Order Code RS22401
Updated July 18, 2008
Money Laundering: An Abridged Overview
of of 18 U.S.C. 1956 and
Related Federal
Criminal Law
Charles Doyle
Senior Specialist
American Law Division
Summary
Money laundering is a federal crime, most often prosecuted today under 18 U.S.C.
1956. Money laundering is commonly understood as the process of cleansing the taint
from the proceeds of crime. In federal criminal law, it is more. In varying degrees under
federal law, money laundering involves the flow of resources to and from several
hundred other federal, state and foreign crimes. It consists of: (1) engaging in a financial
transaction involving the proceeds of certain crimes in order to conceal the nature,
source, or ownership of proceeds they produced; (2) transporting funds generated by
certain criminal activities internationally in order to promote further criminal activities,
or to conceal nature, source, or ownership of the criminal proceeds, or to evade reporting
requirements; (3) engaging in a financial transaction involving the proceeds of certain
crimes in order to promote further offenses; (4) engaging in a financial transaction
involving criminal proceeds in order to evade taxes on the income produced by the illicit
activity; (5) structuring financial transactions in order to evade reporting requirements;
(6) spending more than $10,000 of the proceeds of certain criminal activities; (7)
traveling in interstate or foreign commerce in order to distribute the proceeds of certain
criminal activities; (8) transmitting the proceeds of criminal activity in the course of a
money transmitting business; (9) smuggling unreported cash across a U.S. border, or
(10) failing to comply with the Treasury Department’s anti-money laundering
provisions. The Supreme Court has recently indicated that the proscription in section
1956 against attempted international transportation of tainted proceeds to conceal their
source, ownership, nature or ultimate location does not reach simple attempted cash
smuggling without some proof of a specific concealment purpose for the smuggling. It
indicated in a second case that references to the tainted “proceeds,” which are the focus
of section 1956, sometimes refer to the profits of a predicate offense and sometimes to
its gross receipts. This is an abridged version of CRS Report RL33315, Money
Related Federal Criminal Law
February 8, 2012
(RS22401)
Summary
This is an overview of the elements of federal criminal money laundering statutes and the sanctions imposed for their violation. The most prominent is 18 U.S.C. 1956. Section 1956 outlaws four kinds of money laundering—promotional, concealment, structuring, and tax evasion laundering of the proceeds generated by designated federal, state, and foreign underlying crimes (predicate offenses)—committed or attempted under one or more of three jurisdictional conditions (i.e., laundering involving certain financial transactions, laundering involving international transfers, and stings). Its companion, 18 U.S.C. 1957, prohibits depositing or spending more than $10,000 of the proceeds from a Section 1956 predicate offense. Violations of Section 1956 are punishable by imprisonment for not more than 20 years; Section 1957 carries a maximum penalty of imprisonment for 10 years. Property involved in either case is subject to confiscation. Misconduct which implicates Sections 1956 and 1957 may implicate other federal criminal statutes as well. Federal racketeer influenced and corrupt organization (RICO) provisions outlaw acquiring or conducting the affairs of an enterprise (whose activities affect interstate or foreign commerce) through the patterned commission of a series of underlying federal or state crimes. RICO violations are also 20-year felonies. Every RICO predicate offense, including each "federal crime of terrorism," is automatically a Section 1956 money laundering predicate offense. A second related statute, the Travel Act (18 U.S.C. 1952), punishes interstate or foreign travel, or the use of interstate or foreign facilities, conducted with the intent to distribute the proceeds of a more modest list of predicate offenses or to promote or carry on such offenses when an overt act is committed in furtherance of that intent. Such misconduct is punishable by imprisonment for not more than five years. Other federal statutes proscribe, with varying sanctions, bulk cash smuggling, layering bank deposits to avoid reporting requirements, failure to comply with federal anti-money laundering provisions, or conducting an unlawful money transmission business.
The Supreme Court has held that the Section 1956 ban on attempted international transportation of tainted proceeds for the purpose of concealing their ownership, source, nature, or ultimate location is limited to instances where concealment is a purpose rather than an attribute of the transportation (simple smuggling is not proscribed as such), United States v. Cuellar, 553 U.S. 550 (2008). In a second case, the Court indicated that for purposes of Section 1956 the "proceeds" of a predicate offense often referred to the profits rather than the gross receipts realized from the offense, United States v. Santos, 553 U.S. 507 (2008). Congress responded by defining "proceeds" for purposes of Sections 1956 and 1957 as the property obtained or retained as a consequence of a predicate offense, including gross receipts, P.L. 111-21, 123 Stat. 1618 (2009)(S. 386)(111th Cong.).
