By: Dallas Money Laundering Defense Lawyer Mick Mickelsen – Partner Broden & Mickelsen, LLP
When one hears the phrase “money laundering” one usually thinks of some activity by which illegal proceeds, such as that earned from selling narcotics, are made to appear as if they were derived from legitimate income. Most people also tend to think the crime of money laundering is much less serious than the underlying criminal activity from which it is derived. However, under Federal law, money laundering encompasses more activity than what people would assume, and the penalties for money laundering can be as severe as the penalties for the underlying criminal activity.
The two principal Federal money laundering statutes are 18 U.S.C. §§ 1956 and 1957. Section 1956 prohibits various activities involving criminal proceeds, including transactions that conceal the nature of the proceeds. Section 1957 focuses on spending criminal proceeds.
Engaging in Financial Transactions to Conceal Criminal Proceeds; to Use Such Proceeds to Promote Criminal Activity; or to Evade Taxes
This statute prohibits, among other things:
- Engaging in financial transactions involving criminal proceeds to conceal their nature.
- Engaging in financial transactions involving criminal proceeds to promote further criminal activity.
- Engaging in financial transactions involving criminal proceeds to evade taxes.
“Proceeds” means gross receipts from the criminal activity. The requirement that there be a “financial transaction” may be satisfied by something as simple as simple hand to hand transfer of cash. Although the statue requires that the defendant has knowledge that the financial transaction involved proceeds of criminal activity, it does not, however, require that the defendant have knowledge of the exact nature of the criminal activity. The law also permits the government to satisfy the knowledge requirement by showing that the defendant was willfully blind to the criminal nature of the funds.
Although the defendant need not necessarily know the precise nature of the crime from which the proceeds are derived, the government usually must show the proceeds are in fact derived from a specified “predicate” offense. These offenses include murder; kidnapping; arson; robbery; gambling; bribery; drug offenses; fraud; or dealing in obscene material.
Concealment requires a “design” to conceal. This is determined by examining the purpose, not the actual effect, of the transaction. To determine if such a design existed, the fact finder can consider the defendant’s statements, whether there was secrecy surrounding the transaction, and the irregularity of the transaction, etc.
Promotion is usually easy to prove with some courts holding that it may simply be met by showing the charged transaction facilitated the continued prosperity of the underlying crime. However, at least in the context of drug cases, the courts have held the money laundering transaction must be distinct from the underlying criminal activity. In other words, selling drugs and receiving money does not, in and of itself, also constitute a separate money laundering offense.
Tax evasion in the money laundering context does not require the government to show that the defendant knew his conduct violated the tax laws, but only that he acted intentionally as opposed to inadvertently.
A single violation of one of the provisions of section 1956 carries up to twenty-years in prison.
Spending or Depositing Criminal Proceeds
Although a violation of section 1957 requires the government to prove the defendant was promoting criminal activity; concealing the proceeds of criminal activity; evading taxes on the proceeds of criminal activity; or structuring transactions to avoid cash reporting requirements, Section 1957 simply outlaws spending or depositing funds tainted by criminal activity.
To be found guilty of section 1957 violation the defendant must engage in:
- A monetary transaction,
- knowing the funds involved were criminally derived,
- exceeded $10,000,
- derived from a “specified criminal activity” (a list of crimes including murder; kidnapping; arson; robbery; gambling; bribery; drug offenses; fraud; or dealing in obscene material).
A violation of section 1957 carries up to ten years in prison.
31 U.S.C. § 3124
Another commonly employed statute for money laundering related offenses is 31 U.S.C. § 3124. This statute prohibits “structuring,” i.e., the evasion of Federal requirements that any cash transaction of $10,000 or larger be reported. If someone sells a car for $12,000 cash and makes three separate $4,000 cash deposits to avoid the triggering of a cash transaction report by their bank, they would be subject to prosecution under this statute. A violation of this statute can carry up to five years imprisonment.
31 U.S.C. § 5322
Willful Failure to Report Cash Transactions
Closely related to the offense of “structuring,” is the offense of willfully failing to report a cash transaction over $10,000. If someone sells a car for $12,000 they are required to report the $12,000 received (just as the bank is required to report the $12,000 deposit). If the government can prove the seller knew of this requirement and intentionally refused to comply with it, they can be subject to five years imprisonment.
Sentencing Guideline Implications
If the defendant committed the underlying criminal offense, the defendant’s Federal sentencing guidelines are usually determined based on the underlying offense and then an additional enhancement applies. The enhancement is more severe for a section 1956 offense then a section 1957 offense. If the defendant did not commit the underlying offense the guidelines are largely based on the amount of money laundered. Once again, the enhancement is more severe for a section 1956 offense then section 1957 offense, and much more severe if the laundered funds were drug crime proceeds or the proceeds of a crime of violence.
By: Mick Mickelsen Dallas Criminal Defense Attorney