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Money laundering

Revision as of 00:31, 18 July 2016 by Mdscott (talk | contribs) (→‎Definitions)
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Definitions

Money laundering (also called laundering) is

“ [d]isguising the origin and ownership of money, often by placing it in a bank, moving it through multiple transactions, and finally mixing it with legitimate funds. These steps are known respectively as placing, layering, and integrating the money.[1] ”
“ a process of hiding sources, transmittal, and people involved in financial matters and transfers of money for intelligence and today more commonly for criminal purposes, primarily associated with terrorist activity and narcotics trafficking.[2] ”

Background

Money laundering involves concealing the nature, location, source, ownership, or control of proceeds from an illegal activity or placing them back into further illegal activity.[3] The ill-gotten proceeds are laundered through a variety of methods to become “clean money.”

With the expansion of the Internet and increased globalization, the methods of money laundering continue to become increasingly complex and difficult to detect. The Financial Crimes Enforcement Network (FinCEN), under the Department of the Treasury, indicates that the routes for money laundering include banks, check cashers, money transmitters, businesses, and casinos. Money launderers use methods such as complex wire transfers, shell companies, and currency smuggling to hide their dirty money.

Money laundering became a federal crime in the Money Laundering Control Act of 1986.[4] It came to Congress’s attention that organized criminals were camouflaging their proceeds, and Congress strengthened the federal criminal statues to better combat criminal organizations. Recently, the scope of the money laundering statute has come under examination. The statute prohibits financial transactions of proceeds from illicit activities, but it does not currently define what constitutes “proceeds.” The U.S. Supreme Court ruled in United States v. Santos[5] that in the money laundering statute, the term “proceeds” refers to profits rather than gross receipts.

Internet gambling

Congress has enacted several statutes to deal with money laundering. It would be difficult for an illegal Internet gambling business to avoid either of two of the more prominent statutes — 18 U.S.C. §§1956 and 1957 — both of which involve financial disposition of the proceeds of various state and federal crimes, including violation of 18 U.S.C. §1084 (Wire Act), 18 U.S.C. §1955 (Illegal Gambling Business Act), 18 U.S.C. §1952 (Travel Act), or any state gambling law (if punishable by imprisonment for more than one year).[6] In fact, the courts have frequently upheld money laundering convictions predicated upon various gambling offenses.[7] The crimes under Section 1956 are punishable by imprisonment for not more than twenty (20) years or a fine of the greater of not more than twice value of the property involved in the transaction or not more than $500,000[8]; those under Section 1957 carry a prison term of not more than ten (10) years or a fine of the greater of twice the amount involved in the offense or not more than $250,000 (not more than $500,000 for an organization).[9] Any property involved in a violation of either section is subject to the civil and criminal forfeiture provisions of 18 U.S.C. §§981, 982.

Laundering the proceeds

Section 1956 is really several distinct crimes: (1) laundering with intent to promote an illicit activity such as an unlawful gambling business; (2) laundering to evade taxes; (3) laundering to conceal or disguise; (4) structuring financial transactions (smurfing) to avoid reporting requirements; (5) international laundering; and (5) “laundering” conduct by those caught in a law enforcement sting.

Promotion

In its most basic form the “promotion” offense essentially involves plowing the proceeds of crime back into an illegal enterprise. Like most of the crimes under Section 1956, the elements of the promotion offense begin with a financial transaction and the knowledge that the proceeds involved flow from a predicate offense like illegal gambling:

1. knowing
A. that the property involved in a financial transaction,
B. represents the proceeds of some form of unlawful activity,
2. A. conducts or
B. attempts to conduct such a financial transaction
3. which in fact involves the proceeds of specified unlawful activity (A)(i)
4. with the intent to promote the carrying on of specified unlawful activity.[10]

The “knowledge” element is the subject to special definition which allows a conviction without the necessity of proving that the defendant know the exact particulars of the underlying offense or even its nature.[11] The “proceeds” may be tangible or intangible, e.g., cash or debt, things of value or things with no intrinsic value, e.g., checks written on depleted accounts.[12]

“Financial transaction” for purposes of section 1956 make take virtually any shape that involves the disposition of something represent the proceeds of an underlying crime,[13] including disposition as informal has handing cash over to someone else.[14]

The jurisdictional requirements of the section may be satisfied in two ways — with a transaction which affects commerce or with a financial institution whose activities affect commerce. In either case, the effect on interstate or foreign commerce need be no more than de minimis to satisfy the jurisdictional requirement.[15]

The “promotion” element of the offense can be satisfied by proof that the defendant used the proceeds to continue a pattern of criminal activity[16] or to enhance the prospect of future criminal activity.[17]

