Money laundering prosecutions have escalated over the past decade with some devastating effects.
Individuals and businesses who have handled “dirty money” can be charged and convicted as money launderers, primarily through “willful blindness” instructions to juries, if they chose to turn a blind eye to the illegal source of the money. This can include situations where an individual had a reason to suspect that the money was dirty, but did not take any action to confirm or disprove their belief.
To make matters worse, federal prosecutors have adopted the tactic of “piling on” money laundering charges that are merely incidental to, or indistinguishable from, the underlying offense. For example, an individual could be charged with money laundering for spending “dirty” money on legitimate business expenses, even without any attempt to conceal its source, after allegations of a minor business fraud.
The results of “piling on” can be devastating because the exposure to prison time can be more serious than the underlying offense. Money laundering charges in connection with drug trafficking can result in a sentence almost four times what could ordinarily be given with a simple drug violation. Further, piling on money laundering charges allows prosecutors to obtain easy plea bargains and forfeitures in white collar crime cases.
Money laundering became a Federal crime in 1986. In 2005, it became a “national threat” with the creation of the Money Laundering Threat Assessment—the first government wide analysis of money laundering in the United States. This threat assessment includes a detailed analysis of the thirteen money laundering methods. Today, the FBI, DEA, Customs and Border Protection, U.S. Immigration and Customs Enforcement, the IRS, and U.S. Treasury’s Office of Terrorist Financing and Financial Crime coordinate efforts to detect and prosecute money laundering offenses.
There are two federal money laundering statutes: Sections 1956 and 1957 of Title 18, United States Code. Of the two, Section 1956 is the one most often used to prosecute money laundering offenses. The statute prohibits four kinds of money laundering. Each can occur only in connection with what the statute defines as “specified unlawful activities” (SUA). Section 1956’s companion, Section 1957, prohibits depositing or spending more than $10,000 of the proceeds from Section 1956 SUA. In short, money laundering has been defined as the act of transferring illegally obtained money through people or accounts so that its original source cannot be trace.
Section 1956 carries a penalty of not more than 20 years while Section 1957 carries a penalty of not more than 10 years. Violations of these two statutes may implicate other federal statutes, such as RICO which involves additional 20-year felonies. Violations of these two statutes may also involve conspiracies to commit separate federal offenses punishable by imprisonment of not more than five years.
SUAs generally involve both mail and wire fraud. A conviction for money laundering will usually result in a much more severe sentence than a conviction based solely upon mail or wire fraud. One legal scholar has written that there are at least 250 or so SUAs.
Money laundering statutes and the policies governing their use are in dire need of reform.