9-105.000 - Money Laundering

 9-105.100 - Introduction

The Department has established notification, consultation, and approval requirements for certain types of investigations or prosecutions involving:

• Money laundering, 18 U.S.C. §§ 1956 and 1957;
• Unlicensed money transmitting businesses, 18 U.S.C. § 1960; and
• Violations of the Bank Secrecy Act (BSA), 31 U.S.C. §§ 5311-5328, and regulations promulgated thereunder.

As described below, the Criminal Division’s Money Laundering and Asset Recovery Section (MLARS) has responsibility for most of these requirements. In some cases, review or approval by the Tax Division, a U.S. Attorney, or a Criminal Division Deputy Assistant Attorney General may be required. Money laundering prosecutions may involve specified unlawful activity that may implicate Justice Manual notification, consultation, or approval requirements, including those of other sections and components. See, e.g., JM §§ 9-47.000  (foreign corruption matters); 9-51.000  (cyber-enabled crimes); 9-90.020  (national security matters). Department attorneys should read the Justice Manual as a whole and coordinate appropriately. 

[updated January 2025]

9-105.200 – Consultation and Approval Requirements for Certain Cases Involving Money Laundering and/or Financial Institutions

When conducting a criminal investigation involving potential charges for money laundering, unlicensed money transmitting businesses, or BSA violations, prosecutors should review the following provisions to assess whether the matter may require notification to, consultation with, and/or approval by MLARS or the Tax Division. The prosecution team may also be required to report to MLARS certain criminal convictions involving financial institutions, pursuant to JM § 9-105.300.

Where none of these reporting requirements apply, but the money laundering charges involve complex, novel, or unusual issues, or are subject to appeal, prosecutors are encouraged to consult with MLARS. 

A. Matters Requiring MLARS Authorization. For the four categories of cases described below, Department attorneys must notify MLARS when opening a new investigation and, if the case proceeds to criminal charges, obtain authorization from MLARS, as follows:

• Approval of charging document. Prior to the filing of criminal charges, attorneys must obtain MLARS’ approval of the charging document (e.g., indictment, complaint, information); and
• Approval of resolution of criminal matter. Prior to agreeing to resolve a criminal matter attorneys must obtain MLARS’ approval of the resolution document (e.g., plea agreement, deferred prosecution agreement (DPA), nonprosecution agreement (NPA), written declination).

Once an investigation is opened, Department attorneys are encouraged to consult regularly with MLARS as the matter progresses. When seeking approval of a charging document or criminal resolution, Department attorneys should submit to MLARS a prosecution memo, along with a draft final copy of the document(s) for approval via MLARS.Approvals@usdoj.gov. Department attorneys are encouraged to engage with MLARS as early as possible. The notification and approval requirements apply to the following categories of cases:

1. Extraterritorial jurisdiction. Matters where jurisdiction to prosecute is based solely on the extraterritorial jurisdiction provisions of 18 U.S.C. §§ 1956 or 1957.
2. Financial transactions involving attorneys’ fees. Matters where the money laundering financial transaction involved the payment of attorneys’ fees, regardless of whether the payment involved attorneys’ fees in a criminal or civil case. Such approval shall be given in accordance with the prosecution policies set forth in JM § 9-105.400.
3. Financial institutions. Matters where a financial institution—as defined in 18 U.S.C. § 20, 31 U.S.C. § 5312(a), or regulations promulgated thereunder (31 C.F.R. § 1010.100)—is a defendant or unindicted co-conspirator for violations of:
   1. 18 U.S.C. §§ 1956, 1957, or 1960(b)(1)(B), except where:
      1. The financial institution is a standalone “non-bank financial institution” (NBFI), such as a check-cashing service or casa de cambio, that has no regional, national, or international operations, or is not part of a larger business organization; unless
      2. The government is prosecuting the NBFI on a theory that, notwithstanding its lack of a physical presence in the United States, the NBFI is a U.S. money transmitting business because it engages in action in the United States or does business wholly or in substantial part in the United States, including by virtue of its service to U.S. customers, in which case notification and approval are required.
   2. Any provision of 31 U.S.C. §§ 5311-5336 or regulations promulgated thereunder that is punishable under 31 U.S.C. § 5322; or
   3. 18 U.S.C. § 371, for a conspiracy to defraud the United States (a “Klein conspiracy”), where the object of the conspiracy is to frustrate any federal agency’s exercise of its authority to enforce the BSA or registration requirements for money transmitting businesses.
4. Individual culpability for certain violations related to financial institutions. Matters involving the investigation or prosecution of an individual predicated on:
   1. Any violation of 31 U.S.C. §§ 5318(h) or 5322, or regulations promulgated thereunder, that requires financial institutions to establish anti-money-laundering (AML) programs; or
   2. any violation of 18 U.S.C. § 1960(b)(1)(B), that requires an individual operating a business without a physical presence in the United States to register it as a money transmitting business because it engages in action in the United States or does business wholly or in substantial part in the United States, including by virtue of its service to U.S. customers.

