Money Laundering

• Author: Michael Bednarczyk
• Pages: 1129-1156

MONEY LAUNDERING

I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1129

II. OVERVIEW OF THE STATUTE . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 1131

A. Section 1956. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1131

1. Transaction Money Laundering. . . . . . . . . . . . . . . . . . . . 1132

2. Transportation (or International) Money Laundering. . . . 1133

3. Sting Money Laundering (Sting Operations). . . . . . . . . . 1134

B. Section 1957. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1135

III. ELEMENTS OF THE OFFENSES . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . 1135

A. Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1136

B. Proceeds Derived From a Specified Unlawful Activity. . . . . . 1138

1. Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1138

2. Specified Unlawful Activity. . . . . . . . . . . . . . . . . . . . . . 1140

C. Financial Transaction Affecting Interstate or Foreign

Commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1141

1. Financial Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . 1141

2. Interstate Commerce. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1144

3. Multiple Transactions .. . . . . . . . . . . . . . . . . . . . . . . . . . 1145

D. Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1146

IV. DEFENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1148

A. Constitutional Vagueness. . . . . . . . . . . . . . . . . . . . . . . . . . . 1148

B. Double Jeopardy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1149

C. Constitutionally Impermissible. . . . . . . . . . . . . . . . . . . . . . . 1150

V. PENALTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1150

A. Criminal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1150

B. Civil. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1153

VI. INTRODUCTION TO THE BSA’S AML REGULATORY FRAMEWORK . . . . . . 1153

A. Introduction to the BSA’s AML Regulatory Framework.. . . . . 1154

B. The AML Provisions in the FY 2021 NDAA. . . . . . . . . . . . . . 1155

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-

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 Oct. 17, 2021).

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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

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 to the BSA 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 transac-

tions 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

Then, the terrorist attacks of September 11,

2001 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.

8

The Act’s expansive definition of “money laundering”

criminalizes a broad spectrum of activities.

9

Then, in early 2021, Congress

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,

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) (defining money laundering and outlining the scope of the problem).

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 infra Section VI (introducing the reader to federal government’s

AML regulatory framework and recent relevant statutory updates included in the FY 2021 NDAA); Transfer and

Reorganization of Bank Secrecy Act Regulations, 75 Fed. Reg. 65,806 (Oct. 26, 2010).

7. 18 U.S.C. §§ 1956–57.

8. 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

that additional resources were allocated to prosecute banks).

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 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

(2001); see also Andres Rueda, International Money Laundering Law Enforcement & The USA PATRIOT Act

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