Money Laundering Charges

I’ve represented well over 100 people who were facing money laundering charges in federal court. Now, money laundering can be a complicated type of an offense, so I thought it might be helpful to walk through the basics, “What is money laundering, and what type of defenses have we used in the past to win these cases?” Well, to begin with, what is money laundering? Well, to put it simply, it’s taking dirty money, money from criminal activity, and making it clean, making it appear to be legitimate. And so it can be something as simple as taking money that was made from a drug transaction and depositing it into a checking account. That is technically money laundering.

Now, in federal court, we see money laundering charges usually in cases involving some type of underlying financial crime. It can be a drug crime. It can also be a fraud or embezzlement crime. It can be a racketeering/RICO Act-type of crime. Basically, any crime where the person is alleged to have made money, you’re going to see the federal government add money laundering charges to that case, and there’s a good reason for that. In addition to trying to make the person face additional criminal penalties, the government wants to get that money. So they use the money laundering charges as a way to convince a judge, even before the case goes to trial, to let the government seize the money and eventually try to keep it.

Now, there are various types of money laundering charges under federal law. The most common falls under 18 U.S.C. Section 1956. That’s the one that we see most of the time. Now, this is a serious crime. It carries up to 20 years in prison for someone who is convicted. Let’s go through the elements. The first element is that this must involve a financial transaction. And that means you take the money and you go to a bank, or you take the money and you go buy a car, go buy some jewelry. Anything that you do with that money where you’re exchanging it for goods, services, or trying to put it in a bank account is a financial transaction. What is not a financial transaction is if you take that money, give it to someone to hold for you, and all they do is put it in their bedroom or under the mattress. Even though that may be dirty money, it’s not money laundering because there’s no financial transaction.

The second element is that the money must be from a particular crime. It has to be dirty money. Now, the money laundering statute gives a list of different types of crimes that must be involved for the money to be money subject to a money laundering charge, but it’s a long list. So almost any type of federal crime where the person is alleged to have made some money can be the basis for a money laundering charge, as long as the money actually comes from the crime. And of course, the person who’s being charged with money laundering has to know that. They have to know that the money that they’re taking, receiving, or using in some way comes from some type of criminal activity.

And finally, for this type of money laundering offense, the money has to be used or a particular purpose. In other words, you’re taking the money, putting it into a bank account or buying something with it for the purpose of promoting the underlying crime, trying to conceal it, or trying to avoid a reporting requirement, taking the money and dividing it up into less than $10,000, which is a structuring crime and certainly can also be money laundering. But there’s another type of money laundering offense, and that’s found in 18 U.S.C. Section 1957. Also, a very serious crime, but the maximum is 10 years instead of 20 years and the elements are a little different.

First of all, it has to involve a monetary transaction. That’s a little bit different from the other money laundering crime. For this particular crime, the money has to involve a financial institution, a bank, an investment company, securities. You have to actually take the money and give it to some type of financial institution to be guilty of this type of money laundering offense. And there’s a threshold amount. The amount of the transaction has to be more than $10,000. But like the other money laundering charge, the money, of course, has to come from criminal activity and the person has to know that the money is dirty.

Now, there are other types of money laundering charges that kind of fall under these two laws. The first is international money laundering, and that’s basically money laundering that involves the movement of the money from one country to another, some type of international transaction. It can be from the United States to, say, Europe or Asia. Or it can simply involve the United States. Even if the money is moving between two foreign countries, if the United States is somehow involved in that transaction or someone in the United States is involved, then it can qualify for this type of money laundering. What’s interesting about international money laundering is that the money doesn’t actually have to come from a crime. As long as the person is trying to further the criminal activity that they may be involved with, even if the money is otherwise clean, they can be charged and convicted of international money laundering.

Now, we also see a lot of money laundering sting operations. Especially now, I’m seeing more and more of these cases being charged in federal court. Now, obviously, this involves an undercover operation by government agents and we see it two different ways. Either the government will set up some type of business, where they try to convince people to give them dirty money and then charge them with money laundering. Or they will act like they’re criminals, like they’re drug dealers or they’ve committed fraud, and they’ll go out to professionals, people in the community, accountants, merchants, financial advisors, even lawyers, and try to convince them to take money that is dirty.

