Money Laundering Overview
Section 1956(a) defines three types of criminal conduct: domestic
money laundering transactions (§ 1956(a)(1)); international money
laundering transactions (§ 1956(a)(2)); and undercover "sting" money
laundering transactions (§ 1956(a)(3)). See this Manual at 2182.|
To be criminally culpable under 18 U.S.C. § 1956(a)(1), a
defendant must conduct or attempt to conduct a financial transaction,
knowing that the property involved in the financial transaction represents
the proceeds of some unlawful activity, with one of the four specific
intents discussed below, and the property must in fact be
derived from a specified unlawful activity.
The actual source of the funds must be one of the specified forms
criminal activity identified by the statute, in 18 U.S.C. § 1956(c)(7),
or those incorporated by reference from the RICO statute (18 U.S.C. §
1961(1)). Section 1956(c)(7)(B) includes in the list of specified unlawful
activity certain offenses against a foreign nation. Thus, proceeds
of certain crimes committed in another country may constitute proceeds of a
specified unlawful activity for purposes of the money laundering statutes.
To prove a violation of § 1956(a)(1), the prosecutor must
either by direct or circumstantial evidence, that the defendant knew that
the property involved was the proceeds of any felony under State, Federal or
foreign law. The prosecutor need not show that the defendant knew the
specific crime from which the proceeds were derived; the prosecutor must
prove only that the defendant knew that the property was illegally derived
in some way. See § 1956(c)(1).
The prosecutor must also prove that the defendant initiated or
concluded, or participated in initiating or concluding, a financial
transaction. A "transaction" is defined in § 1956(c)(3) as a purchase,
sale, loan, pledge, gift, transfer, delivery, other disposition, and with
respect to a financial institution, a deposit, withdrawal, transfer between
accounts, loan, exchange of currency, extension of credit, purchase or sale
safe-deposit box, or any other payment, transfer or delivery by, through or
to a financial institution.
A "financial transaction" is defined in § 1956(c)(4) as a
transaction which affects interstate or foreign commerce and: (1) involves
the movement of funds by wire or by other means; (2) involves the use of a
monetary instrument; or (3) involves the transfer of title to real property,
a vehicle, a vessel or an aircraft; or (4) involves the use of a financial
institution which is engaged in, or the activities of which affect,
interstate or foreign commerce.
PRACTICE TIP: The legislative history indicates, and several cases have
held, that each separate financial transaction should be charged separately
in an individual count. For example, if an individual earns $100,000 from
offense. If he then withdraws $50,000, he commits a second offense. If he
then purchases a car with the withdrawn $50,000, he commits a third offense.
Each transaction should be charged in a separate count. Charging multiple
financial transactions in a single count is duplicitous. See, e.g.,
United States v. Prescott, 42 F.3d 1165 (8th Cir. 1994); United
States v. Conley, 826 F. Supp. 1536 (W.D. Pa. 1993).
In conducting the financial transaction, the defendant must have
acted with one of the following four specific intents:
§ 1956(a)(1)(A)(i): intent to promote the carrying on of specified
§ 1956(a)(1)(A)(ii): intent to engage in tax evasion or tax fraud;
§ 1956(a)(1)(B)(i): knowledge that the transaction was designed to
conceal or disguise the nature, location, source, ownership or control of
proceeds of the specified unlawful activity; or
§ 1956(a)(1)(B)(ii): knowledge that the transaction was designed to
avoid a transaction reporting requirement under State or Federal law [e.g.,
in violation of 31 U.S.C. §§ 5313 (Currency Transaction Reports)
5316 (Currency and Monetary Instruments Reports), or 26 U.S.C. § 6050I
(Internal Revenue Service Form 8300)].
Prosecutions pursuant to 18 U.S.C. § 1956(a)(2) arise when
monetary instruments or funds are transported, transmitted or transferred
internationally, and the defendant acted with one of the requisite criminal
intents (i.e., promoting, concealing, or avoiding reporting requirements).
The intent to engage in tax violations is not included in
If the transportation, transmission or transfer was conducted with
the intent to conceal the proceeds of specified unlawful activity or to
avoid a reporting requirement, the prosecutor must show that the defendant
knew the monetary instrument or funds represented the proceeds of some form
of unlawful activity. However, if the transportation, transmission
or transfer is conducted with the intent to promote the carrying on of
specified unlawful activity, the prosecutor need not show that the funds or
monetary instruments were actually derived from any criminal activity.