This is an abridged version of CRS Report RL33315, Money Laundering: An Overview of 18 U.S.C. 1956 and Related Federal Criminal Law
, by [author name scrubbed], by
Charles Doyle and Todd Garvey, without the footnotes, appendices, or most
citations
of the citations to authority found in the longer report.
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18 U.S.C. 1956: Section 1956 outlaws four kinds of laundering — promotional,
concealment, smurfing, and tax evasion — committed or attempted under one or more of
three jurisdictional conditions — laundering involving certain financial transactions,
laundering involving international transfers, and stings. More precisely, section
1956(a)(1) outlaws financial transactions involving the proceeds of other certain crimes
— predicate offenses referred to as ‘specified unlawful activities” — committed or
attempted: (1) with the intent to promote further predicate offenses, (2) with the intent to
evade taxation, (3) knowing the transaction is designed to launder the proceeds, or (4)
knowing the transaction is designed to avoid anti-laundering reporting requirements.
Section 1956(a)(2) outlaws the interstate or international transportation or transmission
(or attempted transportation or transmission) of funds (1) with the intent to promote a
predicate offense, (2) knowing that the purpose is to conceal laundering of the funds and
knowing that the funds are the proceeds of a predicate offense, or (3) knowing that the
purpose is to avoid reporting requirements and knowing that the funds are the proceeds
Related CRS Reports include CRS Report RL33020, Terrorist Financing: U.S. Agency Efforts and Inter-Agency Coordination, by [author name scrubbed] et al., and CRS CRS Report RS21547, Financial Institution Customer Identification Programs Mandated by the USA PATRIOT Act, by [author name scrubbed].
Money Laundering: An Abridged Overview of 18 U.S.C. 1956 and Related Federal Criminal Law
Introduction
Money laundering is commonly understood as the process of cleansing the taint from the proceeds of crime. In federal criminal law, however, it is more. In the principal federal criminal money laundering statutes, 18 U.S.C. 1956 and 1957, and to varying degrees in several other federal criminal statutes, money laundering involves the flow of resources to and from several hundred other federal, state, and foreign crimes.
18 U.S.C. 1956
Section 1956 outlaws four kinds of money laundering—promotional, concealment, smurfing, and tax evasion committed or attempted under one or more of three jurisdictional conditions—laundering involving certain financial transactions, laundering involving international transfers, and stings. More precisely, Section 1956(a)(1) outlaws financial transactions involving the proceeds of other certain crimes—predicate offenses referred to as "specified unlawful activities"—committed or attempted (1) with the intent to promote further predicate offenses; (2) with the intent to evade taxation; (3) knowing the transaction is designed to launder the proceeds; or (4) knowing the transaction is designed to avoid anti-laundering reporting requirements.
Section 1956(a)(2) outlaws the interstate or international transportation or transmission (or attempted transportation or transmission) of funds (1) with the intent to promote a predicate offense; (2) knowing that the purpose is to conceal laundering of the funds and knowing that the funds are the proceeds of a predicate offense; or (3) knowing that the purpose is to avoid reporting requirements and knowing that the funds are the proceeds of a predicate offense.
of a predicate offense. Section 1956(a)(3) is a sting section. It outlaws financial
transactions (or attempted transactions) that the defendant believes involve the proceeds
of a predicate offense and that are intended to (1) promote a predicate offense, (2) launder
the proceeds, or (3) avoid reporting requirements.
All but
two2 of the
ten section10 Section 1956 crimes are related in one
way or another to the
commission or purported commission of at least one of a list of predicate offenses,
“ "specified unlawful activities.
”" The predicate offenses come in three varieties: state
crimes, foreign crimes, and federal crimes. The list of state crimes is relatively short and
consists of any state crime that is a RICO predicate offense, that is, any act or threat
involving murder,
kidnapingkidnapping, gambling, arson, robbery, bribery, extortion, dealing in
obscene matter, or dealing in a controlled substance or listed chemical (as defined in
section Section 102 of the Controlled Substances Act), which is chargeable under state law and
punishable by imprisonment for more than one year. The list of foreign crimes recognized
as section as Section 1956 predicate offenses is very much the same
— —violations of the laws of
another country involving murder,
kidnapingkidnapping, bribery, drug trafficking and the like
— but
—but it only applies in cases involving a financial transaction occurring in whole or in part in
this country. The list of federal predicate offenses is
considerableconsiderably longer if for no other
reason than it is specific rather than generic.
