Title 18 U.S. Code 1956 - Laundering of Monetary Instruments
The laundering of monetary instruments, also known simply as "money laundering," is a federal crime that involves concealing or disguising the source of illegally obtained money.
The offense is defined in Title 18 U.S. Code 1956, making it illegal for anyone to conduct financial transactions with proceeds from specified unlawful activities, such as drug trafficking and fraud.
Money laundering can also involve using false identities and other deceptive methods to hide the true ownership of funds derived from criminal activity.
Penalties for violating this law can be severe, ranging from steep fines to imprisonment, depending on the severity of the case.
18 U.S.C. § 1956 says, “Whoever, knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity, conducts or attempts to conduct such a financial transaction which involves the proceeds of specified unlawful activity…”
It's known as the Money Laundering Control Act of 1986. Generally, the crime of money laundering is making money appear as if it came from a legitimate source, but it's the product of unlawful conduct.
Federal law prohibits two types of money laundering, including conducting a financial transaction with money obtained from illegal activity with the specific intent to promote unlawful activity or conceal the money's illegal source. Let's review this federal statute in more detail below.
What Is Money Laundering?
The legal definition of money laundering under 18 U.S.C. 1956 and 1957 is knowingly concealing the source of money that was obtained unlawfully. There are three steps in a money laundering process: placement, layering, and integration.
The most common definition of money laundering involves taking proceeds from illegal activity and putting them through a series of transactions to hide their true source.
This can be done by transferring money between different accounts, using false identities, or even breaking up large sums into smaller amounts to avoid detection. The goal is to make it appear that the funds have come from a legitimate source.
However, 18 U.S.C. 1956 expands this basic definition by identifying four specific types of money laundering as illegal acts. These are:
- Promotional money laundering: Using the proceeds of unlawful activities to promote further criminal activities, such as reinvesting the profits of an illegal drug trade back into the drug trade;
- Concealment money laundering: Using the proceeds of unlawful activities to conceal the true nature or source of the action itself. This is similar to the basic definition mentioned above;
- Reporting evasion: Structuring the illegal money to bypass state or federal reporting requirements. A typical example is the practice of "smurfing," in which a large sum of money is broken into smaller deposits made to multiple banks to keep the banks from having to report the deposits to the government;
- Tax evasion: Laundering monetary instruments to evade the payment of taxes on that money.
What Are the Defined Areas of Money Laundering?
18 U.S.C. 1956 specifies three specific areas in which any money laundering activities mentioned above constitute a federal crime. These are:
- Domestic money laundering defined under 18 U.S.C. 1956(a)(1): Targets any money laundering activities within the United States or its territories;
- International money laundering defined under 18 U.S.C. 1956(a)(2): Addresses money laundering activities that involve transferring money across U.S. international borders into other countries or vice versa;
- Money laundering stings defined under U.S.C. 1956(a)(3): This section addresses money laundering as part of a government undercover "sting" operation. Specifically, suppose a person conducts money laundering or attempts to do so, using proceeds that a law enforcement official says are gained through unlawful activities; in that case, it's as much a federal crime as other instances of money laundering.
What Are the Penalties for 18 U.S.C. 1956?
If you're convicted of money laundering under 18 U.S.C. 1956, you will likely face significant penalties, which include:
- A fine of up to $500,000, or twice the value of the property involved in the money laundering, whichever is greater, and
- Up to 20 years in federal prison.
In addition to the fines and imprisonment mentioned above, you may also face civil penalties, which may be an additional $10,000 or the value of the property involved in the transaction, whichever is greater.
In other words, you may have to pay back up to three times the amount of money laundered between the criminal fine and the civil penalty.
What Are the Defenses for 18 U.S.C. 1956?
To obtain a conviction on any of these money laundering offenses, federal prosecutors must prove the following elements:
- That you engaged in a financial transaction or attempted to do so;
- That the transaction involved proceeds from unlawful activities, in whole or in part; and
- That you knew or had reason to believe the money was illegally obtained.
If any of these elements are missing, it will be difficult for prosecutors to prove their case. As such, some of the most common defenses to money laundering charges used by federal criminal lawyers involve disproving one or more of these elements. The common defenses are discussed below.
Perhaps we can argue that you did not know the money was made from unlawful activities. In other words, maybe you were involved in the transaction, but you had no reason to know that the money was obtained illegally.
The federal prosecutor has the burden of proving that transactions came from illegal activity.
Perhaps we can argue that you were unaware of the transaction or did not participate. However, sometimes, a person may be wrongfully implicated because of their connection with someone else involved in the money laundering scheme.
Perhaps we can argue that the transaction didn't involve any proceeds of unlawful activities. This defense is generally easier to raise with single transactions, such as when someone deposits a large amount of cash into their bank account, as this kind of transaction can be more easily traced.
Perhaps we can argue that you did not intentionally conceal the source of the funds. A financial transaction with money from criminal activity only qualifies as money laundering if the transaction involves an intent to disguise the origin of the funds.
For an initial case evaluation, you can contact our law firm via phone or the contact form. Eisner Gorin LLP is based in Los Angeles, CA.