Concealment

The “concealment” offense shares several common elements with the other offenses in Section 1956. Concealment occurs when anyone:

1. knowing
A. that the property involved in a financial transaction
B. represents the proceeds of some form of unlawful activity,
2. A. conducts or
B. attempts to conduct such a financial transaction
3. which in fact involves the proceeds of specified unlawful activity (A)(i)
4. knowing that the transaction is designed in whole or in part to conceal or disguise the nature, location, the source, the ownership, or the control of the proceed of specified unlawful activity.[18]

The courts have made it clear that conviction for the concealment offense requires proof of something more than simply spending the proceedings of a predicate offense.[19] That having been said, the line between innocent spending and criminal laundering is not always easily discerned.

“ Evidence that may be considered when determining whether a transaction was designed to conceal includes: [deceptive] statements by a defendant probative of intent to conceal; unusual secrecy surrounding the transactions; structuring the transaction to avoid attention; depositing illegal profits in the bank account of a legitimate business; highly irregular features of the transaction; using third parties to conceal the real owner; a series of unusual financial moves cumulating in the transaction; and expert testimony on practices of criminals.[20] ”

Tax evasion, smurfing and international laundering

The tax evasion[21] and structured transactions (“smurfing”) offenses[22] shadow the promotion and concealment offenses. A tax evasion, laundering prosecution requires the government to show that the defendant acted intentionally rather than inadvertently, but not that the defendant knew that his conduct violated the tax laws.[23] Similarly, conviction for the smurfing offense does not require a showing that the defendant knew that his conduct was criminal as long as the government establishes that the defendant acted with the intent to frustrate a reporting requirement.[24] The international laundering crime replicates the elements of the promotion, concealment and smurfing offenses (but not the tax evasion offense) and adds an international transportation element.[25] Of course, the proof the transportation element alone is insufficient without the evidence of an intent to promote, conceal or smurf.[26]

The final crime found in Section 1956 is a “sting” offense, the proscription drafted to permit the prosecution of money launderers taken in by under cover officers claiming have proceeds in need of cleansing from illegal gambling or other predicate offenses.

Spending the proceeds

Section 1956 does not make spending tainted money a crime, but Section 1957 does. Using most of the same definitions as Section 1956, the elements of Section 1957 cover anyone who:

1. A. in the United States,
B. in the special maritime or territorial jurisdiction of the United States, or
C. outside the United States if the defendant is an American,
2. knowingly
3. A. engages or
B. attempts to engage in
4. a monetary transaction[27]
5. [in or affecting interstate commerce]
6. in criminally derived property that
A. is of a greater value than $10,000 and
B. is derived from specified unlawful activity.[28]

The government’s jurisdictional burden is the same one it must bear for Section 1956 and therefore is minimal.[29] The knowledge requirement receives similar treatment. Thus, the government must prove that the defendant knew the monetary instrument came from some criminal activity,[30] but not that the defendant knew that the underlying crime was a money laundering predicate.[31]

