On May 20, 2009, the President signed the Fraud Enforcement and Recovery
Act (FERA) into law. FERA provides the Department of Justice with
significant criminal and civil tools that can be used in the investigation
and prosecution of mortgage fraud, commodities fraud, and related financial
fraud offenses. Descriptions of several of the new law enforcement tools
were previously issued on June 24, 2009 and August 14, 2009.|
Among the provisions of FERA was one that amended the federal money
laundering statutes—18 U.S.C. §§ 1956 and 1957—as
discussed below. In addition to the changes in these statutes, FERA included
a "Sense of Congress" provision that imposes new approval and reporting
requirements for certain categories of money laundering prosecutions. This
memorandum (1) addresses the provisions of the legislation relating to the
money laundering statutes, (2) describes the procedures that should be
followed to ensure the Department adheres to pre-existing internal guidance
and satisfics thc ncw approval requirements, and (3) outlines the new
reporting requirements associated with the fiing of certain money laundering
I. Clarifying the Money Laundering Statute
FERA amended 18 U.S.C. § 1956(c) by defining "proceeds" as "any
property derived from or obtained or retained, directly or indirectly,
through some form of unlawful activity, including the gross receipts of such
activity." FERA also inserted a conforming reference into 18 U.S.C.
§ 1957. The provision was designed to eliminate the confusion
created by the Supreme Court's decision in United States v. Santos,
128 S Ct. 2020 (2008), which held that the "proceeds" of crime may be limited, at
least in some money laundering prosecutions, to "net profits" of the
predicate offense or specified unlawful activity. FERA eliminates this
confusion and defines "proceeds" in the money laundering statutes as "gross
receipts" of unlawful activity.
II. Instituting Approval Requirements
In response to FERA, the Department has implemented new approval
requirements for certain money laundering prosecutions. Subsection 2(g) of
FERA, known as the "Sense of Congress" provision, states that certain money
laundering prosecutions require prior approval by the Attorney General, the
Deputy Attorney General, the Assistant Attorney General for the Criminal
Division, a Deputy Assistant Attorney General for the Criminal Division, or
the relevant United States Attorney (hereafter "Appropriate
(1) SENSE OF CONGRESS—It is the sense of the Congress that no
prosecution of an offense under section 1956 or 1957 of title 18, United
States Code, should be undertaken in combination with the prosecution of
any other offense, without prior approval of the Attorney General, the
Deputy Attorney General, the Assistant Attorney General in charge of the
Criminal Division, a Deputy Assistant Attorney General in the Criminal
Division, or the relevant United States Attorney, if the conduct to be
charged as "specifed unlawful activity JJ in connection with the offense
under section 1956 or 1957 is so closely connected with the conduct to be
charged as the other offense that there is no clear delineation between
the two offenses.
The relevant language in the Sense of Congress provision appears to be
based on the following consultation requirement located in
§ 9-105.330 of the United States Attorneys Manual
Cases Involving Financial Crimes. In any case in which the conduct
to be charged as "specified unlawful activity" under sections 1956 and
1957 consists primarily of one or more financial or fraud offenses, and in
which the financial and money laundering offenses are so closely connected
with each other that there is no clear delineation between the underlying
financial crime and the money laundering offense, no indictment or
complaint may be filed without prior consultation with AFMLS, Criminal
Division. (This issue is often referred to as the "merger" issue.)
A. Cases that Require Approval
Explanation: Sections 1956 and 1957 both require that the property
involved in the money laundering transaction be the proceeds of specified
unlawful activity at the time that the transaction occurs. The statute
does not define when property becomes "proceeds," but the context implies
that the property wil have been derived from an already completed offense,
or a completed phase of an ongoing offense, before it is laundered.
Therefore, as a general rule, neither section 1956 nor section 1957 should
be used where the same financial transaction represents both the money
laundering offense and a part of the specified unlawful activity
generating the proceeds being laundered.
In light of the similarities between the current language of the USAM and
the Sense of Congress provision, which was enacted in response to the
"merger" concerns discussed in the Santos decision, the following categories
of cases wil be subject to the Sense of Congress approval requirement: (1)
cases that fall within the existing consultation requirement of
§ 9-105.330 of the USAM; and (2) any money laundering offense
charged under a promotion theory under section 1956(a)(I)(A)(i) where the
financial transaction is alleged to promote the specific SUA offense that
generated the proceeds, and where both money laundering and the SUA offense
are being charged.
The following are examples of charges that require prior
For example, the following transactions require prior approval before
they can be used as the basis for a money laundering charge:
- Money laundering charges based on a transaction where criminal
proceeds are used to pay essential expenses of the specific SUA offense that
generated those proceeds.
- Money laundering charges based on a transaction that is an integral
part of the underlying criminal activity, such as the receipt of money for
sellng drugs, or the receipt of fraud proceeds from a victim.
The Sense of Congress provision does not, however, impose an
approval requirement on all money laundering charges. For example, charges
based on the following types of transactions do not require prior
- A drug retailer has a supply of drugs "fronted" to him, sells the
drugs, and then pays his supplier for the "fronted" drugs.
- The promoter of a Ponzi scheme cashes a check he received from an
- The operator of an ilegal lottery uses sales proceeds to pay winners.
- A sex trafficker uses the money earned by prostitutes in his massage
parlors to pay current expenses such as rent, utilties, phone bils, and
advertising costs for the massage parlors.
- In a health care fraud prosecution, a dentist uses proceeds of the
fraud to pay current expenses of his practice, such as building rent,
equipment rent, and dental supplies.
- A telemarketer uses proceeds of his fraud scheme to pay the current
monthly phone bil of his boiler room operation.
