Money Laundering Prosecutions and How They Are Fought.

The Money Laundering Control Act of 1986 established 18 U.S.C. Sections 1956 and 1957. Section 1956 contains several different offenses, and while each has different intent and conduct requirements, they also all require that the transactions in question involve proceeds connected to a designated specified unlawful activity (or SUA). While Section 1957 only has one offense and it also requires this, the statute is less complex than Section 1956.

Ordinary deposits or purchases can qualify as money laundering when every statutory element exists. As a result, when facing allegations, defendants will need to rely on the advice of experienced defense counsel. Our defense counsel can coordinate responses to subpoenas, interviews, seizures, and parallel proceedings on your behalf.

Structuring under 31 U.S.C. § 5324 and other financial crimes under the Bank Secrecy Act also present similar challenges for defendants. While these crimes are different from money laundering, some of the evidence that is used to prove the commission of a crime can overlap with evidence for both. However, structuring under 31 U.S.C. § 5324 is different from money laundering in one important respect: while money laundering offenses under 18 U.S.C. Sections 1956 and 1957 only apply when financial transactions involve proceeds of a specified unlawful activity, structuring offenses under 31 U.S.C. § 5324 can apply even when financial transactions involve entirely lawful money. This is because the target of a structuring investigation is not the source of the funds used, but rather the intentional attempt to avoid triggering Currency Transaction Reports (CTRs), which apply to cash transactions exceeding $10,000.

What must prosecutors prove under Sections 1956 and 1957?

Under Section 1957, prosecutors must prove four elements by a preponderance of the evidence: (i) the defendant engaged in a “covered monetary transaction”; (ii) the transaction was in an amount greater than $10,000, and the money or property involved is “criminally derived property”; (iii) the defendant knew that the money or property involved was “criminally derived”; and (iv) the monetary transaction took place in the United States or its special maritime and territorial jurisdiction, or was conducted outside the United States by a United States person. 18 U.S.C. § 1957 (2018), 18 U.S.C. § 1956(f)(2).

The first element requires only that a transaction, which can be as simple as a purchase, deposit, or transfer, be covered under the statutory definition. The second element requires that the transaction is at least $10,000 in value, and that the funds or property involved were generated through a specified offense. While it is possible for a transaction to satisfy the definition of a covered monetary transaction under federal law even when the amount involved is less than $10,000, the criminal statutes only apply when the amount involved is greater than $10,000.

The third element requires that the defendant know that the funds or property involved were “criminally derived.” As with the second element, the defendant need not know what specific offense generated the criminal proceeds. If you can show that you have not received notice of the property in question’s unlawful origin or that it is not connected to a designated specified unlawful activity, you may be able to avoid conviction and civil penalties.

The final element requires that the transaction involves the money or property of another. Money laundering charges do not require proof of any intent to conceal or to promote the specified unlawful activity, these are the other two prosecution theories that prosecutors can pursue under Section 1956. While concealment of transactions is often a component of money laundering, concealment is not one of the requirements for criminal liability under Section 1957. Instead, concealment is only one prosecution theory that prosecutors can pursue under Section 1956, and the other is promotion. Additionally, while the government must still prove that the defendant’s transaction is connected to a specified unlawful activity, prosecutors will not need to prove that a defendant’s transaction involved proceeds of an offense that they promoted.

What are the different stages of money laundering?

The “three stages” of money laundering (i.e. placement, layering, and integration) is commonly discussed by law enforcement officials and in textbooks. However, these three stages are not statutory elements or relevant to determining whether money laundering liability should be imposed. Instead, the three stages simply describe some of the patterns of conduct that can lead to criminal liability. When fighting a federal money laundering investigation, any attempt to focus on the three stages can be a distraction from what is important.

How can a lawyer defend federal money laundering charges?

There are many ways to defend federal money laundering charges, and the defense lawyers at Spodek Law Group are able to help both financially and legally in every manner of defense. Our knowledge defenses use all available evidence such as contemporaneous communications, accounting records, and compliance procedures to show that the government’s accusations are unjustified.