References

  1. ↑ Information Technologies for the Control of Money Laundering, Glossary, at xii.
  2. ↑ Terms & Definitions of Interest for Counterintelligence Professionals (July 9, 2014) (full-text).
  3. ↑ Money laundering is codified as a federal crime at 18 U.S.C. §1956.
  4. ↑ Pub. L. No. 99-570.
  5. ↑ 553 U.S. 507, 128 S.Ct. 2020 (2008).
  6. ↑ 18 U.S.C. §§1956(7)(A), 1957(f)(3), 1961(1).
  7. ↑ See, e.g., United States v. Mick, 263 F.3d 553 (6th Cir. 2001) (upholding convictions under 18 U.S.C. §§1952, 1955, 1956, and 1957); United States v. Ables, 167 F.3d 1021 (6th Cir. 1999) (upholding convictions under 18 U.S.C. §§1955, 1956, and 1957); United States v. Hill, 167 F.3d 1055 (6th Cir. 1999) (same); United States v. Owens, 159 F.3d 221 (6th Cir. 1998) (upholding convictions under 18 U.S.C. §§1952, 1955, and 1956); United States v. Boyd, 149 F.3d 1062 (10th Cir. 1998) (upholding convictions under 18 U.S.C. §§1955 and 1956); see also United States v. Iacaboni, 363 F.3d 1 (1st Cir. 2004) (affirming in part and reversing in part a lower court forfeiture decision based upon the defendant’s plea to violations of 18 U.S.C. §§1955 and 1956).
  8. ↑ 18 U.S.C. §1956(a)
  9. ↑ Id. §§1957(b), 3571.
  10. ↑ 18 U.S.C. §1956(a)(1)(A)(i)).
  11. ↑ “The term ‘knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity’ means that the person knew the property involved in the transaction represented proceeds from some form, though not necessarily which form, of activity that constitutes a felony under State, Federal, or foreign law, regardless of whether or not such activity is specified in paragraph (7).” 18 U.S.C. §1956(c)(1); United States v. Rivera-Rodriguez, 318 F.3d 268, 271-72 (1st Cir. 2003); United States v. Hill, 167 F.3d 1055, 1065-68 (6th Cir. 1999).
  12. ↑ United States v. Akintonbi, 159 F.3d 401, 403 (9th Cir. 1998). There is some dispute over whether the term includes revenues, or only profits, or something in between. See United States v. Grasso, 381 F.3d, 160, 166-69 (3d Cir. 2004) (citing cases reflecting conflicting views).
  13. ↑ “The term ‘financial transaction’ means (A) a transaction which in any way or degree affects interstate or foreign commerce (i) involving the movement of funds by wire or other means or (ii) involving one or more monetary instruments, or (iii) involving the transfer of title to any real property, vehicle, vessel, or aircraft, or (B) a transaction involving the use of a financial institution which is engaged in, or the activities of which affect, interstate or foreign commerce in any way or degree.” 18 U.S.C. §1956(c)(4). “The term ‘transaction’ includes a purchase, sale, loan, pledge, gift, transfer, delivery, or other disposition, and with respect to a financial institution includes a deposit, withdrawal, transfer between accounts, exchange of currency, loan, extension of credit, purchase or sale of any stock, bond, certificate of deposit, or other monetary instrument, use of a safe deposit box, or any other payment, transfer, or delivery by, through, or to a financial institution, by whatever means effected.” Id. 1956(c)(3).
  14. ↑ United States v. Gough, 152 F.3d 1172, 1173 (9th Cir. 1998); United States v. Garcia Abrego, 141 F.3d 142, 160 (5th Cir. 1998); United States v. Roy, 375 F.3d 21, 23-24 (1st Cir. 2004) (exchange between individuals of $100 bills for currency of smaller denominations to facilitate drug trafficking).
  15. ↑ United States v. Ables, 167 F.3d 1021, 1029 (6th Cir. 1999); United States v. Owens, 167 F.3d 739, 755 (1st Cir. 1999); United States v. Bollin, 264 F.3d 391, 408 (4th Cir. 2001); United States v. Sabbeth, 262 F.3d 207, 218-19 (2d Cir. 2001).
  16. ↑ United States v. Masten, 170 F.3d 790, 797-98 (7th Cir. 1999) (payments to early victims of a pyramid scheme kept the scheme alive and enabled the defendant to ensnare subsequent victims); United States v. Parker, 364 F.3d 934, 947-50 (8th Cir. 2004) (payment for surplus instrumental as part of an ongoing fraud); United States v. Miles, 360 F.3d 472, 478 (5th Cir. 2004) (adding the observation that when an enterprise is as a whole illegitimate even otherwise ordinary and lawful expenditures may support a promotion money laundering charge).
  17. ↑ United States v. King, 169 F.3d 1035, 1040 (6th Cir. 1999) (drug dealer’s payment for past shipments preserved the defendant’s opportunity to acquire additional shipments); United States v. Williamson, 339 F.3d 1295, 1302 (11th Cir. 2003).
  18. ↑ 18 U.S.C. §1956(a)(1)(B)(i); United States v. Frank, 354 F.3d 910, 919 (8th Cir. 2004) (“The money-laundering statute required the government to prove that each of the defendants conducted or attempted to conduct a financial transaction, knowing that the property involved in the transaction represented the proceeds of unlawful activity, and knowing the transaction was designed to conceal or disguise the nature, location, source, ownership, or control of the proceeds of the unlawful activity”).
  19. ↑ United States v. Anderson, 189 F.3d 1201, 1209 (10th Cir. 1999); United States v. Stephenson, 183 F.3d 110, 121 (2d Cir. 1999).
  20. ↑ United States v. Burns, 162 F.3d 840, 848-49 (5th Cir. 1998), quoting United States v. Garcia-Emanuel, 14 F.3d 1469, 1475-76 (10th Cir. 1994).