Each of the
ten10 criminal proscriptions found in
sectionSection 1956 outlaws both the
completed offense and the attempt to commit it. Section 1956(h) outlaws conspiracy to
violate any of these proscriptions.
Consequences
Consequences: Prison terms, fines, civil penalties, and confiscation may follow as
a consequence of conviction of a money laundering offense. Any violation of
sectionSection 1956
is punishable by imprisonment for not more than 20 years. Violations of
section
Section 1956(a)(1) and (a)(2), the financial institution and interstate or foreign transmission
offenses, are punishable by a fine of no more than the greater of $500,000 or twice the
value of the property involved in the offense. Sting violations are punishable by a fine of
not more than the greater of $250,000 ($500,000 for an organization) or twice
ofthe amount
involved in the offense. Violators of any provisions of
sectionSection 1956 are subject to a civil
penalty of no more than the greater of $10,000 or the value of the property involved in the
offense. Forfeiture is the confiscation of property to the government as a consequence of
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the property
’'s proximity to some form of criminal activity. The proceeds of a confiscation
are generally shared among the law enforcement agencies that participate in the
investigation and prosecution of the forfeiture. Section 1956 provides a vehicle for
confiscation in two very distinct ways. First, the
“proceeds”"proceeds" of any
sectionSection 1956 predicate
offense (and any property traceable to such proceeds) are subject to confiscation without
the necessity of any actual violation of
sectionSection 1956. Second, property
“involved” in a
section"involved" in a Section 1956 money laundering offense (or property traceable to such involved property)
may be confiscated. The Eighth Amendment prohibits excessive fines. Fines are excessive
if they are grossly disproportionate to the gravity of the offender
’'s misconduct. While the
excessive fines clause may impose limits upon the permissible extent of the confiscation
for failure to comply with anti-money laundering reporting statutes, forfeitures under
section Section 1956 are not ordinarily considered excessive because of the gravity of the offense
and its predicate offenses.
18 U.S.C. 1957: Unless there is some element of promotion, concealment or evasion,
section 1956 does not make simply spending or depositing tainted money a crime. Section
1957 does. It outlaws otherwise innocent transactions contaminated by the origin of the
property involved in the transaction. Using most of the same definitions as section 1956,
the elements of 1957 cover anyone who:
The Supreme Court recently held that the proscription in Section 1956 against attempted international transportation of tainted proceeds for the purpose of concealing their ownership, source, nature, or ultimate location is limited to instances where concealment is a purpose rather than an attribute of the transportation (simple smuggling is not proscribed as such), United States v. Cuellar, 553 U.S. 550 (2008). In a second case, the Court indicated that for purposes of Section 1956, in many instances the "proceeds" of a predicate offense referred to net receipts or profits realized from the offense, United States v. Santos, 553 U.S. 507 (2008). Congress preferred a different reading of "proceeds," which in an amendment to Section 1956, it defined to mean any property obtained or retained through the commission of a predicate offense, including gross receipts, 18 U.S.C. 1956(c)(9)(P.L. 111-21, 123 Stat. 1618 (2009)(S. 386)).
18 U.S.C. 1957
Unless there is some element of promotion, concealment, or evasion, Section 1956 does not make simply spending or depositing tainted money a crime. Section 1957 does. It outlaws otherwise innocent transactions contaminated by the origin of the property involved in the transaction. Using most of the same definitions as Section 1956, the elements of 1957 cover anyone who:
1. A. in the United States,
1. A. in the United States, B. in the special maritime or territorial jurisdiction of the
United States, or
C. outside the United States if the defendant is an American,
2. knowingly
3. A. engages or
B. attempts to engage in
4. a monetary transaction
5. [
5. in or affecting U.S. interstate or foreign commerce
]
6. in criminally derived property that
A. is of a greater value than $10,000 and
B. is B. is
derived from specified unlawful activity.
Section 1957 also proscribes attempts to violate its provisions. Section 1956(h)
outlaws conspiracy to violate
sectionSection 1957. Violations of
sectionSection 1957 and conspiracy to
violate
sectionSection 1957 are each punishable by imprisonment for not more than 10 years
and/or by a fine of not more than the greater of $250,000 ($500,000 for an organization)
or twice the amount involved in the transaction. Violators of
sectionSection 1957 are subject to
a civil penalty of no more than the greater of $10,000 or the value of the property involved
in the offense. Any property involved in a violation of
sectionSection 1957 or traceable to
property involved in a violation of
sectionSection 1957 is subject to confiscation under either
civil or criminal procedures, and the applicable law is essentially the same as in the case
of section 1956.
