Technology has developed new avenues for people to hide their money. These new avenues have made it extremely difficult for government anti-fraud agencies to track these funds.
Why Does the Government Care Where I Put my Money?
If it looks like you’re trying to hide your money, the government is going to want to know why. If you’re saving to buy a house, a new car, or pay for your child’s tuition, you would think that putting that money in the bank would not be a problem.
Unfortunately, Americans are being prosecuted for the way they deposit their money, how frequently they deposit their money, or even because of how much money they are depositing at any given time.
What concerns authorities is the wide range of criminal activity laundered money could support. Federal agencies are constantly implementing improved auditing procedures to help detect, trace and prosecute individuals who try to “disguise” their money.
So what’s the problem?
The Problem: Not Everyone the Government Accused of Money Laundering is Guilty
Innocent owners and businessmen are becoming entangled in the process. With few legal protections available and no due process rules to protect them, people across the country are having their right to property violated.
Picture waking up one morning and receiving a notice that you have been suspected of money laundering. Maybe they freeze your bank account and prevent you from paying your bills. Maybe they seize your car and prevent you from going to work or taking your children to school. This is happening to people all over the country.
As the government continues its search for ill-gotten gains by seizing assets and freezing bank accounts, you may be one of the hundreds of innocent bystanders left in the wake.
More fraud is occurring, and the heightened awareness of that fraud has led to the development of robust federal laws. These laws grant the federal government and its agencies broad powers.
Generally, Any Alleged Criminal Activity that Results in Financial Gain May Lead to Investigations, Accusations, and Charges of Money Laundering
As a result, business owners, accountants, bankers, and anyone who deal with large amounts of money are often threatened with charges of money laundering as a secondary charge, without even knowing they have committed a crime.
What is money laundering?
According to the Federal Bureau of Investigations (“FBI”), money laundering is the process by which people “conceal or disguise” proceeds from criminal activity and make them “appear to have come from a legitimate source.”[1]
According to this definition, taking money from a drug transaction and depositing it into a checking account would constitute money laundering.
Money laundering is generally associated with crimes that provide financial benefit. Some of these crimes include:
- Terrorism
- Drug trafficking
- Human trafficking
- Fraud
- Embezzlement
- Racketeering/RICO
Specifically, the FBI focuses its efforts on money laundering facilitation, targeting professional money launderers, key facilitators, gatekeepers, and complicit financial institutions.[2]
How does money-laundering work? – Money Laundering 101
- First, the money is put into some financial institution—usually a bank—and makes its initial entry into the marketplace. This is called “placement” and may be done by breaking up large amounts of cash into less conspicuous smaller sums and then depositing them at different times.
- After the money is “placed” into the financial market, a complex audit trail is usually developed to distance the funds from their source through a series of financial transactions. This is called “layering” and some common methods include channeling the funds through different bank accounts, or disguising the transfers as payments for goods or services.
- After the money is “layered,” all that is left to do is reintroduce the money to a legitimate financial institution like a bank. This process is called “integration.”
Presto! If you’ve followed the steps above, you have officially “washed” your money. Thankfully, that shouldn’t mean that all your money is crumpled and faded. Instead, you’ve essentially washed the crime off of the bills.
Charges Connected to Money Laundering
In addition to defendants charged with money laundering as a primary charge, many defendants are charged with money laundering as a secondary charge. This is done for two reasons.
- First, the government wants your money. Civil forfeiture allows the government to take assets from anyone suspected of being involved with illegal activity. That’s right, suspected. In contrast, criminal forfeiture only allows the government to temporarily hold property until the accused it ultimately convicted. Therefore, while you have to be convicted of the crime for the government to ultimately keep your property, you need only be suspected of a crime for them to seize your assets and your money and hold them until they are able to determine where it came from. This process can take years. To get back the seized property, owners and their lawyers must prove that the money or property was not involved in criminal activity.
- Second, cash and property seized by the government can ultimately be used by the department that seized it. While drugs that are seized are usually destroyed, cash and property are used to purchase new equipment, vehicles, and things like simulated training systems for departments.
Interestingly, drug-related offenses make up 90% of the cases where money laundering is a secondary charge. Why? Because the government knows that if you sold drugs, you made money, and they want that money.
As a result, business owners, accountants, bankers, and anyone who deal with large amounts of money are often threatened with charges of money laundering as a secondary charge, without even knowing they have committed a crime.
What laws make money laundering illegal?
