Money Laundering – 18 U.S.C. §§ 1956 & 1957 Sentencing Guidelines

Thanks for visiting Spodek Law Group, a second-generation firm managed by Todd Spodek with over 40 years of combined experience defending clients against federal money laundering charges. Sections 1956 and 1957 criminalize transactions involving proceeds of unlawful activity with intent to promote that activity, conceal its source, or evade taxes. Maximum sentences: 20 years under Section 1956, 10 years under Section 1957. These statutes have become prosecutors’ favorite tools for piling charges onto any case involving financial transactions—nearly every crime that generates money can be charged as money laundering alongside the underlying offense.

Money laundering prosecutions originally targeted organized crime and drug trafficking operations that needed to legitimize illegal proceeds. But the statutes’ expansive language criminalizes routine financial transactions when connected to any underlying crime. Depositing cash from drug sales is money laundering. Using fraud proceeds to pay rent is money laundering. Transferring embezzled funds between accounts is money laundering. The same conduct that constitutes the underlying crime also becomes separate money laundering offense, doubling or tripling defendants’ sentencing exposure.

Section 1956: Promotional and Concealment Laundering

Section 1956(a)(1) criminalizes conducting financial transactions knowing the property involved represents proceeds of unlawful activity with intent to: promote the underlying criminal activity, conceal the nature/source/ownership of the proceeds, or evade taxes. Each intent creates distinct money laundering offense with identical 20-year maximum sentence.

Promotional money laundering involves using crime proceeds to further the criminal enterprise. Drug traffickers who use drug proceeds to purchase more drugs, fraudsters who use fraud proceeds to fund additional fraudulent schemes, or criminals who pay co-conspirators with crime proceeds all commit promotional money laundering. The requirement is that transactions were designed to promote the underlying offense, not just that they occurred during the offense.

Concealment money laundering targets efforts to hide the criminal source of funds. Structuring deposits to avoid currency reporting requirements, transferring funds through multiple accounts to obscure origin, using shell companies to hold proceeds, converting cash to assets that are harder to trace—these transactions violate Section 1956(a)(1)(B)(i) when done with intent to conceal the source or nature of criminal proceeds.

When Every Transaction Becomes Laundering

The statutes’ breadth creates absurd results. Someone who commits wire fraud to steal $50,000, then deposits the money in their bank account, commits both wire fraud and money laundering. Paying bills with that money constitutes additional money laundering transactions. The deposit and every subsequent use of the funds are separate federal felonies carrying 20-year maximums. What was single fraudulent scheme becomes dozens of money laundering charges multiplying sentencing exposure enormously.

Courts have struggled with this merger problem—when does the underlying offense end and money laundering begin? Some circuits hold that minimal additional conduct beyond the underlying crime doesn’t constitute separate money laundering. Others allow money laundering charges for virtually any financial transaction involving proceeds, reasoning that Congress intended broad coverage. The circuit split means identical conduct might be money laundering in one jurisdiction but not another.

The Supreme Court in Cuellar v. United States narrowed concealment laundering slightly by requiring proof that defendants’ purpose was to conceal the source of funds, not just that they concealed funds while transporting them for other purposes. But that narrow ruling left most money laundering prosecutions undisturbed. Prosecutors still routinely charge money laundering alongside underlying offenses, creating count multiplication that serves prosecutorial interests but doesn’t reflect distinct criminal conduct.

Section 1957: Spending More Than $10,000

Section 1957 criminalizes engaging in monetary transactions exceeding $10,000 involving proceeds of specified unlawful activity. This provision is even broader than Section 1956 because it doesn’t require proof of promotional or concealment intent—merely conducting the transaction with knowledge funds derived from crime suffices for conviction.

The $10,000 threshold means large transactions receive criminal scrutiny that smaller transactions escape. Buying a car with crime proceeds exceeding $10,000 violates Section 1957; buying furniture for $9,000 doesn’t (though it might violate Section 1956 if done with concealment intent). The arbitrary line reflects congressional assumption that large transactions warrant criminal prosecution while small ones don’t.

