Money Laundering

Under 18 U.S.C. § 1956, federal money laundering charges apply when someone conducts a financial transaction involving proceeds of unlawful activity, knowing it conceals the source, evades reporting, or promotes crime. A conviction carries up to 20 years and $500,000 in fines. Related charges under § 1957, covering transactions over $10,000, carry up to 10 years and $250,000 in fines.

What Is Federal Money Laundering Under U.S. Law?

Federal money laundering statutes criminalize moving money derived from crime through the financial system in a way that disguises its origin.

Some of the ways an individual can be held responsible for federal money laundering include conducting a domestic financial transaction, transporting funds on an international level, or structuring a transaction to avoid currency reporting requirements. Each requires proof that the funds were proceeds of a specified unlawful activity. Building a defense against these charges draws on the same financial forensics skill set used across federal criminal defense more broadly.

Cases on money laundering are document-intensive. Before bringing charges, investigators reconstruct a paper trail across multiple bank accounts, shell entities, and even multiple countries. This reconstruction process ultimately shapes the defense, as the government’s theory of the case is usually in place long before the indictment, and challenging it requires reviewing the same financial documents the prosecution relied on.

What Are the Penalties for Federal Money Laundering?

The penalties for federal money laundering, like several other offenses, differ by statute and charge. If someone is convicted under 18 U.S.C. § 1956, they could face up to 20 years in federal prison, along with the greater of the two: $500,000 or twice the amount of the transaction involved.

On a lower level are the consequences of 18 U.S.C. § 1957, where a convicted individual could face up to 10 years in federal prison, with fines up to $250,000 or twice the amount of the transaction. Due to the fact that proof of concealment intent is not required, § 1957 is often charged as a companion count to § 1956.

What calculates the sentences in federal money laundering cases? The U.S. Sentencing Guidelines § 2S1.1. Under this, a base offense level is set, then enhancements are applied based on factors such as the amount, the defendant’s role, and sophistication.

In addition to imprisonment and extensive fines, a conviction can expose the defendant to forfeiture under 18 U.S.C. § 982. In simple terms, this means the government can take away property connected to the crime through a separate court process.

Table 1: Federal Money Laundering Penalty Tiers

Source: 18 U.S.C. § 1956, 18 U.S.C. § 1957, 18 U.S.C. § 982, 18 U.S.C. § 1963, and U.S. Sentencing Guidelines § 2S1.1.

What Does the Government Have to Prove in a Money Laundering Case?

To convict an individual under 18 U.S.C. § 1956(a)(1), the government has to prove four elements: the defendant successfully, or tried to, conduct a financial transaction, the transaction involved proceeds unlawful activity, the defendant was aware the property proceeds unlawful activity, and the defendant operated to conceal or disguise the nature, location, source, ownership or control of the proceeds in order to avoid transaction reporting requirements or to promote the carrying on of unlawful activity.

Though every element carries weight at trial, the focus is often on the knowledge aspect. In detail, prosecutors do not need direct evidence that the defendant knew the exact source of the funds. Circumstantial evidence, for example, communications that show awareness of illegal activities, works just fine.

In the same breath, because knowledge and intent are subjective states that the government ultimately has to infer from, the defense has the most room to work. Defense counsel reviewing a federal money laundering indictment begins by reviewing each of the four required elements the government must prove. They’re ultimately hunting for the weakest piece, which the government cannot prove very well, as that’s the best position to take in fighting the case.

What Are the Most Common Federal Money Laundering Charges?

Most of the time, money laundering charges do not stand alone in federal indictments. They are filed as one count among several that are connected to the laundering scheme. Some common offenses are drug trafficking and different types of fraud, such as bank, securities, and healthcare fraud.

Wire fraud charges are one of the many offenses commonly filed alongside money laundering. This is because a fraud scheme that moves money through wire transfers can support counts of wire fraud and money laundering.

Structuring charges under 31 U.S.C. § 5324 may also appear in the same indictment when a defendant is accused of splitting up large cash deposits into smaller amounts to avoid the trigger of currency transaction reports. Conspiracy charges are also common because they allow the government to charge each individual involved in the laundering scheme without proving they personally conducted a specific transaction.