The Money Laundering Control Act of 1986 made money laundering a federal crime. It prohibits individuals from engaging in a financial transaction with proceeds that were generated from specific crimes known as “specified unlawful activities.”
If you are charged with money laundering, the government must prove that you had actual knowledge that the money came from some criminal activity. Additionally, the law requires that an individual specifically intend in making the transaction to “conceal or disguise” the source, ownership, or control of the funds.
The Act consists of two sections, 18 U.S.C. § 1956 and 18 U.S.C. § 1957.
What are the elements of 18 U.S.C. § 1956?
- You must know the money is derived from criminal activity in order to be found guilty of money laundering. “Thinking” and “knowing” are two different things. The government must prove that you knew the money was derived from criminal activity in order for you to be found guilty of money laundering. However, turning a blind eye to reality cannot negate the knowledge element. Knowledge may be inferred from facts indicating that criminal activity is particularly likely.[3]
- There must be a “financial transaction” involved. “Financial transaction” has been broadly defined. Qualifying transactions must either involve the movement of funds in a manner that affects interstate or foreign commerce or involve a financial institution engaged in, or whose activities affect, interstate or foreign commerce.
o “Transaction” defined. The term ‘transaction’ includes a laundry list of business deals which can trigger the statute. Generally, any movement of money or property between people or institutions may be considered a “transaction.”[4]
- The transaction need not involve a financial institution or even a business. Merely passing money from one person to another, so long as it is done with the intent to disguise the source, ownership, location, or control of the money, has been deemed a financial transaction under law.[5]
- The money must be from a “particular crime”. The list of federal predicate offenses is considerably long. Basically, any crime where the person is alleged to have made some money may be the basis for a money laundering charge.
- The money must be used for a “particular purpose.” This element of money laundering is quite specific. The “particular purposes” the government are concerned about include:
o Promoting the underlying crime or further offenses;[6]
o Concealing the nature, source, or ownership of the proceeds;[7]
o Evading taxes on the income produced by the illegal activity;[8]
o Transporting funds to promote, conceal, or evade reporting requirements;[9]
o Structuring financial transactions to evade reporting requirements.[10]
o Spending more than $10,000 of proceeds;[11]
o Traveling in interstate commerce in order to distribute the proceeds;[12]
o Traveling in interstate commerce in order to promote the criminal activity;[13]
o Transmitting funds or proceeds in the course of criminal activity;[14]
o Failing to comply with the Department of Treasury’s anti-money laundering provisions.[15]
- There is no minimum threshold. A minimum threshold amount is the amount, which must be alleged in order to initiate prosecution.
- There is no requirement that the transaction succeed in disguising the money. This may seem like common sense, but let’s clarify. If your purpose in moving the money was to conceal or disguise the money, you may still be found guilty. You cannot claim that you did not try to conceal the money if you tried and failed.
What are the elements of 18 U.S.C. § 1957?
- There must be a “monetary transaction” involved. The term “monetary transaction” can include any a deposit, withdrawal, purchase or transfer of funds between accounts.
- The transaction must involve a “financial institution.” In order to be found guilty of § 1957, the transaction must involve a financial institution. This can include a bank, investment bank, or other form of investment vehicle.
- You must know the money is derived from criminal activity. This is the same element required to be convicted of money laundering under § 1956. Remember, “thinking” and “knowing” are two different things. The government must prove that you knew the money was derived from criminal activity in order for you to be found guilty of money laundering. However, turning a blind eye to reality cannot negate the knowledge element. Knowledge may be inferred from facts indicating that criminal activity is particularly likely.[16]
What are the differences between § 1956 and § 1957?
- § 1957 requires that the money pass through a financial institution. Unlike 18 U.S.C. § 1956 described above, 18 U.S.C. § 1957 requires that the money pass through a financial institution.
- § 1957 requires that the amount of transaction must be more than $10,000. 18 U.S.C. § 1957 makes it a unlawful to spend more that $10,000 of proceeds of certain criminal activities[17]
Consequences of Being Convicted of Money Laundering
Charges of money laundering can mean prison time, seizure of your property, restitution to those harmed, civil penalties, or a combination of them all.
Imprisonment
- Violating Section 1956 is punishable by imprisonment for not more than 20 years if convicted.
- Violating Section 1967 is punishable by imprisonment for not more than 10 years.
Fines
- Fines for violating § 1956 are punishable by a fine of no more than $500,000 or twice the value of the property involved in the transaction, whichever is greater.