Where prosecutors seek pre-charge resolution with an individual, approval of the charging document and notice of the resolution is required. Where prosecutors have received approval of a document charging an individual and after charging the individual seek to resolve an individual criminal matter, notice to MLARS of the resolution is required, but further approval is not required.

B. Matters Requiring MLARS Consultation. For the three categories of cases described below, Department attorneys must consult with MLARS prior to the filing of a civil action or criminal charges and/or agreeing to resolve a criminal matter (including by plea agreement, DPA, NPA, or written declination):

1. Forfeiture of businesses or certain assets related to money transmitting businesses. Matters where the government intends to seek civil or criminal forfeiture of (a) a business under the theory that the business facilitated the money laundering offenses; or (b) assets on a theory that they were involved in or proceeds of a violation of 18 U.S.C. § 1960(b)(1)(B) where the money transmitting business had no physical presence in the United States but was required to register because it engages in action in the United States or does business wholly or in substantial part in the United States, including by virtue of its service to U.S. customers.
2. Section 1956(b) civil actions. Matters where the government intends to bring a civil action under 18 U.S.C. § 1956(b) against a business entity.
3. “Receipt and deposit” cases. Matters where the conduct to be charged as money laundering under 18 U.S.C. §§ 1956 or 1957, or where the basis for a forfeiture action under 18 U.S.C. § 981 consists of the deposit of proceeds of specified unlawful activity into a domestic financial institution account that is clearly identifiable as belonging to the person(s) who committed the specified unlawful activity.
   1. Note: These types of “receipt and deposit” transactions should not be charged unless the transaction involves other indicia of money laundering, such as an effort to conceal or disguise the illegal proceeds, when a financial transaction is conducted to promote further unlawful activity, when the transaction is designed to avoid a transaction reporting requirement, or when other extenuating circumstances exist.

C. Consultation and Approval Requirements for Money Laundering Cases Implicating Potential “Merger” Issues. When charging violations of 18 U.S.C. §§ 1956 or 1957, Department attorneys must be attentive to whether the matter implicates a potential “merger” issue, whereby the conduct to be charged as the specified unlawful activity (SUA) is so closely related to the conduct to be charged as money laundering that there is no clear delineation between the two offenses. Department attorneys must therefore follow a two-step process to address potential merger issues:

1. Initial MLARS consultation. If a matter meets all three conditions described below, Department attorneys may not charge or resolve a matter without first consulting with MLARS to determine whether a merger issue is present:
   1. The proposed charging document charges both (i) an SUA offense; and (ii) a money laundering offense or conspiracy involving proceeds generated by that same SUA offense; and
   2. Prosecutors seek to charge:
      1. Promotion money laundering, 18 U.S.C. § 1956(a)(1)(A)(i);
      2. Spending money laundering, 18 U.S.C. § 1957; or
      3. Money laundering conspiracy, 18 U.S.C. § 1956(h), where the object of the conspiracy is promotion money laundering or spending money laundering; and
         
