Money laundering and tax evasion are two separate crimes, with two individual statutes defining them. Despite this, they are absolutely linked to one another. In fact, the money laundering statute states that any person who conducts or attempts to conduct, a money laundering scheme with the intent to evade taxes can be found guilty of money laundering.
This section of the statute will be discussed in more detail below.
Below we will discuss:
- Tax evasion as money laundering
- Crimes related to tax evasion and money laundering
- Penalties for committing tax evasion and money laundering
- Possible defenses against the charges
Our lawyers focus on white-collar crimes, like money laundering and tax evasion, and government investigations. If you have been charged with, or are under investigation for, tax evasion or money laundering contact an attorney as soon as possible to ensure that your rights and interests are protected.
Tax Evasion as Money Laundering
The Money Laundering Control Act of 1986 was the first statute, in the United States, to officially criminalize money laundering. It is a statute made of 2 sections, for the purpose of tax evasion you only need to focus on 18 U.S.C. §1956.
Money Laundering – 18 U.S.C. §1956
Money Laundering is the act of concealing where your money came from by “cleaning” it through a legitimate business.
“Cleaning” or “washing” money usually involves a series of financial transfers and transactions which ultimately obscures its true origins.
Sometimes, your transaction history will trigger a computer algorithm that will alert investigators to an abnormal pattern.
However, you cannot be found guilty of money laundering without the prosecutor proving 3 key elements.
3 Elements the Prosecutors Must Prove
Under 18 U.S.C. §1956 the 3 key elements to money laundering
- “knowledge” that the money comes from “specified illegal activities,”
- act, and
- intent.
“Knowledge”
A key element of the crime of money laundering is the knowledge that the money was obtained through illegal activity. You must also have the knowledge that the transaction in question has been designed to conceal the nature of the money or to avoid a reporting requirement under state or federal law.
“Specified Illegal Activities”
The illegal activities specified include, but are not limited to:
- Racketeering;
- Murder;
- kidnapping;
- Robbery;
- Extortion
- Arson;
- Fraud, by or against, a foreign bank;
- Bribery;
- Embezzlement of funds by a public official;
- Smuggling;
- Human trafficking;
- Narcotics trafficking.
Conducts, or attempts to conduct, a financial transaction with that money that will avoid a reporting statute or conceal that nature of the money
Since we are in the tax evasion realm of money laundering, it is most important to focus on the intention to avoid a reporting statute through the conduct.
This factor is discussed in more detail below but is, at the most basic level, using a legitimate business to avoid having to report income in order to avoid paying taxes on it.
The intention to engage in conduct that violates 26 U.S.C. §7201
26 U.S.C. §7201 is a part of the Internal Revenue Code that makes it illegal to attempt to evade or defeat taxes.
It is actually quite simple – there are no hidden elements to it. The statute just makes it illegal to try to do anything that would keep you from paying the taxes you owe to the government.
When you conduct a financial transaction with the illegal money, you must have the intention to be attempting to evade taxes willfully.
Crimes Related to Money Laundering and Tax Evasion
If you would like to learn more about any of the below “crimes related to tax evasion and money laundering,” visit our “practice areas” page or contact us for a legal consultation.
- Fraud
- Bank fraud
- Accounting fraud
- Wire transfer fraud
- Internet fraud
- Willful failure to pay taxes
- Forged or fraudulent documents
Investigations and Enforcement
The investigation into both money laundering and tax fraud are generally conducted by several government agencies in conjunction with one another. These agencies include, but are not limited to:
- Federal Bureau Investigation (FBI)
- United States Department of Treasury
- Internal Revenue Service (IRS)
- Office of a Foreign Asset Control (OFAC)
- Securities and Exchange Commission (SEC)
- United States Attorney General (USAG)
Penalties
Under the money laundering statute, 18 U.S.C. §1956, if you are convicted you could face:
- A fine of, up to, $500,000 OR double the amount of the property involved in the transaction – whichever is greater;
- A prison term of up to 20 years; or
- Both a prison term and a fine.
Under the Internal Revenue Code, if you are convicted of attempting to avoid or defeat taxes, 26 U.S.C. §7201, (a felony) you could face:
- A fine of up to $100,000, or $500,000 if the defendant is a corporation;
- Up to 5 years in prison;
- Both a fine and a prison sentence; and
- The cost of prosecution.
Where this set of crimes grows complicated is the potential they have to be charged under both statutes and face a combination of the penalties above.
Conviction of any of these crimes carries with them heavy penalties. Having an experienced lawyer representing you could be the difference is the strength of the penalty you received.
Possible Defenses to Money Laundering and Tax Evasion
A common defense to tax evasion under money laundering is lack of necessary intent.
While this defense could work to get rid of the tax evasion element of the crime, it may not be enough to dismiss the overlapping charge of money laundering.
The crime of money laundering is more difficult to defend based on lack of intent because there are underlying crimes that make up the offense itself.
Contact a Federal White Collar Criminal Attorney Today
Our attorneys are well-respected, experienced federal litigators with knowledge in all federal judicial practices or procedures.
We have defended private individuals and public companies and will strive to protect you, your rights, and your family from the charges and accusations of tax evasion and money laundering.
