Money Laundering

• Author: Sean Jettner
• Pages: 1071-1092

MONEY LAUNDERING

I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1071

II. OVERVIEW OF THE STATUTE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1073

A. Section 1956 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1073

1. Transaction Money Laundering . . . . . . . . . . . . . . . . . . . 1073

2. Transportation (or International) Money Laundering . . . . 1074

3. Sting Money Laundering (Sting Operations) . . . . . . . . . . 1075

B. Section 1957 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1076

III. ELEMENTS OF THE OFFENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1077

A. Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1077

B. Proceeds Derived from a Specified Unlawful Activity . . . . . . . 1078

1. Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1078

2. Specified Unlawful Activity . . . . . . . . . . . . . . . . . . . . . . 1079

C. Financial Transaction Affecting Interstate or Foreign

Commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1080

1. Financial Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . 1080

2. Interstate Commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . 1082

3. Multiple Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . 1083

D. Intent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1083

IV. DEFENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1086

A. Constitutional Vagueness . . . . . . . . . . . . . . . . . . . . . . . . . . . 1086

B. Double Jeopardy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1086

C. Constitutionally Impermissible . . . . . . . . . . . . . . . . . . . . . . . 1087

V. PENALTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1088

A. Criminal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1088

B. Civil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1090

VI. INTRODUCTION TO THE BSA’S AML REGULATORY FRAMEWORK . . . . . . 1090

A. Introduction to the BSA’s AML Regulatory Framework . . . . . 1090

B. The AML Provisions in the FY 2021 NDAA . . . . . . . . . . . . . . 1092

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

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 July 16, 2022).

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-

1.

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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

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

Congress has passed several statutes to combat this problem. First, Congress

enacted the Bank Secrecy Act of 1970 (“BSA”), which forbids the export of more

than $10,000 of undeclared monies, requires financial institutions to have adequate

anti-money laundering (“AML”) programs, and instructs financial institutions to

file suspicious activity reports (“SARs”).

5

Subsequent amendments to the BSA

allow the Treasury Department to enact additional rules, such as requiring all busi-

nesses that wire money internationally to register with the government, file reports

for all transactions exceeding $750, report suspicious activity, and furnish the

names of both the transferor and the recipient.

6

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

by criminalizing money laundering.

7

Later, September 11th spurred lawmakers to

expand the Act through the International Money Laundering Abatement and Anti-

Terrorist Financing Act of 2001 (“IMLAFA”), which broadened existing rules and

enforcement efforts.

8

The Act’s expansive definition of “money laundering” crimi-

nalizes a broad spectrum of activities.

9

In early 2021, Congress passed a suite of

wide-ranging AML statutes, including the Anti-Money Laundering Act (AMLA),

as part of the Fiscal Year (FY) 2021 National Defense Authorization Act

(NDAA).

10

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).

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).

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

THE FINANCING OF TERRORISM (2d ed. 2006).

5. See 31 U.S.C. § 5316. While the BSA’s AML regulatory framework is not the central focus of this Article,

Section VI contains a brief overview of the regulatory framework.

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

Fed. Reg. 65,806 (Oct. 26, 2010); infra Section VI.

7. 18 U.S.C. §§ 1956–57.

8. See USA PATRIOT Act, Pub. L. No. 107-56, § 302, 115 Stat. 272, 296–97 (2001) (expanding the list of

predicate offenses that give rise to a money laundering charge, including corruption and export control violations

and expanding the international reach of prosecutors).

9. 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 the Act’s background); see also Andres Rueda, International Money Laundering Law Enforcement &

The USA PATRIOT Act of 2001, 10 MICH. ST. U. DET. COLL. L. J. INT’L L. 141, 151 (2001) (indicating that the

USA PATRIOT ACT’s addition of “corrupt practices” to the list of predicate offenses covered by §§ 1956–57

effectively closed the loophole used by foreign officials).

10. Pub. L. No. 116-283, 134 Stat. 3388 (relevant AML provisions codified as amended in 18 U.S.C. § 1510

and scattered sections of 31 U.S.C.). Section VI, infra, briefly addresses these updates.

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