   3. The financial or monetary transaction to be charged:
      1. Promoted the charged SUA offense that generated the proceeds involved in the financial transaction, other than future SUA criminal conduct or a new phase of the SUA activity or scheme; or
      2. Involved the payment of an essential expense or an ordinary business expense or expenses of the criminal operation that generated the SUA proceeds involved in the transaction; or
      3. Constituted an integral part or essential step in the commission of the SUA offense that generated the proceeds involved in the transaction.
2. Approval requirements. If MLARS concludes that the case does not present a merger issue, MLARS will notify the prosecution team, who may then proceed with charging or resolving the matter (subject to any other approval or consultation requirements that may apply to the case).  If MLARS concludes that the case does present a merger issue, then the prosecution team must obtain approval to charge or resolve the case as follows:
   1. For matters supervised by a U.S. Attorney’s Office, the U.S. Attorney must approve the charging document and/or resolution of the criminal matter, with notice to MLARS; or
   2. For matters supervised by any other Department component, a Deputy Assistant Attorney General in the Criminal Division must approve the charging document and/or resolution. MLARS will coordinate review by the Criminal Division.
3. Examples of potential merger issues. Department attorneys are strongly encouraged to consult with MLARS if they are unsure whether a particular matter implicates a potential merger issue. These cases are most likely to arise when a defendant is charged with both the underlying criminal scheme and money laundering for payments made with the proceeds of the scheme, and could arise, for example, when:
   • A drug retailer has a supply of drugs “fronted” to him, sells the drugs, and then pays his supplier for the “fronted” drugs;
   • The operator of an illegal lottery uses daily wagering proceeds to pay the day’s winners;
   • A sex trafficker uses proceeds from commercial sex acts performed by victims to pay rent, utilities, or advertising costs of the sex trafficking operation;
   • A health care professional engaging in health care fraud at her medical practice uses fraud proceeds to pay rent or other costs for her practice; or
   • A telemarketing fraudster uses fraud proceeds to pay his “boiler room’s” phone bills.

D. Matters Requiring Tax Division Authorization. Department attorneys must obtain approval from the Tax Division prior to filing any criminal charges or resolving a matter involving violations of 18 U.S.C. § 1956(a)(1)(A)(ii) where the sole or principal purpose of the financial transaction was to evade the payment of taxes. Such approval shall be given in accordance with the prosecution policies set forth in JM § 9-105.500.

[cited in JM 6-4.210]

[updated January 2025]

9-105.300 – Reporting Requirements for Certain Convictions Involving Financial Institutions

Under 18 U.S.C. § 1956(g), the Attorney General is required to notify financial regulators whenever a financial institution or any officer, director, or employee of such an institution is found guilty of money laundering or certain related offenses. To ensure compliance with this requirement, Department components and United States Attorney’s Offices are required to promptly notify MLARS of any conviction involving:

• A violation of:
• 18 U.S.C. §§ 1956, 1957, or 1960; or
  • 31 U.S.C. § 5324 or any offense punishable under 31 U.S.C. § 5322; and
• The defendant is:
  • A financial institution; specifically, a national bank, federal savings association, federal credit union, federally insured state depository institution, or federal insured state credit union; or
  • A person who was an officer, director, or employee of a financial institution, either at the time of the offense or at the time of conviction.

In such cases, the Department component or United States Attorney’s Office must send MLARS a certified copy of the judgment of conviction, along with the name of the lead prosecutor and the investigative agency, via MLARS.Approvals@usdoj.gov.

This reporting requirement applies regardless of whether the prosecution team previously consulted with or obtained approval from MLARS or the Tax Division regarding the charges or resolution.