  21. ↑ A tax evasion offense requires:
    1. knowing
    A. that the property involved in a financial transaction
    B. represents the proceeds of some form of unlawful activity,
    2. A. conducts or
    B. attempts to conduct such a financial transaction
    3. which in fact involves the proceeds of specified unlawful activity (A)(i)
    4. with intent to engage in conduct constituting a violation of section 7201 or
    7206 of the Internal Revenue Code of 1986.” 18 U.S.C. §1956(a)(1)(A)(ii).
  22. ↑ A structured transaction offense requires:
    1. knowing
    A. that the property involved in a financial transaction
    B. represents the proceeds of some form of unlawful activity,
    2. A. conducts or
    B. attempts to conduct such a financial transaction
    3. which in fact involves the proceeds of specified unlawful activity (A)(i)
    4. knowing that the transaction is designed in whole or in part to avoid a transaction reporting requirement under State or Federal law.”
    18 U.S.C. §1956(a)(1)(B)(ii).
  23. ↑ United States v. Zanghi, 189 F.3d 71, 77-78 (1st Cir. 1999).
  24. ↑ United States v. Hill, 167 F.3d 1055, 1070 (6th Cir. 1999); United States v. Morales, 108 F.3d 1213, 1221 (10th Cir. 1997); United States v. Bowman, 235 F.3d 1113, 1117-19 (8th Cir. 2000).
  25. ↑ The prohibition applies to anyone who:
    1. A. transports,
    B. transmits, or
    C. transfers, or
    D. attempts to transport, transmit, or transfer
    2. a monetary instrument or funds
    3. from a place in the United States to or through a place outside the United States or to a place in the United States from or through a place outside the United States
    A. with the intent to promote the carrying on of specified unlawful activity; or
    B. knowing that the monetary instrument or funds involved in the transportation, transmission, or transfer represent the proceeds of some form of unlawful activity and knowing that such transportation, transmission, or transfer is designed in whole or in part
    i. to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity; or
    ii. to avoid a transaction reporting requirement under State or Federal law.
    18 U.S.C. §1956(a)(2); United States v. Bieganowski, 313 F.3d 264, 279 (5th Cir. 2002) (“An offense under section 1956(a)(2)(B)(i) is almost identical [to an offense under Section 1956(a)(1)(B)(i)], with the exception that the transaction in question must be from a place in the United States to a place outside the United States”); United States v. Caplinger, 339 F.3d 226, 232-33 (4th Cir. 2003) (citing authority under the domestic provisions of Section 1956(a)(1) in its construction of the international provisions of Section 1956(a)(2)).
  26. ↑ United States v. Pitt, 193 F.3d 751, 762 (3d Cir. 1999).
  27. ↑ “[T]he term ‘monetary transaction’ means the deposit, withdrawal, transfer, or exchange, in or affecting interstate or foreign commerce, of funds or a monetary instrument (as defined in Section 1956(c)(5) of this title) by, through, or to a financial institution (as defined in Section 1956 of this title), including any transaction that would be a financial transaction under section 1956(c)(4)(B) of this title, but such term does not include any transaction necessary to preserve a person’s right to representation as guaranteed by the sixth amendment to the Constitution.” 18 U.S.C. §1957(f)(1).
    “[T]he term ‘monetary instruments’ means (i) coin or currency of the United States or of any other country, travelers’ checks, personal checks, bank checks, and money orders, or (ii) investment securities or negotiable instruments, in bearer form or otherwise in such form that title thereto passes upon delivery,” 18 U.S.C. §1956(c)(5).
    “[T]he term ‘financial institution’ has the definition given that term in section 5312(a)(2) of title 31, United States Code, or the regulations promulgated thereunder,” 18 U.S.C. §1956(c)(6). The title 31 definition quoted, supra, includes banks, car dealers, jewelers, real estate agents, brick and mortar casinos and most other institutions likely to be involved in a transaction involve more than $10,000.
    “[T]he term ‘financial transaction’ means . . . (B) a transaction involving the use of a financial institution which is engaged in, or the activities of which affect, interstate or foreign commerce in any way or degree,” 18 U.S.C. §1956(c)(4)(B).
  28. ↑ 18 U.S.C. §1957(a),(d),(f).
  29. ↑ United States v. Ables, 167 F.3d 1021, 1030-31 (6th Cir. 1999).
  30. ↑ United States v. Diamond, 378 F.3d 720, 728 (7th Cir. 2004) (“In order to find Diamond guilty of this offense [under section 1957], the government needed to prove that she derived property from a specified unlawful activity and that she engaged in a monetary transaction”).
  31. ↑ “In a prosecution for an offense under this section, the Government is not required to prove the defendant knew that the offense from which the criminally deprived property was derived was specified unlawful activity,” 18 U.S.C. §1957(c); United States v. Hawkey, 148 F.3d 920, 925 (8th Cir. 1998); United States v. Carucci, 364 F.3d 339, 343 (1st Cir. 2004).

See also

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