Section 1957’s knowledge requirement is satisfied by proving defendants knew property involved generally represented proceeds of some crime, not necessarily which specific crime. If someone receives $50,000 cash and knows it came from criminal activity—whether drug trafficking, fraud, extortion, or some other crime—spending more than $10,000 of it violates Section 1957. That general knowledge standard makes the statute easy to prove: any financial transaction exceeding $10,000 using funds defendant knew were dirty constitutes federal felony.

Specified Unlawful Activity: Almost Every Federal Crime

Money laundering statutes apply to proceeds of “specified unlawful activity”—a defined list in 18 U.S.C. § 1961 that includes virtually every federal felony and many state crimes. Fraud, drug trafficking, illegal gambling, kidnapping, extortion, murder for hire, environmental crimes, immigration violations—the list exceeds 200 predicate offenses. If crime generates money and appears in the SUA list, using that money can be charged as money laundering.

The expansive SUA list means money laundering charges attach to nearly all federal prosecutions involving financial gain. Fraud defendants face money laundering for using fraud proceeds. Drug defendants face money laundering for any financial transactions involving drug money. Environmental criminals face money laundering if they profited from violations. The ubiquity of money laundering charges reflects statutory breadth, not careful targeting of sophisticated financial crimes.

Sentencing: Underlying Offense Plus Enhancement

Guidelines Section 2S1.1 governs money laundering sentences, starting with the offense level for the underlying SUA and adding enhancements. If underlying offense was fraud with $500,000 loss (level 18), money laundering starts at level 18. Then add enhancements: sophisticated laundering adds 2 levels, involvement of financial institutions adds levels based on degree of involvement, conducting transactions to conceal adds 2 levels.

This creates enormous sentences for conduct already captured by underlying offense. A fraudster sentenced at level 18 for fraud faces level 22+ for money laundering charges based on the same conduct. That’s 41-51 months instead of 27-33 months—substantial increase for conduct that was already being sentenced as fraud. The enhancement-stacking reflects congressional determination that laundering money is distinct aggravating conduct warranting additional punishment beyond the predicate crime.

But that policy judgment is questionable. Most criminals use their illegal proceeds somehow—that’s the point of committing crimes for financial gain. Treating routine financial transactions with proceeds as separate aggravated offenses manufactures additional crimes from inherent aspects of the underlying conduct. It’s like charging someone with driving while committing robbery because they drove to and from the crime scene—conduct that’s inherent in the offense becomes separate charge.

The Merger Problem Courts Ignore

Many money laundering convictions involve conduct that merged with the underlying offense. A healthcare fraud defendant who deposited fraudulent Medicare reimbursements didn’t commit separate crime by depositing the checks—depositing reimbursements was the consummation of the fraud scheme. Charging money laundering based on those deposits punishes the same conduct twice.

Courts generally reject merger arguments, holding that money laundering has distinct elements from underlying offenses and therefore doesn’t merge even when based on identical conduct. That formalistic analysis ignores functional reality: the transactions were part of the criminal scheme, not separate subsequent conduct. Allowing separate money laundering charges for transactions inherent in the underlying offense violates double jeopardy principles even if elements differ.

When Cash Becomes Contraband

Section 1956(a)(2) criminalizes transporting monetary instruments or funds with intent to promote unlawful activity or knowing they represent proceeds of unlawful activity. This provision targets physical transportation of criminal proceeds—driving drug proceeds across state lines, mailing fraud proceeds, carrying cash while knowing it derived from crime.

These transportation cases often involve civil asset forfeiture alongside criminal charges. Police stop vehicle, find large cash amounts, seize the money under civil forfeiture laws claiming it represents crime proceeds, then charge defendants with money laundering for transporting it. The civil forfeiture operates under lower “preponderance of evidence” standard while criminal case requires proof beyond reasonable doubt—but practically, cash seizure pressures defendants into plea agreements to recover their money.

The cash transportation prosecutions raise Fourth Amendment concerns. Police who stop vehicles for minor traffic violations then search for cash claim they’re interdicting drug proceeds. But the stops often seem pretextual—police target vehicles for searches hoping to find money to seize. The financial incentive created by asset forfeiture creates policing-for-profit that undermines constitutional protections against unreasonable searches.