- Fines for violating § 1957 are punishable by a fine of not more than the greater of $250,000 ($500,000 for an organization) or twice the amount involved in the transaction
Civil Penalties
- Violators of any provision of § 1956 are also subject to a civil penalty of no more than the greater of $10,000 or the value of the property involved in the offense.[18]
- Violators of any provision of §1957 are also subject to a civil penalty of no more than the greater of $10,000 or the value of the property involved in the offense.[19]
o The court may also impose an alternate fine of not more than twice the amount of the criminally derived property involved in the transaction.
Forfeiture
- Any property involved in violation of §1956 is subject to seizure under either civil or criminal procedures.
- Any property involved in violation of §1957 is subject to seizure under either civil or criminal procedures.
Further Consequences
- Anyone convicted under 18 U.S.C. § 1956 is prohibited from owning or being employed by an institution insured by the Federal Deposit Insurance Company for a minimum of ten years from the time of conviction.
Detection, Investigation, and Reporting
Laws regarding drug-related money laundering activities are enforced across a variety of federal agencies. These agencies include:
- Board of Governors of the Federal Reserve System
- Department of Homeland Security (DHS)
- Department of Defense (DoD)
- Drug Enforcement Agency (DEA)
- Federal Bureau of Investigation (FBI)
- Federal Deposit Insurance Corporation (FDIC)
- Financial Crimes Enforcement Network (FinCEN)
- Government Accountability Office (GAO)
- Internal Revenue Service Criminal Investigations(IRS-CI)
- National Credit Union Administration (NCUA)
- Office of Foreign Asset Control (OFAC)
- Office of National Drug Control Policy (ONDCP)
- Securities and Exchange Commission (SEC)
- U.S. State Department
- United States Immigrant and Customs Enforcement (ICE)
Once any one of these law enforcement agencies suspect someone of being involved in money laundering, they usually initiate an investigation. These investigations can be initiated for many different reasons.
As if the fifteen government agencies listed above were not enough, the federal government also has a people in every bank across the nation that are required to report your suspicious activity.
The Bank Secrecy Act of 1970 requires banks to report any financial transactions of $10,000.01 or more. All firms must comply with the Bank Secrecy Act and its implementing regulations (“Anti-Money Laundering rules”). [20] The purpose of the AML rules is to help detect and report suspicious activity and this type of reporting is one of the most common reasons investigations into people’s finances are initiated.
Negative Impacts You’ll Face If You’re Accused of Money Laundering
It is important to be aware of the negative impacts of investigations, accusations, and charges related to money laundering.
If you are charged with money laundering, the government’s goal is to obtain court authority over your assets. Prosecutors will use the charge of money laundering to convince a judge, even before the case begins, to let the government hold onto your money and eventually try to keep it.
Court Authority Over Assets
Federal law allows law enforcement agencies and prosecutors to seize property, including money, from people convicted of federal crimes like drug trafficking and money laundering.
According to the Wall Street Journal, around 400 federal statutes empower the government to take assets from convicted criminals as well as people never charged with a crime. The seizure is known as “forfeiture.”
Even before you go to trial, the government will be allowed to freeze your bank accounts and lock up your money.
At the beginning of the case, the government can place a lien (a legal claim) on the property. They can also obtain a restraining order to prevent you from transferring or disposing of the property before the case is decided.
Unless you have an attorney who knows the forfeiture procedures, you may be without access to your bank accounts for the duration of the trail—or even longer!
Money Laundering in the News
- New York businessman James Lieto, an innocent bystander to a fraud case, had $390,000 seized during an FBI probe after an armored-car firm hired by Mr. Lieto to carry money for his check-cashing business was alleged to be involved in federal criminal activity.
- New Jersey businessman Raul Stio had more than $157,000 seized from him by the IRS because Mr. Stio’s deposits were allegedly “structured” to illegally avoid an anti-money-laundering rule that requires a cash transaction of more then $10,000 to be reported to federal authorities. Mr. Stio made 21 deposits over a four-month period, each $10,000 or less.
If you were charged with money laundering for making deposits which were allegedly “structured” to illegally avoid an anti-money-laundering rule, your attorney would need to show that the deposits merely reflected the amount of cash your businesses had produced. In the case of the New Jersey businessman, Mr. Stio owned a bar and a security firm and he was saving to buy a house.
