Money Laundering (Federal Court)

Money Laundering is best understood in a federal criminal prosecution as a crime in which ill-gotten gains, or dirty money (money made from a crime) is brought or introduced into the banking system through a transaction or a series of transactions. The purpose of this filtering process is to “wash” or “launder” money of its taint of criminality.

The Federal Money Laundering Control Act of 1986 was the first major focused consolidation of federal laws under one statute. Prior to that, a federal money laundering prosecution proceeding under a varied construct of criminal laws. The criminality of money laundering and its prosecution all pre-date 1986. But it was the 1986 statute that focused the laws and made money laundering prosecutions easier for the government. The Statute can be found at 18 U.S. Code § 1956 and 1957.

Money laundering is built on three key stages or elements: 1) The ‘placement stage;’ 2) The ‘layering stage;’ and 3) The ‘integration stage’. The ‘placement stage’ is when money made from a criminal activity is first moved, intentionally moved, into the banking or commerce system. Placement can occur by depositing money into a banking or financial institution, purchasing real estate or personal property (cars, jewelry, furniture: anything of value).

Stage two, ‘layering,’ is disguising the money from its source and the objective in layering is to make the money appear to be of lawful origins when it is in fact the fruit or product of a criminal activity. Passing drug money through a retail store you own is one of the most common and obvious of many methods used to ‘layer’ money.

“Integration’, the last of the three stages, is when the money is now in a financial institution or a real estate property, and is owned or controlled by the persons who sourced the money or it is paid to others for their use.

Money laundering prosecutions come in three varieties. The first is the principal variety, that is the actor is in fact charged. There are also prosecutions for conspiracy to commit money laundering. A conspiracy charge requires the government to prove that there was an agreement between two or more persons to launder money and the government can point to or prove that one of the conspirators took an affirmative step or act toward accomplishing the crime of money laundering. The third type of prosecution is for an attempt to money launder.

In 1989, most of the major Western industrialized nations formed the Financial Action Task Force of Money Laundering (FATF). The purpose and function of the task force is to pool information among and between the banking systems of the member nations to uncover, track and prosecute international movements of illicit monies. The increasing scope of government surveillance and prosecutions is moving toward the arrest of professionals such as lawyers and accountants and real estate advisors.

The U.S. Treasury Department created an interagency domestic task force involving the Drug Enforcement Administration, the FBI, the U.S. Attorney, and itself. This domestic task force is prosecuting lawyers and real estate agents in New York City and Miami, Florida when illicit monies are moved from offshore accounts to buy real estate.