In 1986, Congress passed Federal Money Laundering Act of 1986, making Money Laundering a federal offense. Money laundering is a crime that involves cleaning proceeds of criminal activity through a series of financial transactions designed to conceal the illegitimate source of the money. Money laundering is a crime under New York State Law as well as federal law. This article will cover federal money laundering.
Federal Money Laundering Act of 1986 contains two criminal provisions, specifically 18 U.S.C. Section 1956 and 18 U.S.C. Section 1957. Section 1956 of Title 18 of United States Code contains the federal Money Laundering charge. Section 1956(a) lists three types of prohibited criminal conduct, specifically:
- Domestic money laundering transactions (Section 1956(a)(1));
- International money laundering transactions (Section 1956(a)(2)); AND
- Undercover or “sting” money laundering transactions (Section 1956(a)(3)).
Domestic Money Laundering Transactions
Under Section 1956(a)(1) of Title 18 of United States Code, these are the elements of domestic money laundering under federal law:
- Knowing that the property involved in a financial transaction represents the proceeds of unlawful activity,
- Conducting or attempting to conduct a financial transaction which involves the proceeds of unlawful activity
- With intent to promote the carrying on of the unlawful activity OR with intent to engage in conduct constituting violations of sections 7201 or 7206 of the Internal Revenue Code; OR
- Concealment of Assets: Knowing that transaction is designed in whole or in part to conceal or disguise the nature, location, source or ownership, or control of the proceeds of unspecified unlawful activity, or to avoid transaction reporting requirements under state or federal law.
When Does a Financial Transaction Involve the Proceeds of Unlawful Activity?
Under Federal Law, a financial transaction involves the proceeds of unlawful activity if it is part of a set or parallel or dependent transactions, any one of which involves the proceeds of specified unlawful activity, and all of which are part or a single plan or arrangement. This means that virtually any federal crime that results in a financial gain is “specified unlawful activity,” including:
- Wire Fraud,
- Bank Fraud,
- Securities Fraud,
- Insurance Fraud,
- Narcotics Trafficking,
- Human Trafficking,
- Smuggling and Customs Violations,
- Violent Crimes, AND
- Conspiracies to commit any of the above crimes.
Therefore, it is unusual for someone to just be charged with money laundering by itself. That is because the charge is usually coupled up with the illegal activity, which resulted in the funds. Importantly, the same conduct cannot be the both the underlying criminal conduct and the money laundering activity. So, money exchanged between a drug dealer and a purchaser during an illegal drug sale is not funds from specified unlawful activity. That is because money exchanged for drugs is not proceeds of criminal activity at the time that the exchange took place.
How Much Knowledge is Required About the Source of Funds to Convict Someone of Federal Money Laundering Under 18 U.S.C. 1956(a)?
Under federal law, the prosecutor must prove beyond a reasonable doubt by direct or circumstantial evidence, that the Defendant knew that the property involved was a result of a felony under state, federal or foreign law. The prosecutor does not need to prove that the Defendant knew exactly from which crime the funds came from. Rather, the prosecutor just needs to prove that the Defendant knew that the funds came from illegal activity. Knowledge of the exact crime that resulted in the proceeds is not required for a federal money laundering conviction under 18 U.S.C. 1956(a).
International Money Laundering Transactions
International Money Laundering Transactions are the second type of federal money laundering. These are the elements of International Money Laundering:
- Transportation, transmission, transfer or attempt to transport, transmit or transfer a monetary instrument or funds either from or to the United States from or to another county,
- With intent to promote the carrying on of the unlawful activity OR
- Knowing that the monetary instrument or funds involved in the transportation, transmission, or transfer represent the proceeds of unlawful activity AND
- Knowing that such transportation, transmission or transfer is designed to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds OR avoid transaction reporting requirements.
Undercover Money Laundering Transactions
Undercover Money Laundering is the third type of federal money laundering under 18 U.S.C. 1956(a)(3). This charge applies to sting or undercover operations conducted by law enforcement to catch individuals engaged in money laundering. Similarly to domestic and international federal money laundering charges, this charge applies to promotion, concealment and reporting avoidance of criminal proceeds.
The elements of the Undercover Money Laundering charge are:
- Intent to promote the carrying on of specified unlawful activity, OR to conceal or discoid the nature, location, source, ownership, or control of property believed to be the proceeds of specified unlawful activity, OR to avoid transaction reporting requirements under state or federal law,
- Conducts or attempts to conduct a financial transaction involving property represented by the proceeds of specified unlawful activity, or property used to conduct or facilitate specified unlawful activity.
Federal Money Laundering Penalties
Violations of 18 United States Code 1956, the federal money laundering statute, are punishable by imprisonment up to 20 years. The exact sentence will be determined by the federal sentencing guidelines as well as nature and circumstances of the offense and individual characteristics under 3553(a).
