Cooperating in Federal Money Laundering Investigations.

Cooperating in Federal Money Laundering Investigations

A proffer agreement’s written terms determine if and how the federal prosecutors may use any information you disclose while participating in a proffer. Because these provisions are so important, negotiating for favorable terms and negotiating with a clear understanding of the federal prosecutors’ position are both critical steps. Participating in a federal proffer offers no guarantee of a plea offer or leniency. Along with deciding whether to cooperate, deciding when and how to cooperate are both critical decisions. Because federal cooperation reductions for money-laundering offenses remain discretionary rather than automatic, it is important for both sides to evaluate all relevant information before agreeing to any reduction (if one is warranted). There is no nationwide rule or authority that establishes a uniform pre-indictment deadline for accepting a federal cooperation offer. In federal court, Section 5K1.1 of the U.S. Sentencing Guidelines identifies five factors that prosecutors must consider when deciding whether a defendant’s assistance in federal government prosecution is “substantial.” Spodek Law Group evaluates all potential defendants’ eligibility for downward departures through the lens of these factors. In many circumstances, federal judges must follow the recommendations they receive from the federal prosecution. However, when the prosecution makes a §5K1.1 motion, the sentencing judge is permitted to determine the amount of a downward departure. If you are eligible for a downward departure, your legal counsel can attempt to secure one for you. One limitation: a judge’s ruling based on a §5K1.1 motion cannot authorize sentencing below an applicable mandatory minimum by itself. In order to sentence a defendant beneath an applicable mandatory minimum, the federal government must file a §3553(e) motion. Spodek Law Group takes an active approach to these requests. Our firm represents federal defendants who need help negotiating cooperation deals, and we handle matters serving as interlocutors between our clients and federal prosecutors.

What Is the Hardest Money Laundering Case to Win?

To establish a violation of 18 U.S.C. § 1957, federal prosecutors must prove that a defendant executed a monetary transaction exceeding $10,000 involving a covered financial institution. Along with this, federal prosecutors must also prove that the defendant knew that the monetary transaction involved the proceeds of criminal activity. To establish a § 1957 violation, prosecutors must also prove:

• The property involved in the transaction was “criminally derived property”;
• The defendant knew that the transaction involved “criminally derived property”; and
• The defendant acted “knowing that the property involved in a financial transaction was or represented the proceeds of some form of criminal activity.”

To connect the property involved in the transaction to a “specified unlawful activity” (SUA), federal prosecutors must prove that the funds came from any of a specific set of listed crimes.

Is there a “hardest” money laundering case?

No federal offense label determines how “hard” a case is to win.

While there is no single offense label for the hardest money laundering offense to defend, allegations that are backed by corroborated evidence are generally the hardest cases to defend. For example, corroborated financial records (i.e., bank statements, wire transfer confirmation receipts, and tax returns) and credible insiders (i.e., cooperating witnesses) are generally strong forms of evidence that are very difficult to contest.

Overall federal conviction rates include cases that end in guilty pleas, not only contested trials. Guilty pleas generally come after negotiations between the prosecution and the defendant’s counsel, and those pleas can depend on various factors.

A federal judge’s ruling that a defendant’s attempt to spend his or her criminal proceeds alone does not establish the required intent or purpose for a money laundering conviction under 18 U.S.C. § 1956.

With respect to the “concealment” prong of a § 1956 money laundering offense, federal judges have held that engaging in a financial transaction doesn’t necessarily “conceal or attempt to conceal” the nature or source of criminal proceeds per se.

Even if a judge suppresses the evidence that federal prosecutors have illegally obtained, this will not result in the dismissal of the charges unless that evidence is the only evidence that can be used to establish criminal liability.

How can prosecutors use statements from my proffer?

Will a proffer agreement provide me with transactional immunity?