Tracing

Many money laundering cases also involve tracing. Tracing involves tracing the flow of funds into and out of a transaction in question and analyzing all potential sources. Tracing may be useful when it shows that the funds involved in the transactions in question are not linked to a specified unlawful activity, or that they came from other legitimate sources. This type of tracing defense requires working closely with the government, so it is important to know what evidence exists and when it is possible to file in court.

Predicate Offenses

When fighting a money laundering prosecution, defenses are often related to the predicate offense. If there is a flaw with a predicate offense charge, such as an offense’s designation as a specified unlawful activity or the fact that there is not enough evidence to link the defendant’s transaction to the offense, this can result in a successful money laundering defense as well.

Intent-Based Defenses

If the government is prosecuting a defendant under Section 1956, a successful defense of this nature will generally need to target the specific theory that prosecutors are pursuing. For example, if prosecutors pursue a theory of concealment, a defendant’s defense will need to be focused on showing that they did not engage in a transaction with the intent to conceal, avoid reporting, or obfuscate. If the defendant’s transaction does not involve funds from specified unlawful activities, they may be able to argue they are not the right party for a Section 1956 prosecution.

Forensic Accounting

Spodek Law Group’s defense lawyers work closely with forensic accountants who can test various aspects of the government’s tracing methods, including assumptions, attribution, and the transaction totals. While possessing cash or making a large deposit is not, per se, evidence of money laundering orstructuring, a defense that tries to address “willful blindness” must do more than just show negligence or a failure to investigate. Instead, it will need to show that the defendant was probably aware of the illegal proceeds, and that they deliberately worked to avoid confirm information.

Which federal agency investigates suspected money laundering?

While the underlying offense involved may frequently dictate which federal agency will take the lead in an investigation, various other federal agencies also play important roles in financial investigations. These agencies include:

• The Financial Crimes Enforcement Network (FinCEN), administers the reporting requirements imposed by the Bank Secrecy Act and analyzes financial intelligence received from the private sector to detect suspected illegal transactions;
• Internal Revenue Service Criminal Investigation, conducts investigations relating to tax crimes, money laundering, and other financial crimes;
• Drug Enforcement Administration (DEA), conducts investigations involving suspected illegal drug trafficking;
• Homeland Security Investigations (HSI), conducts cross-border investigations into money laundering, trade-based financial schemes, and other offenses; and,
• U.S. Attorney’s Office (USAO) and other federal prosecutors, prosecute criminal cases in federal district courts on behalf of the U.S. Department of Justice (DOJ).

Criminal financial investigations in the U.S. are complex and often involve the cooperation of agencies such as the FBI, IRS-CI, DEA, HSI, and FinCEN. Investigators can examine records relating to bank accounts, wire transfers, credit card transactions, business accounts, real estate, and cryptocurrency activity. If a federal financial investigation is focusing on a specific transaction or transactions, prosecutors are likely to search for anything that may support a prosecution theory. Furthermore, a financial investigation can last for many years before prosecutors file charges against a defendant. In some cases, federal agents and prosecutors may even file charges for a separate offense while continuing an investigation into a defendant’s suspected money laundering.

As you can see, defending against money laundering charges involves unique challenges and procedures compared to other federal offenses. Spodek Law Group focuses our criminal defense practice on these challenges and we are confident that we can provide an effective defense on your behalf.

Todd Spodek is the managing partner of Spodek Law Group, a second generation criminal defense firm that has been practicing since 1976.

How can I fight forfeiture and protect seized property?

Courts may restrain what they consider potentially “forfeitable” assets in advance of a federal criminal defendant’s trial. This process involves specified procedures, but the government may still lose its ability to restrain or seize property if a defendant proves the property is not subject to criminal forfeiture. While it is important to litigate the merits of a money laundering case, it is also important to litigate forfeiture and restitution issues. If you ignore a forfeiture notice, you may lose your property without litigating the merits.