Because laundering charges are built on top of predicate offenses, the strength of the laundering charge is connected to the strength of the underlying case. If the government’s proof of the predicate offense is insufficient and weak, that weakness can affect the laundering count and undermine it. That is why each and every allegation in charges should be reviewed carefully and meticulously from the start.

What Are the Defenses to Federal Money Laundering Charges?

The defense in a money laundering case usually aims to attack one of the four elements the government must prove.

A lack of knowledge supports the defendant by showing they were unaware the money involved was proceeds of unlawful activity, which can be a complete defense depending on the jury's credibility assessment.

The challenge to the intent aspect focuses on whether the transaction was truly designed to conceal, evade, or promote, rather than being an everyday transaction that happened to involve tainted funds. Courts have held that spending or depositing money is not enough to show the money was being hidden, which gives the defense an advantage because they can argue there was no intent to hide it.

Tracing problems are common, as it becomes challenging for the government to prove that the specific dollars charged in a transaction were criminally derived when legal and illegal money are mixed in the same accounts.

The defense party also looks at how financial records were obtained, whether that’s through a grand jury subpoena, search warrant, or cooperation from the bank. This is because a successful suppression motion can remove the evidence the government needs, and of course, without it, they may not be able to prove the case at all.

Table 2: Elements vs. Defense Angles

Source: 18 U.S.C. § 1956(a)(1) and (c)(7).

What Happens to Assets in a Federal Money Laundering Case?

Under 18 U.S.C. § 982, if someone is found guilty, the government may confiscate property involved in or traceable to the crime through a process known as federal asset forfeiture. In some cases, the government will even start a separate court case specifically to take the property, hoping it will conclude faster than the criminal case.

Outside of money, what else can the government take? Bank accounts, houses, clothes, cars, and even parts of a business, if the government can prove a connection between any assets and the crime. There’s more; if the illegitimate money derived from the crime has already been spent, the government can take other property of the same value in place of it. That’s right, the government can use a process called substitution of assets in criminal forfeiture that allows the government to seize clean untainted personal property when the original ill-gotten gains can’t be found.

Pretrial restraint, where the government can seek a restraining order to freeze accounts or property to preserve them as evidence, can sometimes occur in larger cases. The defense can also challenge a pretrial restraining order through a Monsanto hearing. This ultimately tests whether the government had proper justification to freeze the property.

The government can also file a case, completely separate from the crime, to seize the property. This is known as civil forfeiture, and because of its different rules, missing the response deadline can lead to a loss of property, even if the case is won.

Frequently Asked Questions About Federal Money Laundering?

What is federal money laundering? Federal money laundering is the act of conducting a financial transaction with funds known to be proceeds of a specified unlawful activity, with intent to conceal their origin, evade reporting, or promote further criminal activity. It is prosecuted under 18 U.S.C. § 1956 and § 1957.

What is the sentence for federal money laundering? A conviction under 18 U.S.C. § 1956 carries a maximum of 20 years in federal prison. A conviction under § 1957 carries a maximum of 10 years. Sentences are determined by the federal sentencing guidelines and the dollar amount involved.

What is the minimum sentence for money laundering? There is no mandatory minimum sentence for money laundering under § 1956 or § 1957. The federal sentencing guidelines produce a recommended range based on the amount involved and criminal history. First-time offenders with smaller amounts may face sentences well below the statutory maximum.

What are the 4 stages of money laundering? The commonly cited stages are placement, layering, integration, and in some frameworks, concealment. These stages describe how criminal funds enter and move through the financial system. They are used by prosecutors to explain the alleged conduct but are not statutory elements of the federal charges.

Can you be charged with money laundering without knowing it was illegal? Knowledge is a required element of § 1956. The government must prove the defendant knew the funds were proceeds of criminal activity. Lack of knowledge is a recognized defense, though prosecutors often rely on circumstantial evidence to establish it.

What assets can the government seize in a money laundering case? The government may seek forfeiture of any property involved in or traceable to the money laundering offense under 18 U.S.C. § 982. This can include bank accounts, real estate, vehicles, and cryptocurrency. Substitute assets may also be seized if the direct proceeds cannot be located.