These two men are just some of the thousands who have been forced to fight to recoup assets. According to the Justice Department, claimants challenged more than 1,800 civil forfeiture actions in federal court last year.
Seek Assistance
Regardless of your involvement in the criminal activity, you must be aware of the fact that the government can—and will—use the charge of money laundering to seize your money and freeze your assets. Prosecutors will use the charge of money laundering to convince the judge, even before the case goes to trial, to let the government hold onto the money and eventually try to keep it.
Being accused of money laundering could cost you hundreds of thousands of dollars or even millions of dollars in restitution, a criminal record that will follow you for the rest of your life, and the possibility of incarceration.
You have to protect your rights.
Establishing a Defense
Successfully defending against charges of money laundering is possible.
In order to successfully defend against the federal charge of money laundering, an attorney could put forward one or more of the following defenses.
- You did not take part in a monetary or financial transaction.
o As discussed above, charges of money laundering require you to take part in some type of financial transaction. For example, if you rob a bank and give the money to your friend without asking for anything in return, there was technically no financial transaction. But be careful, if the intent of giving the money to your friend was to conceal your criminal activity, promote further criminal activity, or evade reporting, you may still be liable.
- Your property/money was not involved in the crime.
o This is the most common way to combat a charge of money laundering. If your attorney can prove that the money or property seized was not the proceeds of a drug sale, but actually were earnings from your legitimate job or some other source, you would have a viable defense.
- Money is a product of criminal activity but you did not know that is was.
o A conviction of money laundering requires intent.
o That means that you must know the money was originally obtained illegally and intend to promote the underlying crime, conceal the underlying crime, avoid reporting the money, or intend to prevent the money from being traced to its origin.
o If you did not have knowledge of the criminal activity, an experienced defense attorney would seek to provide evidence that shows that you did not know the money you received was obtained illegally.
- Money must not only be a product of the crime, but the transaction must also be for a “particular purpose.”
o The government is required to prove that the transaction not only includes money from a crime, but also that the person is carrying out this transaction for the particular purpose of promoting, concealing, or avoiding reporting.
- Lack of Evidence
o The prosecution has the burden to prove, beyond a reasonable doubt, that you intended to commit money laundering. This is a heavy burden. When defending against this type of charge, your attorney should question the amount and quality of the evidence presented against you. In cases of money laundering, it is important for the government to prove where the money came from. The government must prove that the source of the money was illegal activity. If they cannot prove that the source of the money was illegal activity, or if the source of the money cannot be traced at all, the prosecution will likely be unable to prove beyond a reasonable doubt that the money was laundered.
Work with an Experienced Criminal Defense Attorney
If you are notified that you are to be investigated or if you receive a subpoena in relation to money laundering, you must take action immediately. This includes obtaining the best possible legal assistance.
[1] https://www.fbi.gov/investigate/white-collar-crime
[2] Id.
[3] United States v. Quinones, 635 F.3d 590, 594 (2d Cir. 2011) (“A conscious avoidance instruction permits a jury to find that a defendant had culpable knowledge of a fact when the evidence shows that the defendant intentionally avoided confirming the fact.”)
[4] “The term ‘transaction’ includes 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 safety deposit box, or any other payment, transfer, or delivery by, through, or to a financial institution, by whatever means effected.” 18 U.S.C. § 1956(c)(3); e.g. United States v. Garcia, 587 F.3d 509, 516 (2d Cir. 2009).
[5] Id. § 1956
[6] Id. § 1956(a)(1)(B)(ii)
[7] Id. § 1956(a)(1)(A)(i)
[8] Id. § 1956(a)(2)
[9] Id. § 1956(a)(1)(A)(ii)
[10] Id. § 1956(a)(1)(B)(ii); 31 U.S.C. § 5324
[11] 18 U.S.C. § 1957.
[12] 18 U.S.C. § 1952(a)(1).
[13] Id. § 1952(a)(3).
[14] Id. §§ 1960(a), (b)(1)(A), (B), (C)
[15] Id. §§ 5322
[16] United States v. Quinones, 635 F.3d 590, 594 (2d Cir. 2011)(“A conscious avoidance instruction permits a jury to find that a defendant had culpable knowledge of a fact when the evidence shows that the defendant intentionally avoided confirming the fact.”)
[17] 18 U.S.C. § 1957
[18] 18 U.S.C. § 1956(b)(1)
[19] 18 U.S.C. § 1956(b)(1)
[20] http://www.finra.org/industry/aml
