-

cipient.

6

Regulatory requirements, however, have limited impact because they

impose obligations on legitimate f‌inancial institutions, which only indirectly inhib-

its suspected money launderers.

7

To avoid triggering reporting requirements, sus-

pects simply structure their transactions to fall below reporting thresholds.

The Money Laundering Control Act of 1986 (the “Act”) added teeth to the BSA

by criminalizing money laundering.

8

Then, the terrorist attacks of September 11,

2001 and the f‌inancial crisis of 2008 motivated Congress and the executive branch

to expand the Act through the International Money Laundering Abatement and

Anti-Terrorist Financing Act of 2001 (“IMLAFA”), thereby broadening existing

rules and enforcement efforts to combat money laundering.

9

The Act’s expansive

def‌inition of “money laundering” criminalizes a broad spectrum of organized

crime.

10

3. See generally GUY STESSENS, MONEY LAUNDERING: A NEW INTERNATIONAL LAW ENFORCEMENT MODEL

(2000) (discussing the U.N. Convention Against Illicit Traff‌ic in Narcotic Drugs and Psychotropic Substances,

opened for signature Dec. 19, 1988).

4. See generally PAUL ALLAN SCHOTT, REFERENCE GUIDE TO ANTI-MONEY LAUNDERING AND COMBATING

THE FINANCING OF TERRORISM (2d ed. 2006) (referring to Chapter 1, def‌ining money laundering and the scope of

the problem).

5. 31 U.S.C. § 5316(a)(1)(A).

6. 31 C.F.R. § 1010 (2019); see also Transfer and Reorganization of Bank Secrecy Act Regulations, 75 Fed.

Reg. 65,806 (Oct. 26, 2010).

7. See Stephen Jeffrey Weaver, Modern Day Money Laundering: Does the Solution Exist in an Expansive

System of Monitoring and Record Keeping Regulations?, 24 ANN. REV. BANKING & FIN. L. 443, 446–48 (2005);

see also Adams, supra note 2, at 536.

8. 18 U.S.C. §§ 1956–1957.

9. See USA PATRIOT Act, Pub. L. No. 107-56, § 302, 115 Stat. 272, 296–97 (2001) (stating that the

IMLAFA amends the Act by expanding the list of predicate offenses that give rise to a money laundering charge,

including corruption and export control violations; it also expands the international reach of prosecutors); Jessica

Silver-Greenberg & Ben Protess, Money Laundering Inquiry is Said to Aim at U.S. Banks, N.Y. TIMES (Sept. 14,

2012), www.nytimes.com/2012/09/15/business/money-laundering-inquiry-said-to-target-us-banks.html (noting

additional resources were allocated to prosecute banks).

10. See generally Jonathan H. Hecht, Airing the Dirty Laundry: The Application of the United States

Sentencing Guidelines to White Collar Money Laundering Offenses, 49 AM. U. L. REV. 289, 293–300 (1999)

(discussing background of Money Laundering Control Act). The IMLAFA amended 18 U.S.C. § 1956 by

expanding the list of predicate offenses. USA PATRIOT Act, Pub. L. No. 107-56, § 315, 115 Stat. 272, 308–09

1224 AMERICAN CRIMINAL LAW REVIEW [Vol. 58:1223