Difference Between Forfeiture, Restitution, and Criminal Fines

Forfeiture, restitution, and criminal fines all serve different purposes under federal law. Criminal forfeiture is a part of a defendant’s sentence, and it is only pursued when the defendant is convicted. Unlike restitution and criminal fines, which assess financial liability against defendants based on restitution and criminal fines schedules, criminal forfeiture targets property and assets suspected to have been acquired through, or used to facilitate, a designated specified unlawful activity.

Civil forfeiture also targets property and assets suspected to have been used in commission of designated crimes. However, civil forfeiture differs from criminal forfeiture in two important respects. First, civil forfeiture proceeds against the property itself, not the property owner or a defendant, and second, civil forfeiture does not require the property owner to be convicted of a crime. As a result, civil forfeiture can be pursued without criminal charges pending.

Forfeiture Notice Deadlines

Under the Civil Asset Forfeiture Reform Act (CAFRA), the government generally must send the owner of the seized property a notice within 60 days after seizing the property, subject to various exceptions and extensions. Under CAFRA, the notice must be sent via certified mail to the owner or a purported owner. A CAFRA notice must allow at least 35 days from its date of mailing for the owner to file an administrative claim. If no administrative claim is filed, the government’s right to keep the property is presumed unless the owner can show that a CAFRA notice was either never sent or was sent in violation of the statute.

Criminal Forfeiture Petitions

Criminal forfeiture petitions are governed by the Federal Rules of Criminal Procedure. In criminal forfeiture cases under 21 U.S.C. § 853 (the federal money laundering statute), a third party other than the defendant generally has 30 days from the earlier of the final publication of notice or receipt of direct written notice to file a petition with the court. With the exception of petitioning for the return of seized or restrained property under the pre-trial procedures of the Comprehensive Drug Abuse Prevention and Control Act of 1970, criminal forfeiture proceedings involve unique challenges. Spodek Law Group’s attorneys can assist with fighting forfeiture when necessary, and we will work with you closely throughout the process to protect your rights to your seized and restrained property.

How are federal money laundering sentences calculated?

Under 18 U.S.C. Section 1956, a single count of money laundering has a maximum sentence of 20 years. A conviction under Section 1957 has a statutory maximum sentence of ten years per count. As with all other federal criminal cases, the courts’ sentencing decisions depend on the circumstances involved in each case.

U.S. Sentencing Guidelines

The U.S. Sentencing Guidelines (U.S.S.G.) established a sentencing framework for federal courts in 1987. However, in 2005, the United States Supreme Court recognized a flaw in the U.S.S.G. and rendered them “ advisory in nature.” Today, federal judges continue to refer to the U.S.S.G. when sentencing, but judges are no longer obligated to sentence within the guidelines’ recommended sentences.

Sentencing Guidelines for Money Laundering

Under U.S.S.G. §2S1.1, the sentencing level calculated using the Guidelines depends on the nature of the charged offense, the launderer’s involvement, the laundered value, and other factors. While the laundered value can lead to an increase in the advisory offense level, several other factors can also play a role in a defendant’s sentencing.

U.S.S.G. §2S1.1(a)(1) applies when the defendant committed (or was accountable for) the underlying offense that generated the laundered proceeds. In that case, the defendant’s sentencing will start with the base offense level established under the guideline for that offense (e.g., § 2L1.1 for alien smuggling offenses).

If the defendant is not accountly for the offense that generated the laundered proceeds, then U.S.S.G. §2S1.1(a)(2) applies. This guideline has a base offense level of eight, to which the value adjustment under § 2B1.1 will be applied. Under §2S1.1(b)(2)(B), conviction of a Section 1956 offense leads to a two-level increase in the Sentencing Guidelines’ advisory offense level.

18 U.S.C. Section 3553(a) Factors

While Sentencing Guidelines are often important, they are not the only factor in determining what sentences courts will impose. Section 3553(a) of 18 U.S.C. governs sentencing decisions, and it requires federal judges to consider several factors when imposing federal criminal sentences:

• The nature and circumstances of the offense and the history and characteristics of the defendant;
• The need to reflect the seriousness of the offense, to promote respect for the law, to provide adequate deterrence, and to protect the public from further crimes;
• The kinds of sentence, restrictions, or other conditions that are most appropriate in the case;
• The need to avoid unwarranted sentencing disparities; and,
• The need to provide the defendant with medical care.