[updated January 2025]

9-105.400 – Bona Fide Fees Paid to Attorneys for Representation in a Criminal Matter

A. General Principle. Prosecution of attorneys, particularly for money laundering involving financial transactions that may be related to representation, is highly sensitive. Attorneys must not be hampered in their ability to effectively and ethically represent their clients within the bounds of the law. As such, Department attorneys shall not (1) prosecute attorneys for violations of 18 U.S.C. § 1957 based on the receipt of bona fide fees for legitimate representation in a criminal matter unless there is proof beyond a reasonable doubt that the attorney had actual knowledge of the illegal origins of the specific property and that proof is not predicated on confidential or privileged communications or information; and (2) inform an attorney, in writing or orally, who is legitimately representing a client in a criminal matter, that the property the attorney is receiving is or may be criminally derived solely for meeting the knowledge requirement of this policy or the statute.

B. Comment. Section 1957, as originally enacted, granted no exemptions based on a potential defendant’s trade or business or the purpose for which a particular "monetary transaction" was undertaken. Thus, the statute, on its face, would have allowed the prosecution of a defense attorney who knowingly received and deposited more than $10,000 in criminally derived funds as legal fees for representation of a client in a criminal case.  However, Congress later enacted an express, but extremely limited, exemption under § 1957 for “attorney fee” transactions by adding the following language at the end of the definition of “monetary transaction” in subsection 1957(f)(1): “but such term does not include any transaction necessary to preserve a person’s right to representation as guaranteed by the Sixth Amendment of the Constitution.” (emphasis added).

Any prosecution of an attorney under Section 1957 for the receipt and deposit of funds of legitimate fees allegedly derived from a specified unlawful activity must be approached with great care.  Attorneys in such situations, unlike all others who may deal with criminal defendants, may be required to investigate matters which will provide them with knowledge of the illicit source of the property they receive.  Indeed, the failure to investigate such matters may be a breach of ethical standards or may result in a lack of effective assistance to the client.

Because the Department firmly believes that attorneys representing clients in criminal matters must not be hampered in their ability to effectively and ethically represent their clients within the bounds of the law, the Department, as a matter of policy, will not prosecute attorneys under Section 1957 based upon the receipt of property constituting bona fide fees for the legitimate representation in a criminal matter, except if (1) there is proof beyond a reasonable doubt that the attorney had actual knowledge of the illegal origin of the specific property received (prosecution is not permitted if the only proof of knowledge is evidence of willful blindness); and (2) such evidence does not consist of (a) confidential communications made by the client preliminary to and with regard to undertaking representation in the criminal matter; or (b) confidential communications made during the course of representation in the criminal matter; or (c) other information obtained by the attorney during the course of the representation and in furtherance of the obligation to effectively represent the client.

What constitutes “representation in a criminal matter” depends on the facts and circumstances of the particular case.  In deciding if representation in different but related proceedings constitutes “representation in a single matter,” prosecutors should consider whether the proceedings relate to investigations or cases arising out of the same facts or transactions—for example, a civil RICO case that arises out of a criminal RICO prosecution.

This prosecution standard applies only to fees received for legal “representation in a criminal matter.”  Attorneys who receive criminally derived property in exchange for carrying out or engaging in other commercial transactions unrelated to the representation of a client in a criminal matter or for representing a client in a civil matter should be treated the same as any other person.

Proper application of this policy requires examination of three issues:

1. What constitutes bona fide fees;
2. What constitutes actual knowledge; and
3. What evidence may be relied upon to meet the knowledge requirement of the policy.

This policy applies only to property transferred to an attorney as a bona fide fee for representation in a criminal matter. The question whether a fee is bona fide will have to be answered on a case-by-case basis; however, the fundamental inquiry is whether the fee was paid in good faith without fraud or deceit for representation concerning the defendant’s personal criminal liability.

Thus, for example, if a defendant’s legal fees are paid by another person in an effort to protect that other person’s identity or legal interests or any other interests of the overall criminal venture, such payments may not be bona fide.  However, fee payments by third parties, standing alone, do not create any presumption of illegitimacy, so long as the attorney’s loyalty and obligation remains to the client and the third-party payment does not create any conflicting obligation to the payor.