Now, of course, in a sting operation, the money is not really dirty at all. It’s usually money that’s coming from the government. They’re just pretending that it’s dirty. The key thing, though, is that the person who’s being charged has to think that this money is from a crime, has to think that the money is actually dirty. And the government has a variety of different ways to try to make those suggestions without actually saying the money comes from a crime.

Now, you can also have money laundering conspiracy charges, and that’s basically money laundering, but it involves an agreement between two or more people. What’s interesting about a conspiracy, though, is you never have to take the money to a bank or you never have to actually engage in a transaction. What’s being punished here is the agreement to commit this unlawful act. So even if someone never sees dirty money but they know that there’s an attempt to do something with that dirty money, even if they played a very small role, they can be charged in a money laundering conspiracy.

Now, of course, like any federal case, there are defenses to this type of charge and we’ve used several of these successfully in other cases. The first offense is that the case doesn’t involve a monetary or financial transaction. A great example of this is, say, someone goes to a bank, robs the bank, ends up with a sackful of cash. They take the cash to a friend and say, “Hey, I need you to hide this for me. Go put it out back somewhere.” The other person takes the money, ti’s dirty money clearly, and then they go do something with it, they hide it, they conceal it, but they don’t take it to a bank, they don’t spend it. There’s been no monetary or financial transaction, so that’s not a money laundering case.

An obvious defense is that the money isn’t dirty. You see that in two ways. Either someone’s been involved or charged with being involved in a criminal activity and they’re using money in connection with that case, but the money came from some other source. It wasn’t directly from the criminal activity that was the basis of the case. We mostly see, though, this type of defense, and we used it successfully last month in fraud cases. The government says, “Okay, this person’s engaging in an illegal, fraudulent activity. So any money that they make and spend or use, deposit, has to be money laundering. Well, if you can show that the underlying activity wasn’t fraud to begin with, then the money is not dirty and there’s no money laundering.

You can also defend these charges even when you have dirty money. The money is clearly from a criminal activity, but the person being charged doesn’t know that. A good example of that is a merchant, say, a jeweler or someone who sells cars. And somebody’s got some dirty money, they go to these folks, they buy stuff from them, but the people selling the merchandise, the jewelry, the cars, they don’t know that the money is from an unlawful source. They may have some suggestions, they may have some suspicions, but the government has to show that they knew the money came from criminal activity.

Now, in 1956, that first money laundering charge we talked about, there’s this additional element that the government has to show that not just is the money from a crime, but that the transaction that’s taking place is for a particular purpose. You’re either trying to promote the unlawful activity, conceal it, or to avoid reporting requirements. If the government can’t show that, then that’s a good defense to a 1956 money laundering charge. And finally, if there is an undercover sting operation, you always want to consider an entrapment defense. Did the government go too far? Did they try to push this person to take money that the person really wasn’t interested in taking? Or were they so unclear about the source of the money that the person has a legitimate defense that they had no idea that the money was from any type of crime?

So there are a lot of defenses to money laundering charges. These are very serious charges, very complicated charges. If you’re going through it or know someone who is, you probably have questions. If you have questions, hopefully, we can have some answers. So give us a call and we will do our best to help

Money laundering laws cover both domestic and international financial transactions. International money laundering cases are usually focused on the purpose of the financial transaction. Even a transaction with “clean” money can be the basis of an international money laundering charge if the money is being used to promote a particular crime.

There are two federal criminal laws that specifically address money laundering. The first law (18 U.S.C. §1956) makes it a crime for any person to engage in a financial transaction with money that was obtained from criminal activity with the intent to try and promote the criminal activity or conceal it. The second law (18 U.S.C. §1957) makes it a crime for a person to engage in a monetary transaction in an amount greater than $10,000, knowing that the money was obtained through criminal activity.