Additionally, there may be civil penalties imposed on federal money laundering charges:
- For transactions under subsection (a)(1) or (a)(3), or section 1957 or transportation, transmission or transfer described in (a)(2), the civil penalty is the greater of (1) the value of the property, funds, or monetary instruments involved in the transaction OR (2) $10,000.
- For Domestic and International money laundering transactions, the fine is no more than $500,000 or twice the value of the property involved in the transaction, whichever is greater.
Importantly, federal money laundering can be punishable by jail time, or a fine or both jail time or a fine.
Monetary Transactions Involving Proceeds of Criminal Activity
The second provision of the Federal Money Laundering Control Act of 1986 is codified in Section 1957 of Title 18 of United States Code. This charge is called Engaging in Monetary Transactions in Property Derived from Specified Unlawful Activity. Simply put, this section covers money laundering spending.
Under 18 U.S.C. Section 1957, it is a federal crime to knowingly engage or attempt to engage in a financial transaction of over $10,000 involving funds derived from specified unlawful activity.
Which Transactions Can Be Prosecuted Under 18 U.S.C. Section 1957?
18 U.S.C. Section 1957 applies to many financial transactions. Specifically, transactions can be prosecuted under 18 U.S.C. Section 1957, if:
- The offense takes place in the United States or in the special maritime or territorial jurisdiction of the United States, OR
- The Defendant is a United States person, even if the transaction takes place outside the United States or a special maritime or territorial jurisdiction. The following are considered United States persons under 18 U.S.C. Section 3077:
- A national of the United States;
- An alien lawfully admitted for permanent residence in the United States;
- Any person within the United States;
- A sole proprietorship, partnership, company, or association composed principally of nationals or permanent residents of the United States;
- A corporation organized under the laws of the United States, any state, District of Columbia, or any territory or possession of the United States and a foreign subsidiary of such corporation.
How Much Knowledge Is Required About the Source of the Funds to Be Prosecuted for Money Laundering under 18 U.S.C. 1957?
Knowledge that the transaction involved funds obtained from unlawful activity, is one of the requirements federal prosecutors have to prove at trial in order to convict someone of federal money laundering. However, knowledge is established by simply doing the transaction involving proceeds of criminal activity. This allows the Government to prosecute individuals under what is commonly called “willful blindness.” Under the “willful blindness” theory, the definition of knowledge or knowingly doing something includes the closing of one’s eyes to the high probability that a certain fact exists.
Sentencing and Penalties for Conducting Monetary Transactions Involving Proceeds of Criminal Transactions
A conviction under 18 U.S.C. Section 1957 for Conducting Monetary Transactions Involving Proceeds of Criminal Activity is punishable by:
- Imprisonment up to 10 years;
- A fine up to $500,000 or twice the value of the transaction, whichever is greater;
- Both imprisonment and a fine.
There is however a sentencing exception if the offense involves theft pre-retail medical product (as defined in 18 U.S.C. Section 670). The punishment for the offense is the greater of the punishment under 18 U.S.C. 1957 or 18 U.S.C. 670. Under 18 U.S.C. Section 670, if the theft of pre-retail medical product involves aggravating circumstances, the maximum on the charge is 30 years imprisonment.
What Are Some Potential Defenses to Federal Money Laundering?
Although no two federal money laundering cases are alike, these are some common defenses to money laundering charges:
- Lack of Knowledge – As explained above, 18 U.S.C. Section 1956 and 18 U.S.C. Section 1957 have different knowledge requirements. Not knowing that the funds came from unlawful activity is a viable defense for prosecutions under 18 U.S.C. 1956.
- Lack of Intent – Intent is a required element of federal money laundering prosecutions. If the Government cannot prove that you intentionally engaged in federal money laundering, or intended to conceal the source of the funds, then you cannot be convicted of these charges.
- Coercion or Duress – If you were coerced or forced to engage in federal money laundering, you may have a viable defense to these charges.
- Insufficient Evidence – Just because you are arrested and charged with federal money laundering, doesn’t mean that the Government can prove each and every element of the charge against you.
- Violations of Your Constitutional Rights -Violation of your Constitutional rights during the Government’s investigation of the case may result in certain evidence being excluded. If law enforcement conducted their investigation in a way that illegally gathered evidence or somehow violated your Constitutional rights, you may be able to get the evidence suppressed.
What is the Statute of Limitations on Federal Money Laundering?
The statute of limitations for federal money laundering is 5 years from the commission of the offense for prosecutions of both 18 U.S.C. Section 1956 and 18 U.S.C. 1957.
Contact Federal Money Laundering Attorneys Today
If you or a loved one is under investigation or has been charged with federal money laundering, you need to take your case very seriously. Usually, the government has been investigating you, or your business for months, if not years. You need to hire an experienced criminal defense attorney, who will dedicate all the time and resources necessary to defending your case. Please call us at 212-729-9494 or contact us today to schedule your consultation.