Similarly, if there is a reasonable basis to believe that the fee transaction was a fraudulent or sham transaction designed to shield the property from forfeiture or to hide its existence from governmental investigative agencies, or that the fee transaction was conducted for any purpose other than for legitimate legal representation, the fee would not be bona fide. Generally, a transaction is a sham or fraud if there is evidence that a scheme or plan existed to maintain the client’s or any other person’s or corporation’s interest in the asset or the ability to use it beneficially.  This may be established, for example, by proof that the value of the property transferred far exceeded the value of the services rendered and that there was an agreement by the attorney to transfer the asset or some portion of it back to the client, a third party, or any other legal entity.  There need not be proof that the attorney was a participant in the criminal activity giving rise to the property or that he otherwise violated the law. Quite obviously, however, proof that an attorney knowingly acted in a manner as to aid and abet or serve as an accessory after the fact to a money laundering transaction or otherwise to facilitate criminal conduct would lead to the conclusion that the property was not a bona fide fee.

As applied to bona fide fees received for representation in a criminal matter, the Department’s policy precludes prosecution if proof of knowledge is based solely on evidence of willful blindness.  Thus, prosecution will not be authorized solely on evidence that the attorney consciously avoided learning the true nature of the property.  In addition, Department attorneys cannot establish proof of knowledge by informing an attorney that the property they are receiving is criminally derived.

The existence of actual knowledge will be determined on a case-by-case basis, taking into consideration all available facts and circumstances. However, a prosecutor seeking to indict an attorney for a violation of Section 1957 based on a monetary transaction arising from the payment of bona fide fees for representation in a criminal matter should be very circumspect in seeking authority to proceed. The prosecutor must first possess proof beyond a reasonable doubt that the specific property involved in the monetary transaction was derived from “specified unlawful activity” as defined in Section 1957(f)(3).  Second, the prosecutor must possess proof beyond a reasonable doubt that the attorney actually knew that the specific property was criminally derived. Third, this proof of knowledge may not be based solely on evidence that the attorney consciously avoided learning the true nature of the property.

Because this third knowledge requirement is a matter of policy and not a statutory mandate, a prosecutor who receives approval to prosecute an attorney for a violation of Section 1957 based on a monetary transaction arising from the payment of bona fide fees for representation in a criminal matter may request a willful blindness instruction at trial if the evidence warrants such an instruction.  In other words, while the Department will not authorize prosecution where the evidence of knowledge is based solely on a willful blindness theory, once authorization has been obtained, this policy does not preclude the government from relying on a willful blindness instruction at trial.  However, it is expected that this will only occur in extraordinary cases, and that cases normally will be submitted to the trier of fact without reliance on a willful blindness theory.

Another aspect of the Department’s policy is that the actual knowledge predicate must be met without relying upon any of the following three categories of evidence: (1) confidential communications made by the client preliminary to and with regard to whether the attorney will undertake the representation; (2) confidential communications made by the client during the course of the representation; and (3) information obtained by the attorney during the course of the representation and in furtherance of the obligation to effectively represent the client.  This means that actual knowledge may not be established by evidence that the attorney learned from the client during the course of the representation that the fee was paid from criminally derived funds.  Thus, a client’s voluntary testimony at trial or a client’s voluntary disclosure of communications with the attorney—disclosed, for example, in an attempt to “make a deal” by implicating the attorney in criminal misconduct—may not, as a threshold matter, be used to meet the policy requirement of actual knowledge.  However, if other evidence exists, independent of the attorney-client relationship, that establishes beyond a reasonable doubt that the attorney had actual knowledge, client communications may be used at trial to prove the requisite knowledge.

As a practical matter, this limitation means that in most cases there will be proof beyond a reasonable doubt of actual knowledge that pre-existed representation on the particular matter.  For example, if an attorney is functioning as “in house” counsel for a criminal enterprise and knows from personal observation or non-privileged communication with the criminal entrepreneurs that certain property is criminally derived, then the subsequent receipt of that property by the attorney as payment for legal representation on a particular criminal matter may be subject to prosecution.