A proffer agreement ordinarily does not provide transactional immunity. While the statements you make during a proffer generally cannot be used by the government against you in a later criminal proceeding, most proffer agreements allow federal investigators to pursue leads derived from the information you disclose during a proffer. This includes information that helps them secure other evidence that can be used against you.

What are the consequences of participating in a federal proffer?

Participating in a federal proffer can also be risky when you only disclose some of what you know. Providing incomplete or inconsistent information can undermine a proposed cooperation arrangement, and it can also lead investigators to question you further. This makes understanding the government’s position before you start disclosing information a critical step.

Does the “Kastigar Rule” restrict what the government can do with statements made during a proffer?

The Supreme Court’s Kastigar v. United States, 406 U.S. 441 (1972) restricts the government’s ability to use statements provided under “derivative-use immunity.” While providing this immunity under certain circumstances, Kastigar does not apply to every voluntary proffer. Therefore, ensuring you are protected by a negotiated immunity agreement prior to providing a voluntary proffer can be a critical step.

Can prosecutors use statements from a proffer for impeachment?

Yes, proffer agreements may authorize the government to use your statements for impeachment purposes, provided they can show that your court testimony is “demonstrably false or incomplete.” This is one form of impeachment, meaning that prosecutors can use your proffer statements to show your court testimony is not reliable.

Can prosecutors use statements from a proffer for rebuttal?

Proffer agreements may also authorize the government to use the statements from a proffer to rebut any defenses you raise in court. This occurs when your disclosures are inconsistent with the defenses you assert.

Can prosecutors use statements from a proffer at sentencing?

Section 1B1.8 of the Federal Sentencing Guidelines limits the government’s ability to use statements from a proffer against a defendant at sentencing, but only when the government has entered into a “specific cooperation agreement” with that defendant.

As the federal judiciary has explained, “making a ‘specific cooperation agreement’ in this context may require more than offering to consider a sentencing recommendation based on the results of the defendant’s proffer.” Therefore, when attempting to secure sentencing benefits through a proffer, it is critical that you not only provide a satisfactory proffer, but also ensure that you have entered into a binding agreement that entitles you to the protections of Section 1B1.8.

One final note regarding Section 1B1.8: these protections do not extend to any information the government had already obtained before its proffer invitation.

What Makes a Cooperation Sentencing Promise Enforceable?

Is a federal judge free to apply the substantial-assistance departure under Section 5K1.1 of the Federal Sentencing Guidelines?

Generally, a federal judge can only apply a substantial-assistance departure under Section 5K1.1 of the Federal Sentencing Guidelines after the federal government has filed a substantial-assistance motion. If the government files a § 5K1.1 motion, the sentencing judge determines the extent of the downward departure. If the government files a Rule 35(b) motion, the court’s decision will be informed by the government’s substantial-assistance determination.

When can prosecutors file a substantial-assistance motion under Rule 35(b)?

Under Federal Rule of Criminal Procedure 35(b), prosecutors can file a substantial-assistance motion (b)(1) within one year of the defendant’s sentencing. With that said, the government can also file a substantial-assistance motion under Rule 35(b)(2) after the first year, but only if the information identifying a defendant’s qualifying substantial assistance is one of the following three cases:

• Federal prosecutors learned of information which has became important since the filing of the motion under Rule 35(b)(1); or
• The information identifying the defendant’s substantial assistance had not come into existence before the filing of the defendant’s sentence; or
• The defendant’s failure to participate in the grand jury proceedings resulting in the discovery of the information was caused by a “special circumstance.”

Under Rule 35(b)(4), a substantial-assistance reduction can also fall below the defendant’s otherwise applicable statutory minimum sentence. Is there a remedy when the government refuses to file a substantial-assistance motion or set a hearing to determine a defendant’s entitlement to a substantial-assistance reduction? When the government refuses to pursue a substantial-assistance reduction through the federal justice system, the defendant may seek review of the government’s refusal based on constitutional grounds. The Supreme Court’s decision in Wade v. United States allows for judicial review of substantial-assistance motion refusals based on evidence of a “discriminatory intent or otherwise improper motive.”