The transportation, transmission or transfer must cross the border
-- either originating or terminating in the United States. That term
includes all means of transporting funds or monetary instruments, including
wire or electronic funds transfers, and the transfer of currency, checks,
money orders, bearer securities and negotiable instruments.
Section 1956(a)(3) relates to undercover operations where the
financial transaction involves property represented to be proceeds of
specified unlawful activity. The proceeds in § 1956(a)(3) cases are
actually derived from a real crime; they are undercover funds supplied by
the Government. The representation must be made by or authorized by a
Federal officer with authority to investigate or prosecute money laundering
violations. The representation may also be made by another at the direction
of or approval of a Federal officer. It should be noted that the specific
intent provisions in § 1956(a)(3) are slightly different from those in
§ 1956(a)(1). First, the intent to violate the tax laws is not
included in this subsection. Second, subsections 1956(a)(3)(B) and (C)
require that the transaction be conducted with the intent to conceal
or disguise the nature, location, source, ownership or control of the
property or to avoid a transaction reporting requirement, respectively, in
contrast to subsections 1956(a)(1)(B)(i) and (ii), which only require that
defendant know that the transaction is designed, in whole or in part,
to accomplish one of those ends.
Violations of § 1956 have a maximum potential twenty year
sentence and a $500,000 fine or twice the amount involved in the
transaction, whichever is greater. The general sentencing provisions in 18
U.S.C. §§ 3551-3571 should also be consulted.
There is also a civil penalty provision in § 1956(b) which may
be pursued as a civil cause of action. Under this provision, persons who
engage in violations of subsections 1956(a)(1), (a)(2) or (a)(3) are liable
to the United States for a civil penalty of not more than the greater of
$10,000 or the value of the funds involved in the transaction. Copies of
pleadings in § 1956(b) actions are available from the Section.
Prosecutions under 18 U.S.C. § 1957 arise when the defendant
knowingly conducts a monetary transaction in criminally derived
property in an amount greater than $10,000, which is in fact proceeds of a
specified unlawful activity. Section 1957(f)(1) defines a monetary
transaction as a "deposit, withdrawal, transfer, or exchange, in or
affecting interstate or foreign commerce, of funds or a monetary instrument
. . . 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) . . . ." Section 1957 carries a
maximum penalty of ten years in prison and maximum fine of $250,000 or twice
the value of the transaction. There is no civil penalty provision.
The most significant difference from § 1956 prosecutions is the
intent requirement. Under § 1957, the four intents have been replaced
with a $10,000 threshold amount for each non-aggregated transaction and the
requirement that a financial institution be involved in the transaction.
Although the prosecutor need not prove any intent to promote, conceal or
avoid the reporting requirements, it still must be shown that the defendant
knew the property was derived from some criminal activity and that the funds
were in fact derived from a specified unlawful activity.
There is extraterritorial jurisdiction for violations of § 1956
if: (1) the transaction or series of related transactions exceeds $10,000;
and (2) the laundering is by a United States citizen, or, if by a foreign
national, the conduct occurs in part in the United States. See
1956(f). There is extraterritorial jurisdiction for violations of §
1957 if the defendant is a United States person. See
Sections 1956 and 1957 include "attempts" as well as completed
offenses. Conspiracies are indictable under 18 U.S.C. § 1956(h). It
should be noted that, in October 1992, Congress added § 1956(g), which
provides a separate offense for money laundering conspiracy. Since Congress
inadvertently added two sections designated as § 1956(g), the
provision was redesignated § 1956(h) in September 1994. The conspiracy
provision in § 1956(h) is modeled after the conspiracy provision in 21
U.S.C. § 846. Thus, it should not be necessary to plead overt acts in
the indictment. However, the Section recommends that overt acts be included
in the indictment if practicable. A set of indictment forms can be found in
this Manual at 2106 et seq. Jury
instruction forms begin at 2111. See also
this Manual at 2100.
For a comprehensive review of the money laundering statutes and
law, please consult Chapter Three of the Money Laundering Federal
Prosecution Manual (June 1994), prepared by the Asset Forfeiture and
Money Laundering Section, Criminal Division. Additional resources available
from the Section include a newsletter entitled The Money Laundering
Monitor, money laundering caselists, sample indictments and jury
instructions. For further information, please contact the Asset Forfeiture
and Money Laundering Section at the following address: Chief, Asset
Forfeiture and Money Laundering Section, United States Department of
Justice, P.O. Box 27322, Central Station, Washington, D.C. 20038.
Telephone: (202) 514-1263. Fax: (202) 514-5522.