How much does a federal money laundering defense cost?

Private defense counsel does not have a statutory price and is not available via government subsidies. For cases involving money laundering allegations, the complexity of a case, the amount of discovery involved, the need for experts, and the need for trial will all impact the total cost of your defense. While your defense attorney will be able to give you a budget estimate early on, there are various factors that will be relevant to your budget as well, including:

• The hiring of forensic accountants;
• The hiring of investigators;
• The hiring of mitigation specialists;
• Use of technology; and,
• Travel expenses.

When can a defendant receive appointed counsel in a federal criminal case?

If you cannot afford to hire private counsel for your federal case, then you may be eligible for court-appointed counsel under 18 U.S.C. § 3006A. Under the Criminal Justice Act (CJA), indigent defendants are entitled to representation at no charge. CJA funding also may be available to cover necessary investigators and experts if requested in a timely manner (18 U.S.C. § 3006A(e)). If funds become available, courts may order you to reimburse the government for the cost of your appointed counsel as well (18 U.S.C. § 3006A(f)).

Are cryptocurrency and bitcoin transactions more difficult to trace than traditional banking transactions?

In cryptocurrency cases, the use of mixers and cross-chain transfers can greatly increase the time that cryptocurrency tracing takes and it can also lead to a need for more experienced blockchain experts. Blockchain experts charge high hourly rates that often require a higher budget than other money laundering cases.

What should I tell my lawyer about the case?

The attorney-client privilege is a fundamental legal principle that protects confidential communications between a client and their attorney. Generally, the attorney-client privilege covers any communication made between a client and their attorney during an ongoing attorney-client relationship, provided that the communication was intended to be confidential and that it seeks (or relates to) legal advice. Attorney-client privilege generally extends to communications with the attorney’s staff as well.

Does the attorney-client privilege protect the underlying facts of the case?

The attorney-client privilege protects the content of a communication, but it does not protect the underlying facts discussed. For example, if you tell your attorney about your past illegal acts, the fact that you engaged in the acts is not privileged, but the information you shared about your past illegal acts is.

Are there any exceptions to the attorney-client privilege?

The attorney-client privilege is broad in scope. However, the privilege does not cover communications that facilitate future or ongoing crimes, or that would violate other laws and rules. Importantly, although the attorney-client privilege protects confidential communications, the privilege is waivable. While attorneys do everything they can to maintain confidentiality on behalf of their clients, attorneys also advise clients not to share confidential information with unnecessary third parties. Discussing confidential attorney-client communications with third parties that are not necessary can compromise a client’s defense and may also result in the loss of their attorney-client privilege.

What should I tell my lawyer if I know that I am guilty?

If you know that you are guilty, you should be fully transparent with your defense lawyer. If you lie to your lawyer, they will not be able to identify weaknesses with the prosecution’s allegations, and they will not be able to assess defenses accurately. Defense lawyers have experience defending clients who are guilty, and they can help avoid criminal convictions if they can identify the most appropriate defense. When communicating with your lawyer, keep in mind that you can tell your attorney what you have done as long as you do not ask your attorney to conceal evidence or assist with the commission of any unlawful conduct.

Is information that I share with my accountant also protected by the attorney-client privilege?

There is no recognized accountant-client privilege in federal law (Couch v. United States, 1971). However, in some circumstances, the attorney-client privilege may apply to accountants. If an accountant provides a defense attorney with necessary or helpful information so that your attorney can assist you with formulating a defense and seek legal advice (Kovel, 1970), that information can be protected under the attorney-client privilege.

Talk to Spodek Law Group

Every case turns on its own facts, and general information is no substitute for advice about yours. Todd Spodek, managing partner of Spodek Law Group, and the firm's attorneys defend federal criminal and white collar matters nationwide. Reach the firm at 212-300-5196.