With respect to substantial assistance, this does not mean that simply providing substantial assistance automatically entitles you to a substantial-assistance motion or a substantial-assistance hearing. A substantial-assistance departure under Section 5K1.1 typically requires the government to make the initial determination of substantial assistance, and a substantial-assistance motion is typically at the government’s sole discretion.

What happens if I am accused of breaching my cooperation agreement?

In order to determine whether a defendant has breached its cooperation agreement, courts assess whether the defendant has committed a material breach. In doing so, they evaluate a defendant’s compliance in light of the specific language of the cooperation agreement at hand.

In many cases, if a federal judge finds that a defendant has materially breached his or her cooperation agreement, then the plea agreement may only allow for a limited remedy, such as the loss of a sentencing reduction or potential prosecution for an unlicensed business.

Furthermore, the language of your plea agreement may limit the sentencing options available under Section 5K1.1. Specifically, the language of your plea agreement could reserve a substantial-assistance motion to the government’s sole discretion.

How Many Years Could I Face for Money Laundering?

A federal conviction for money laundering under 18 U.S.C. § 1956 can carry up to 20 years of incarceration per count, while a conviction for a violation of 18 U.S.C. § 1957 can carry up to 10 years of incarceration per count. Neither 18 U.S.C. § 1956 nor 18 U.S.C. § 1957 independently impose a mandatory minimum sentence.

A federal judge determines the sentence imposed for a money laundering conviction in federal court. As a part of this determination, the judge must calculate the defendant’s advisory sentencing range pursuant to the United States Sentencing Guidelines. The federal judge is then free to issue a sentence above or below that advisory range; however, any departure or variance from the advisory range must be based on factors that justify such a departure or variance.

Under the Sentencing Guidelines, money laundering falls under Section 2S1.1. There are two main ways to determine a defendant’s base level in a money laundering case:

• Under Section 2S1.1(a)(1), the defendant’s base level is the offense level of the predicate offense in which the defendant’s participation qualifies for the guidelines’ application.
• Under Section 2S1.1(a)(2), the defendant’s base level is eight; the federal judge must then add the appropriate additional levels based on the laundered amount as calculated under Section 2B1.1.

In some cases, money laundering enhancements can also add two additional levels to a defendant’s offense level. This can occur if a defendant has used “sophisticated means” to laundered money as a violation of Section 2S1.1.

Under the Sentencing Guidelines, money laundering is one of the cases that may be grouped under Section 3D1.2(c). This applies when the underlying offense has sufficient elements that it should not be calculated by the same guidelines provisions. When grouping applies, the money laundering counts and underlying-offense counts are computed together. The defendant’s final sentence will depend on the highest level of either the underlying offense or the money laundering offense, or both if they qualify for a concurrent sentence.

What Is the Final Step in Determining a Federal Sentence?

Once the federal judge determines the sentencing range applicable to the defendant’s offense level and criminal history, the federal judge can issue an appropriate sentence.

While there is no fixed sentence for money laundering, the final sentence will depend on a variety of factors, including:

• The amount of money that was laundered,
• Whether the defendant is facing a conviction under 18 U.S.C. § 1956 or 18 U.S.C. § 1957,
• Whether the laundering is viewed as an underlying offense or if it qualifies for grouping,
• Whether any enhancements for sophisticated means apply,
• The defendant’s prior criminal history,
• The defendant’s degree of cooperation (if any).

  What Should I Tell My Lawyer Before Cooperating?

  If you lied to a federal prosecutor, should you tell your lawyer?

  Yes, making a materially false statement to a federal agent or federal prosecutor is a separate offense, which carries a maximum sentence of five years of incarceration per count. Making a materially false statement to federal law enforcement agents is an offense that often gets overlooked during federal money laundering proceedings; however, it is not an offense that a defendant can afford to overlook.