of Section 1956.Travel Act
:
The money laundering provisions of
sectionsSections 1956, 1957 punish
transactions involving promotion, concealment, evasion, spending
, and depositing. The
Travel Act, 18 U.S.C. 1952, punishes interstate or foreign travel (or use of the facilities
of interstate or foreign commerce) conducted with the intent to distribute the proceeds of
a more modest list of predicate offenses or to promote or carry on such offenses when
there is an overt act in furtherance of that intent. The Travel Act is a
sectionSection 1956 and
1957 predicate offense (specified unlawful activity);
sectionSection 1956 and 1957 are Travel
Act predicate offenses (unlawful activity); and although the money laundering predicate
offense list is more extensive, several of the Travel Act predicate offenses are also money
laundering predicates. The Travel Act essentially condemns three crimes each with an
interstate element: the distribution of the proceeds of a predicate offense, the promotion
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of a predicate offense, or the commission of a violent crime in aid of a predicate offense.
The first two variants bear some resemblance to the concealment and promotion offenses
of section of Section 1956 and somewhat more remotely to the deposit/spending proscriptions of
section Section 1957. The violent crime component of the Travel Act is only coincidentally
related to money laundering and consequently will be mentioned only in passing.
The courts often abbreviate their statement of the elements to encompass only
whichever of the three versions is at issue:
Distribution —
Distribution – The essential elements of a violation under section 1952(a) are:
“"(1)
travel in interstate or foreign commerce; (2) with the specific intent to distribute the
proceeds of an unlawful activity; and (3) knowing and willful commission of an act
in furtherance of that intent
.”
Facilitation — “The government must prove (1) interstate travel or use of an interstate
facility; (2) with the intent to . . . promote . . . an unlawful activity and (3) followed
by performance or attempted performance of acts in furtherance of the unlawful
activity.”
Violence: “," United States v. Hinojosa, 958 F.2d 624, 629 (5th Cir. 1992).
Facilitation – The government must prove that the defendant "(1) travels in interstate or foreign commerce [or uses an interstate facility] (2) with intent to ... promote ... any unlawful activity and (3) that the defendant thereafter performs or attempts to perform an act of promotion ... of any unlawful activity," United States v. Driver, 535 F.3d 424, 430 (6th Cir. 2008).
Violence – "To prove a violation of the Travel Act, the government was required to
establish that
Ajaj[the defendant]: (1) used a facility of interstate or foreign commerce; (2) with
intent to commit any unlawful activity (including arson
. . . ... ); and (3) thereafter
performed an additional act to further the unlawful activity
.
," United States v. Salameh, 152 F.3d 88, 152 (2d Cir. 1998).
The distribution and facilitation offenses of the Travel Act, 18 U.S.C. 1952(a)(1) and
18 U.S.C. 1952(a)(3), are punishable by imprisonment for not more than five years; the
crime-of-violence-in-furtherance offense is punishable by imprisonment for not more than
20 years. Offenders of any of the three offenses are subject to a fine of the greater of not
more than $250,000 ($500,000 for organizations) or twice the gain or loss associated with
the offense. Property associated with a violation of
sectionSection 1952 is not subject to
confiscation solely by virtue of that fact, although the property may be
confiscation by
confiscated by operation of the laws governing 1952 predicate
offense.
offenses.31 U.S.C. 5322
- Reporting Requirements: —Reporting Requirements
Section 5322 penalizes willful violation
of several monetary transaction reporting requirements found in Subtitle 53-II of title 31
of the United States Code and elsewhere. The section
’'s coverage extends to violations of:
-
-31 U.S.C. 5313 - financial institution reports of cash transactions involving $10,000
or more (31 C.F.R. §103.22);
-31 U.S.C. 5314 - reports by persons in the U.S. of foreign financial agency
transactions (31 C.F.R. §103.24);
-
-31 U.S.C. 5316 - reports by any person taking $10,000 in cash out of the U.S. or
bring bringing it in;
-31 U.S.C. 5318 - suspicious transaction reports by financial institutions;
-
-31 U.S.C. 5325 - reports by financial institutions issuing cashier
’'s checks in amounts
of $3000 or more (31 C.F.R. §103.29);
-31 U.S.C. 5326 - cash transaction reports by financial institutions and/or various
trades or businesses pursuant to Treasury Department geographical orders (31 C.F.R.
§103.26);
-31 U.S.C. 5331 - reports of trades and businesses other than financial institutions of
cash transactions involving $10,000 or more (31 C.F.R. §103.30);
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-12 U.S.C. 1829b - record keeping requirements of federally insured depository
institutions;
-12 U.S.C. 1953 - record keeping by uninsured banks or similar institutions.