Structuring: Avoiding Reporting Requirements

Banks must file Currency Transaction Reports for transactions exceeding $10,000. Structuring—breaking transactions into amounts under $10,000 to avoid reporting—violates 31 U.S.C. § 5324 and often gets charged alongside money laundering. Making five deposits of $9,000 each instead of one $45,000 deposit constitutes structuring if done to avoid CTR filings.

Structuring prosecutions don’t require proving the structured funds derived from crime—merely avoiding reporting requirements while handling lawful money is criminal. This seems Orwellian. People have no obligation to help government surveil their finances. Structuring transactions to maintain privacy shouldn’t be criminal when the underlying funds are legitimate.

Yet courts uphold structuring prosecutions even when funds weren’t criminal proceeds. The structuring itself is crime regardless of whether underlying money was lawfully obtained. That transforms bank reporting requirements from regulatory obligations into criminal liability traps. People who structure transactions for privacy reasons—distrusting banks, wanting to avoid scrutiny, or simply ignorant of reporting requirements—face federal felony prosecution.

When Seizure Precedes Any Criminal Conduct

IRS has seized funds from bank accounts under structuring theories, then offered to return the money if account holders don’t contest the seizure. Many small businesses had money seized for structuring even though funds were legitimate business receipts—the businesses just made deposits under $10,000 regularly. After public outcry, IRS changed policy to focus on illegal-source funds rather than technical structuring of legal money.

But the policy change doesn’t eliminate the underlying problem: structuring law criminalizes financial privacy. Banks are required to report large transactions; individuals who try to avoid that reporting face criminal liability. The system treats anyone seeking financial privacy as presumptive criminal while banks act as government informants reporting customer activities. That surveillance regime would horrify the framers who fought against general warrants and unreasonable searches.

Defending Money Laundering Prosecutions

Challenge whether transactions actually promoted underlying offense or concealed proceeds. Section 1956 requires specific intent to promote or conceal, not just that transactions occurred. Routine financial transactions that happened to involve proceeds but weren’t designed to further crime or hide its source don’t violate the statute. Defendants who simply used money for normal purposes lack the specific intent element.

Contest knowledge that funds represented crime proceeds. Money laundering requires knowledge property derived from SUA. Defendants who didn’t know funds were criminal proceeds—who believed they were legitimate payments, who didn’t inquire about source, who received funds in apparently normal business transactions—lack the knowledge element. Willful blindness can substitute for actual knowledge, but courts must find deliberate avoidance of knowledge rather than mere failure to investigate.

Argue merger between underlying offense and money laundering. When transactions were inherent in the predicate crime rather than subsequent separate conduct, charging money laundering punishes the same conduct twice. While courts often reject merger arguments, the claim resonates with judges who recognize the injustice of treating single course of conduct as multiple crimes.

Dispute sentencing enhancements by showing laundering wasn’t sophisticated, didn’t involve financial institutions in meaningful way, or didn’t include concealment beyond what underlying offense necessarily involved. Money laundering sentences often exceed underlying offense sentences dramatically; preventing unjustified enhancements keeps sentences proportionate to culpability.

Present evidence of legitimate source for funds. Section 1957 prosecutions and structuring cases sometimes involve money that wasn’t criminal proceeds. Demonstrating legitimate business receipts, lawful income sources, or other non-criminal origins defeats knowledge element and undermines entire prosecution. In civil forfeiture cases accompanying criminal charges, proving legitimate source may result in money’s return and dismissal of charges.

If you’re under investigation for money laundering or facing charges under Sections 1956 or 1957, contact Spodek Law Group immediately. Money laundering investigations involve extensive financial records analysis, bank account tracing, and coordination with underlying offense investigations. By the time money laundering charges are filed, prosecutors have mapped defendants’ financial activities over years. Early representation allows us to present evidence negating knowledge that funds were criminal proceeds, demonstrate that transactions didn’t have promotional or concealment intent, and argue that conduct merged with underlying offense rather than constituting separate crime. We handle money laundering cases from simple spend-down of proceeds to sophisticated international financial transactions. These cases require expertise in criminal law, financial systems, and banking regulations. We’re available 24/7.