Similarly, if an attorney personally hears an individual boasting of lucrative criminal activities (before any attorney-client relationship was established or contemplated), and if that individual, having no known legitimate source of income, later retains that attorney and pays the attorney’s fee with cash, a prosecution under Section 1957 may be appropriate.

On the other hand, the fact that an attorney has a long-term attorney-client relationship with an individual who is in chronic trouble with the law, or has represented more than one member of a suspected criminal enterprise, is not sufficient evidence by itself to establish actual knowledge.

Similarly, if an attorney accepts a bona fide fee from a client to provide legal representation in connection with a then-existing legal problem, and the attorney has no information that the specific funds used to pay the fee may be criminally derived other than widespread press reports that the client’s only source of income is narcotics trafficking, prosecution under § 1957 would not be authorized.  The fact of extensive pre-representation publicity concerning an individual’s reputed criminal activities is never sufficient by itself to establish actual knowledge.

The limitation upon the type of evidence that may be relied upon to meet the requirement of actual knowledge is imposed as a matter of policy.  It is intended to enable attorneys to explore and inquire freely into all facts relevant to the defense of a client in a criminal matter without fear of prosecution based solely on information learned as a result of carrying out that responsibility.  This policy should not, however, be read to authorize or condone conduct on the part of any attorney which, in fact, constitutes a violation of Section 1957 or any other law.

[cited in JM 9-105.200]

[updated January 2025]

9-105.500 – Tax-Related Money Laundering Offenses Under Section 1956(a)(1)(A)(ii)

A. General Principle. The use of the specific intent language set forth in 18 U.S.C. § 1956(a)(1)(A)(ii) in a proposed indictment for a violation of 18 U.S.C. § 1956 requires Tax Division approval: (1) when the indictment also contains charges for which Tax Division approval is required, including allegations of tax fraud (e.g., Klein-type) conspiracy; or (2) when the intent to engage in conduct constituting a violation of 26 U.S.C. § 7201 or 26 U.S.C. § 7206 is the sole or principal purpose of the financial transaction that is the subject of the money laundering count.  In accordance with normal review procedures, except in Organized Crime Drug Enforcement Task Force cases, Tax Division’s approval would be preceded by its review of a submission from IRS. See JM 6-4.210.

B. Comment. The Anti-Drug Abuse Act of 1988 (Pub. L. 100-690) amended the money laundering provisions of 18 U.S.C. § 1956 by adding a provision that makes it a crime to conduct or attempt to conduct a financial transaction involving the proceeds of criminal activity with the intent to violate Section 7201 (attempted tax evasion) or Section 7206 (false tax return) of the Internal Revenue Code of 1986 (26 U.S.C.).  See 18 U.S.C. § 1956(a)(1)(A).

According to the legislative history of the amendment (134 Cong. Rec. S17367 (daily ed. November 10, 1988)):

[The provision] is vital to the effective use of the money laundering statute and would allow the Internal Revenue Service with its expertise in investigating financial transactions to participate in developing cases under § 1956. Under this provision any person who conducts a financial transaction that in whole or in part involves property derived from unlawful activity, intending to engage in conduct that constitutes a violation of the tax laws, would be guilty of a money laundering offense.

This amendment was intended to facilitate and enhance the prosecution of money launderers.  It was not intended to provide a substitute for traditional Title 18 and Title 26 charges related to tax evasion, filing of false returns, including the aiding and abetting thereof, or tax fraud conspiracy. Consequently, prosecutors should use appropriate tax-related Title 18 and Title 26 charges when the evidence so warrants.

Tax Division approval is not required for use of the specific intent language in a money laundering indictment that does not fall in either of the two categories above.  For example, Tax Division approval is not required in cases where: (1) the principal purpose of the financial transaction was to accomplish some other covered purpose, such as carrying on some specified unlawful activity like drug trafficking; (2) the circumstances do not warrant the filing of substantive tax or tax fraud conspiracy charges; and (3) the existence of a secondary tax evasion or false return motivation for the transaction is one that is readily apparent from the nature of the money laundering transaction itself.

[cited in JM 6-2.000; JM 9-105.300]

[updated January 2025]