- A Ponzi scheme operator diverts victim investment proceeds to pay his
For example, the following transactions do not require prior approval before they can be used as
the basis for a money laundering charge:
- Transactions where the "promotion" element involves an SUA different
from the SUA that generated the proceeds.
- Transactions where the "promotion" element involves a future crime or
new phase of the SUA activity, such as soliciting new victims in a fraud
scheme, implementing a new phase of a fraud scheme, or expanding the scope,
nature, or geographical range of the SUA activity.
- Transactions charged under section 1956(a)(I)(A)(ii) or (B)(ii).
- Transactions where the money laundering charged under section 1957
does not involve payment of essential expenses of the criminal enterprise or
ordinary business expenses of the criminal operation.
- Cases involving international money laundering under section
1956(a)(2)(A) or section 1956(a)(2)(B).
- Cases where money laundering is charged, but the underlying SUA is
- Cases involving conceal-or-disguise money laundering under sections
1956(a)(1) (B)(i) or (a)(2)(B)(i).
- Any civil forfeiture action, regardless of whether such civil action
is related to a criminal investigation, indictment or complaint that would
otherwise require prior approval.
B. Approval Process
- A drug smuggler sells a load of marijuana and uses the money to set up
a meth lab.
- A drug dealer sells a kilogram of heroin and uses the proceeds to buy
more heroin for future sales.
- A sex trafficker uses money earned by prostitutes in a massage parlor
to open a massage parlor in another city.
- A terrorist in Indonesia sends money to a terrorist in the United
States to pay for a car bomb attack.
- A bank robber gives the proceeds of a robbery to a straw man to
purchase a house for the robber.
- The operator of a Ponzi scheme uses fraud proceeds to purchase a
mailng list of new potential victims.
Currently, the USAM requires that all federal prosecutors must consult with
the Asset Forfeiture and Money Laundering Section, Criminal Division
("AFMLS") prior to filing an indictment or complaint that involves a
"merger" issue. See
USAM 9-105.330. All prosecutors should continue to
adhere to the USAM consultation requirement.
In addition, to comply with the new "Sense of Congress" provision in
FERA, all federal prosecutors are reqnired to seek approval from an
Appropriate Official prior to filing an indictment or complaint in the
categories of cases described above.
The request for approval should be in writing and should include a brief
description of the facts of the case, identify the count or counts that
raise "merger" concerns, describe the "merger" issue, state the reasons why
approval should be granted, and indicate when AFMLS was consulted, note the
result of that consultation, and attach any related correspondence or
- For AUSAs, approval must be obtained from their respective United
- For Criminal Division trial attorneys, approval must bc obtained from
a Deputy Assistant Attorney General by means of a request submitted through
- For other Department components; approval must be obtained from a
Deputy Assistant Attorney General within the Criminal Division by means of a
request submitted through AFMLS.
To document that the approval process has been followed, the form attached
to this memorandum should be completed and maintained in the case file. See
[Criminal Resource Manual 2188
("Money Laundering 'Merger' Case Approval Form")].
III. Instituting Reporting Requirements
FERA also imposes new reporting requirements. Section 2(g)(2) of the bil
requires that one year after the date ofFERA's enactment, and at the end of
each of the four succeeding one year periods, the Attorney General shall
report to the House and Senate Judiciary Committees on efforts undertaken by
the Department of Justice to ensure that the review and approval process
described above takes place in all appropriate cases. Specifically, the
Attorney General must report on:
(1) The number of prosecutions that were undertaken during the previous oneyear
period after prior approval by an Appropriate Official. The prosecutions
must be classified by type of offense and by the approving official.
To ensure the Attorney General can timely and accurately report the
above-described information to Congress, on or before May 1 of every year,
starting in May 2010 and ending in May 2015, every U.S. Attorney's Office
and Department component must provide copies of all of the
'Merger' Case Approval Forms" generated during the prior one year
period to AFMLS. Because the reporting requirement was effective as of May
20, 2009, every U.S. Attorney's Office and Department component should also
notify AFMLS of any cases indicted or charged by complaint after May 20, 2009,
but before the date of this memorandum for which approval would have been
required had this memorandum then been in force.
(2) The number of prosecutions that were undertaken during the previous oneyear
period without prior approval by an Appropriate Official. The prosecutions
must be classified by type of offense, and the reasons why prior approval was not
(3) The number of times during the previous year in which an Appropriate
Official denied approval for a prosecution.
Forms must be submitted by email, fax, or courier delivery service (not by
mail) as follows:
By courier delivery service:
United States Department of Justice
Asset Forfeiture and Money Laundering Section
1400 New York Avenue, N.W., Suite 10100
Washington, D.C. 20530
Attention: Deputy Chief for Policy
By email: AFMLS-FERA@usdoj.gov
By fax: (202) 514-5522 (Attention: Deputy Chief for Policy)
AFMLS will, in turn, compile the information and provide the reporting
information to the Attorney General on or before May 10 of each year.
In addition, every U.S. Attorney's Office and Department component must
take adequate steps to ensure that no prosecutions subject to the approval
and reporting requirements are brought without prior approval of an
Appropriate Official. In the event that a U.S. Attorney's Office or
Department component learns that any such prosecution was undertaken without
prior approval, it must immediately notify AFMLS, providing a description of
the case and explaining why prior approval was not obtained.
If you have any questions, please contact Jim Meade, Deputy Chief for
Policy, Asset Forfeiture and Money Laundering Section, at (202) 307-2115.
FN 1. The procedures implemented by the Department in response to the Sense
of Congress recommendations are not intended to create any privileges,
benefits, or rights, substantive or procedural, enforceable by any
individual, part or witness in any administrative, civil, or criminal
[added January 2010] [cited in