18 USC 1956 Money Laundering Elements.

In order to establish liability for money laundering under 18 U.S.C. § 1956(a)(1), prosecutors must prove several core elements:

• Conducting or attempting to conduct a financial transaction;
• The transaction must involve the proceeds of a “specified unlawful activity”;
• The defendant knew that the property involved in the transaction represented proceeds of some form of unlawful activity; and
• The defendant had the specific intent or knowledge (or, under some theories, the purpose) to commit the unlawful act as required under § 1956(a)(1).

1. Conducting or Attempting a “Financial Transaction”

Section 1956(a)(1) establishes liability for any person who conducts, or attempts to conduct, a “financial transaction.” This is a broad category that can cover both money laundering and other transactional offenses. It also covers attempts to conduct a financial transaction, regardless of whether the attempted transaction was successful.

2. The Transaction Involved the Proceeds of a Specified Unlawful Activity

The financial transaction must involve the “proceeds of specified unlawful activity.” This requirement creates a nexus between the alleged money laundering offense and an underlying illegal act. In federal money laundering cases, the “specified unlawful activity” can encompass various crimes, from mail fraud and healthcare fraud to bribery and extortion.

3. Knowledge that the Property Involved Represented Proceeds of Unlawful Activity

To satisfy the knowledge requirement under Section 1956(a)(1), prosecutors must demonstrate that the defendant knew that the property involved in the financial transaction represented the proceeds of some form of unlawful activity. This is a distinct requirement from knowledge of the specific underlying unlawful activity that produced the proceeds.

4. Specific Intent or Knowledge Under Section 1956(a)(1)

Section 1956(a)(1) provides four alternative theories of intent or knowledge:

• Promoting a specified unlawful activity;
• Concealing, disguising, or avoiding reporting requirements;
• Knowing that the transaction is designed in whole or in part to avoid a state or federal transaction-reporting requirement; or,
• Having the intent to engage in conduct constituting a violation of 26 U.S.C. § 7201 or § 7206.

How Do Domestic, International, and Sting Provisions Change What § 1956 Requires?

The Federal money laundering statute allows for multiple theories of liability. Each theory changes the elements that prosecutors must prove to meet their burden beyond a reasonable doubt.

1. Section 1956(a)(1)(A)(i): Intent to Promote

The most common money laundering theory involves promoting criminal activity. Under § 1956(a)(1)(A)(i), prosecutors must prove the defendant engaged in a financial transaction involving proceeds of a specified unlawful activity and that the defendant intended the transaction to promote the carrying on of said specified unlawful activity.

2. Section 1956(a)(1)(B)(i): Concealment

Under § 1956(a)(1)(B)(i), prosecutors must prove that the defendant conducted a financial transaction knowing that the transaction is designed to conceal or disguise the nature, location, source, ownership, or control of the proceeds of a specified unlawful activity. Prosecutors can use this theory to prove a substantive money laundering offense or as evidence of criminal intent under other money laundering theories.

3. Section 1956(a)(1)(B)(ii): Avoiding Transaction Reporting Requirements

Another money laundering theory involves avoiding federal or state transaction reporting requirements. This theory is commonly used to charge individuals who attempt to circumvent the obligations imposed under the Bank Secrecy Act, such as the obligation to file a Currency Transaction Report (CTR) for transactions involving more than $10,000.

4. Section 1956(a)(2): International Money Laundering

Section 1956(a)(2) establishes liability for transporting or transmitting funds between the United States and another country, including countries that are not officially recognized as sovereign. In many cases, transporting or transmitting funds internationally is an independent element of guilt under the federal money laundering statute.

5. Section 1956(a)(1)(B)(iii) and (iv): Avoiding Taxes

The federal money laundering statute also covers individuals who conduct a financial transaction with the intent to engage in conduct constituting a violation of 26 U.S.C. § 7201 or § 7206.

When Can the Government Prove Unlawful Proceeds Without an Underlying Conviction?

Although an underlying illegal act must produce the proceeds of a money laundering offense, prosecutors do not necessarily need to secure a criminal conviction for the underlying activity to establish criminal liability for money laundering. The underlying unlawful activity can be used to sustain a money laundering charge even if it does not result in a separate conviction.

1. Defining “Proceeds”

Under 18 U.S.C. § 1956, the definition of proceeds is broad. It includes property obtained directly or indirectly through an illegal act, the gross receipts of the illegal act, and the gross proceeds of the illegal act as well as any property derived from the gross proceeds or any property derived from the conversion of other unlawful proceeds. This means that, along with the profit of a criminal activity, gross proceeds will also qualify for the federal money laundering statute.

