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Frequently Asked Questions about Federal Money Laundering Offenses

 

What is money laundering?

Although many people think of money laundering as simply the process of executing a series of convoluted financial transactions to conceal the origin of funds obtained from criminal activity, the federal criminal money laundering statutes, cover a far broader range of conduct involving criminally derived property.

Federal criminal money laundering offenses are codified under 18 U.S.C. § 1956 and § 1957.  § 1956 is the more serious and commonly charged of the two, and carries a maximum potential penalty of 20 years.  § 1957, by contrast, carries a maximum potential penalty of 10 years.  In this post, we’ll discuss § 1956 money laundering offenses.

1956 money laundering offenses most commonly fall into one of two kinds of money laundering:

  • “Promotional” money laundering – in which the alleged financial transactions involving criminally derived funds were performed for the purpose of promoting the underlying criminal activity that generated the funds; and
  • “Concealment” money laundering – in which the alleged financial transactions involving criminally derived funds were performed for the purpose of concealing the source, nature, ownership, or location of the funds.

Beyond promotional and concealment money laundering, § 1956(a)(3) also penalizes structuring financial transactions to avoid reporting requirements in the context of concealing the funds, or promoting the underlying criminal activity.  However, § 1956(a)(3) charges are uncommon because where there is evidence of structuring, prosecutors will commonly bring a separate structuring charge under the federal structuring statute: 31 U.S.C. § 5324.

What is the difference between promotional money laundering and concealment money laundering?

Both promotional and concealment money laundering criminalize financial transactions involving tainted property.  A financial transaction in this context can be complex, such as utilizing shell entities and fictitious businesses to transfer money, or simple, such as withdrawing cash. Tainted property simply means property derived from criminal activity. This can be drug proceeds, money obtained from theft or robbery, or profits earned from a fraud.

The main difference between promotional money laundering and concealment money laundering lies in the knowledge and intent elements that must be proven at trial.

In a promotional money laundering case, the government is required to prove that the defendant knew about and intended to promote the underlying unlawful activity.  For example, if the laundered were derived from drug sales, the government must prove that the defendant knew about the drug sales and intended to promote the drug sales by engaging in the financial transactions.

In a concealment money laundering case, by contrast, the government is required to prove that the defendant knew that the money was tainted (i.e., came from a crime), but does not need to prove that the defendant knew specifically what crime.  Furthermore, the government also must prove that the defendant’s intention in engaging in the transaction was to conceal some aspect of the property in question.

What kinds of penalties can be expected if someone is convicted of money laundering?

Federal criminal penalties are heavily influence by the now advisory U.S. Sentencing Guidelines.  Click here to learn more about how sentencing guidelines work. 

The sentencing guidelines for money laundering offenses are primarily influenced by two factors:  first, the value of the laundered funds, and second, whether the defendant can be held accountable for the underlying criminal activity that generated the laundered funds.

The value of the laundered funds is an important factor that affects sentencing in money laundering cases because a defendant’s sentencing guidelines range is increased according to the loss table under U.S.S.G. § 2B1.1 that is also used in basic economic crimes such as theft.  Thus, a defendant who laundered, for example, between $6,500 and $15,000 would receive only a minor enhancement of two points, but a defendant who laundered between $1.5 million and $3.5 million would receive a 16-point increase.

The other important factor affecting money laundering sentencing is whether the defendant engaged in the underlying criminal conduct.  This problem most often arises when the defendant was not charged with, or is acquitted with, the underlying criminal conduct.  At sentencing, the Judge applies a preponderance of the evidence standard to find facts that are relevant to sentencing—including the question of whether the defendant played a role in the underlying criminal conduct that generated the proceeds.  Thus, even in cases where a defendant was acquitted of that criminal conduct, a judge can potentially find, by a preponderance of the evidence, that the defendant was actually guilty, and increase the defendant’s sentence accordingly.

Of course, this often is a counter-intuitive and unfair result for defendants who believe that they have been found not guilty of some criminal conduct, only to be later punished for that very same conduct