Simple violations of
sectionSection 5322 are punishable by imprisonment for not more than
five years, a fine of not more
thethan $250,000, or both. Violations committed during the
commission of another federal crime or as part of a pattern of illegal activity involving
more than $100,000 over the course of a year are punishable by imprisonment for not
more than 10 years; a fine of not more than $500,000 (not more than $1 million for a
special measures violation (31 U.S.C. 5318A) or a violation involving a breach of due
diligence with respect to private banking for foreign customers or foreign shell banks (31
U.S.C. 5318(i), (j)); or both. Section 5322 is a Travel Act predicate offense and RICO
predicate offense, but not a
sectionSection 1956 or 1957 money laundering predicate offense.
Property associated with violations of two of the sections within its coverage is subject
to confiscation. Under
sectionSection 5317(c)
, property becomes forfeitable when it is involved
in, or traceable to, a violation of 31 U.S.C. 5313 (reports relating to cash transactions
involving $10,000 or more) or of 31 U.S.C. 5316 (reports relating to taking $10,000 or
more out of the
U.S.United States or to bring it into the
U.S.).
31 U.S.C. 5324 - Anti-Structuring: Section 5324 condemns causing the failure to
United States).31 U.S.C. 5324—Anti-Structuring
Section 5324 condemns causing a financial institution to fail to file a required report, causing the submission of a false report, structuring transactions to
evade a reporting requirement, or attempting to do so. Violations are punishable by
imprisonment for not more than
five5 years (not more than 10 years if committed in
conjunction with another federal offense or if committed as part of a pattern of activity
involving $100,000 or more) and a fine of not more than $250,000 (not more than
$500,000 for organizations), with the
fine maximummaximum fine doubled if the offense is committed
in conjunction with another federal crime or as part of a pattern of activity involving
$100,000.
31 U.S.C. 5332
- —Bulk Cash Smuggling
:
Section 5332 outlaws carrying or
attempting to transport more than $10,000 in unreported,
“concealed”"concealed" cash across a U.S.
border with the intent to evade 31 U.S.C. 5316 reporting requirements. The proscribed
methods of concealment
seemsseem to envelope any method short of public display. The
offense carries a prison term of not more than five years, but also calls for confiscation
of the cash and related property.
18 U.S.C. 1960
- Money Transmitters: —Money Transmitters
Section 1960 prohibits unlicensed money
transmitting businesses and defines such businesses as (A) those that are required by state
law to be licensed and are not; (B) those that fail to comply with federal regulatory
provisions;
andor (C) those that transmit money they know is derived from, and intended
to finance, criminal activity. Offenders face imprisonment for not more than five years
and/or a fine of not more than $250,000 (not more than $500,000 for organizations).
Racketeer Influenced and Corrupt Organizations (RICO) - 18 U.S.C. 1961 1964): 18 U.S.C. 1961-1964—Racketeer Influenced and Corrupt Organizations (RICO)
All the racketeering predicate offenses listed in 18 U.S.C. 1961(1) are by definition
money laundering predicate offenses under
sectionsSections 1956 and 1957. RICO makes it a
federal crime for any person to:
1. conduct or participate, directly or indirectly, in the conduct of
2. the affairs of an enterprise
3. engaged in or the activities of which affect, interstate or foreign commerce
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4. A. through the collection of an unlawful debt, or
B. through a pattern of racketeering activity (predicate offenses).
RICO violations are punishable by imprisonment for not more than 20 years (not
more than life imprisonment if any of the applicable predicate offenses carries a life
sentence). Offenders also face fines of up to $250,000 (up to $500,000 for organizations)
as well as the confiscation of any property associated with the offense. They may also be
liable to their victims for triple damages
, and subject to the equitable remedies, at least
the behest of the government.
The Supreme Court has recently held that the proscription in section 1956 against
attempted international transportation of tainted proceeds for the purpose of concealing
the ownership, source, nature of ultimate location is limited to instances where
concealment is a purpose rather than an attribute of the transportation (simple smuggling
is not proscribed as such), United States v. Cuellar, 128 S.Ct. 1994 (2008). In a second
case, the Court indicated that for purposes of section 1956 the “proceeds” of a predicate
offense refers to gross receipts rather than profits realized from the offense, unless the
nature of the predicate offense and the penalty it carries renders such a result “perverse,”
United States v. Santos, 128 S.Ct. 2020 (2008).
and attorneys fees, and at least when sued by the government, subject to the equitable remedies.