2. Proving “Proceeds” of Unlawful Activity

To prove proceeds, prosecutors can often rely on a variety of types of circumstantial evidence including:

• Timing: How soon was the financial transaction in relation to the underlying unlawful activity?
• Communications: Did the defendant acknowledge that the funds involved represented the proceeds of an unlawful activity?
• Records: Are there banking records and other documents identifying the transactions as unlawful or tainted?
• Other circumstantial evidence: Does the defendant’s lifestyle suggest that he or she has income sources beyond what is legally disclosed?

3. Establishing “Proceeds” in Money Laundering cases

With that in mind, prosecutors will use various forms of evidence to establish the “proceeds” element in a federal money laundering case. This includes legitimate business records as well as records that are either intentionally concealed or generated to facilitate unlawful activities. These records can be used to establish the nature of the transactions, and they can also bear on knowledge and intent, tracing the proceeds to the illegal activity, and providing insights into the defendant’s state of mind.

Spodek Law Group works out of offices in Manhattan, Brooklyn, Queens and Los Angeles.

Why Does § 1957 Require Knowledge and a Value Threshold Without Concealment Intent?

While both Section 1956 and Section 1957 are federal money laundering statutes, they apply in different scenarios. Section 1957 establishes liability for engaging in monetary transactions involving property criminally derived from a specified unlawful activity that exceeds the value of $10,000. In contrast to Section 1956, Section 1957 is easier to prove as it does not require prosecutors to establish a concealment intent or a specific intent to promote or avoid taxes. Instead, Section 1957 requires establishing that the defendant knew that the property involved in a monetary transaction was criminally derived from a specified unlawful activity.

1. Monetary Transactions Under Section 1957

Under Section 1957, a “monetary transaction” is the deposit, withdrawal, transfer, or exchange, in or affecting interstate or foreign commerce, of funds or a monetary instrument by, through, or to a financial institution:

• A monetary transaction in criminally derived property of a value greater than $10,000 conducted by, through, or to a financial institution; or,
• A transaction that would be a financial transaction under 18 U.S.C. § 1956(c)(4)(B).

The financial institution requirement includes both domestic and international institutions. A monetary transaction also includes the exchange of real property or the exchange of property to qualify a financial institution or engage in a transaction with a financial institution.

The value threshold under Section 1957 is that the monetary transaction involves property derived from specified unlawful activity with a value greater than $10,000.

2. Establishing Knowledge Under Section 1957

Under Section 1957, prosecutors must prove that the defendant conducted a “monetary transaction” that involved property derived from the proceeds of a “specified unlawful activity” (as defined in Section 1956(c)(7)), the value of which was more than $10,000, and that the defendant knew that the property involved in the monetary transaction constituted, or was derived from, proceeds obtained by some criminal offense This is a similar, but not identical, knowledge requirement to that applied under Section 1956. If prosecutors are able to establish knowledge, the defendant is liable even if the monetary transaction did not involve any attempt to hide the source of the proceeds.

Which Conspiracy, Sentencing, and Forfeiture Consequences Can Follow a Laundering Charge?

Under 18 U.S.C. § 1956(h), any individual who “conspires to commit” an offense under Section 1956 or Section 1957 will also face liability. There is an important distinction between conspiracy under Section 1956(h) and conspiracy under 18 U.S.C. § 371 or 18 U.S.C. § 1349 in that prosecutors will not need to prove that an overt act was committed in order to prove a defendant’s guilt for money laundering conspiracy. In other words, an agreement to commit money laundering is sufficient to sustain a guilty verdict for conspiracy, regardless of whether an actual money laundering transaction took place.

A federal conviction for money laundering under 18 U.S.C. § 1956 can carry up to 20 years of imprisonment per offense, and a $500,000 criminal fine (or, if the offense involves property with a greater value, up to twice the value of the property involved).

Similar to other federal money laundering offenses, conspiracy to commit money laundering under 18 U.S.C. § 1956(h) carries the same statutory penalties as those prescribed for the offense the commission of which was the object of the conspiracy.

§ 1957 can carry up to 10 years of imprisonment per offense.

In addition to potentially long criminal sentences and substantial fines, a money laundering conviction may result in criminal forfeiture, while civil forfeiture may be pursued separately. Under 18 U.S.C. § 981(a)(1)(A) and 18 U.S.C. § 982(a)(1), the federal government may seek forfeiture of property involved in a violation of § 1956 or § 1957, and property traceable to that property. Forfeiture can be a very expensive consequence of money laundering charges, even in cases where the government does not pursue criminal charges or seek to secure a criminal conviction.

Speak With Counsel Before You Answer Anything

If agents have contacted you, the order matters: counsel first, answers second. Spodek Law Group has been practicing since 1976 and defends federal matters nationwide, coast to coast, from offices in New York, Brooklyn, Queens and Los Angeles. Call 888 348 8028.