Therefore, when you are disclosing information to your legal counsel, it is critical that you disclose not only when you have been honest about the facts of the case, but when you have been materially dishonest as well.

If I talk to my family, can my family members be arrested?

Discussions with your family, employees, or bankers generally do not fall under the attorney-client privilege. While the federal government has a lot of leeway when it comes to pursuing criminal penalties, it can only enforce these criminal penalties against defendants that commit a crime. For this reason, you should avoid discussing your federal case with family, employees, or bankers in order to reduce their potential criminal liability.

What else should I not tell my lawyer?

Clients should not give their legal counsel false facts, and clients should not conceal transactions that may be relevant to the federal money laundering investigation.

What counts toward the attorney-client privilege?

Candidly disclosing any and all information that relates to the criminal transactions at hand will protect the privileged relationship between a client and their legal counsel. As a part of the attorney-client relationship, attorneys are bound by confidentiality. Their confidentiality obligation covers communications that occur in the scope of their representation. This covers candid disclosures about the criminal transactions at hand, and it also extends to information providing insights on the federal prosecution’s goals, strategies, and the federal money laundering charge’s elements.

Are interviews with company counsel privileged?

If a corporate entity retained you to provide information during an internal investigation, then it will ordinarily control the privilege over any interviews conducted by the corporation’s company counsel. Company counsel does not automatically represent employees during their company-sponsored internal investigations.

These facts are often addressed in “Upjohn warnings.” The Federal Supreme Court approved Upjohn warnings in Upjohn Co. v. United States. These warnings explain the identity of the company’s client and how the corporation controls the confidentiality of the information that may be disclosed by employees.

Can a company disclose employees’ statements to federal prosecutors?

Yes, because the corporation owns the privilege, corporations can waive the privilege. This means that a corporation may disclose information obtained from interviews with employees that may potentially lead to criminal charges. This can occur even without the knowledge of the employee whom the company interviews.

Who investigates and prosecutes federal money laundering?

Which federal agencies investigate money laundering cases?

The federal agencies that investigate money laundering include the Federal Bureau of Investigation (FBI), the Internal Revenue Service Criminal Investigation Division (IRS-CI), the Drug Enforcement Administration (DEA), and Homeland Security Investigations (HSI). While FinCEN also helps uncover money laundering conduct, it is an intelligence unit rather than a prosecutorial agency.

Which federal agencies prosecute money laundering cases?

Money laundering charges are prosecuted by federal prosecutors with the United States Attorneys’ Offices and various components of the U.S. Department of Justice (DOJ).

What methods are typically used in federal money laundering investigations?

To investigate federal money laundering cases, investigators typically look at:

• Bank records;
• Wire transfers;
• Business entities;
• Property transactions;
• Cryptocurrency transactions;
• Social media posts; and
• Public records.

At Spodek Law Group, our lawyers are experienced in analyzing these sources of information to determine their relevance to a defendant’s alleged intent to launder money.

How are federal money laundering charges initiated?

The federal government initiates money laundering charges through an indictment, an information, or a criminal complaint. A grand jury indictment consists of 16 to 23 members, and its purpose is to determine whether there is probable cause to believe the defendant committed the federal crime. Probable cause is a lower standard of proof than proof beyond a reasonable doubt. A criminal complaint is how a prosecutor will ask for an arrest warrant before the indictment. An information is the way the government will start a money laundering prosecution without the involvement of a grand jury.

Can a defendant face both federal and state money laundering charges?

Yes, both the state and federal authorities have the right to prosecute money laundering conduct. State authorities can pursue a defendant’s conduct independently if it violates state laws.

Contact a Federal Criminal Defense Attorney

Nothing here is legal advice, and the details of your case matter. Todd Spodek and Spodek Law Group take federal criminal and white collar cases nationwide, from offices in New York, Brooklyn, Queens and Los Angeles. You can reach the firm at 212-300-5196.