When the FBI Comes Calling…®
MONEY LAUNDERING (Continued)
Case Law Interpreting Section 1956
United States v. Sayakhom, 186 F.3d 928 (9th Cir. 1999).
Section 1956 requires the government to prove that the defendant conducted financial transactions involving the proceeds of the illegal activity charged in the indictment, knowing that the money represented the proceeds of the illegal activity, with the intent to promote the fraud. Sayahom at 942-43. The defendant here claimed that the government failed to prove that the money that was laundered resulted from "prior, separate criminal activity," but the court disagreed. Id. at 943. To prove the requisite intent, the government "must show that the defendant knew the property involved in the transaction represented the proceeds of some form of unlawful activity. Id.
United States v. Kramer, 73 F.3d 1067 (11th Cir. 1996).
In Kramer, one of the defendants was convicted of violating 18 U.S.C. § 1956(a)(2), which prohibits transporting illegally gained funds from a place in the United States to or through a place outside the United States. Kramer at 1072. The facts of the case, as most money laundering cases are, are quite convoluted, but in essence, one of the other defendants received large amounts of cash from the sale of marijuana and the primary defendant helped the smuggler transfer this money through various avenues into Liechtenstein. Id. at 1070. From there, it was further transferred into other countries in an attempt to disguise the origin of the money. Id. At some point the smuggler decided to convert his assets to cash and $9.5 million was sent from California to Switzerland and then to Luxembourg. Id. The primary defendant authorized the transfer of the funds from Switzerland to Luxembourg, but not the transfer from California to Switzerland. Id. This defendant, as noted was convicted of money laundering, based primarily on the fact that the jury found that he "intended to further the laundering scheme by causing the transfer of $9.5 million from Switzerland to Luxembourg. The jury, however, also found that [the defendant] did not cause the transfer of this same money from the United States to Switzerland." Id. at 1072. On appeal, the defendant argued that section 1956(a)(2)(B)(i) does not criminalize transfers which are not to or from the United States. Id. The statute does not make money laundering a continuing offense; instead, each transaction or transfer of money constitutes a separate offense, and as such, since the jury found that the defendant "was involved in only one transaction, and the transaction was totally outside of this country," the defendant's conviction could not be upheld on that basis. Id. at 1072-73.
This may be one of the final words on prosecuting section 1956(a)(2), but Tarkoff, below, offers a whole new way to look at international money laundering and it raises questions of whether more prosecutions will occur under subsection (a)(1).
United States v. Tarkoff, 242 F.3d 991 (11th Cir. 2001).
One particular case that highlights the reach of the United States and its ability to regulate foreign commerce is United States v. Tarkoff, 242 F.3d 991 (11th Cir. 2001). Tarkoff deals with "whether a defendant may be convicted for conspiring to violate and violating the money laundering statute, 18 U.S.C. § 1956(h) and (a)(1)(B)(i), where the indictment charged and the government proved that the two monetary transactions at issue occurred wholly outside the United States." Tarkoff at 991-92. The defendant was convicted for his participation in two transactions in contravention of the money laundering statute: 1) the wife transfer of $400,000 from Curacao to a bank account in Israel, and 2) the transfer of $50,000 of those funds to the defendant's Israeli bank account. Id. at 993. The defendant challenged the conviction on the grounds that the transactions in which he took part occurred wholly outside the United States, and therefore "did not affect interstate or foreign commerce, which is a necessary component of an element of the money laundering statute under which he was convicted." Id.
The discussion hinged upon the statutory definition of "financial transaction" which is defined at 18 U.S.C. § 1956(c)(4) as "(A) a transaction which in any way or degree affects interstate or foreign commerce (i) involving the movement of funds by wire or other means or (ii) involving one or more monetary instruments …, or (B) a transaction involving the use of a financial institution which is engaged in, or the activities or which affect, interstate or foreign commerce in any way or degree." Tarkoff at 994 (quoting 18 U.S.C. § 1956(c)(4). Relying on an earlier case, United States v. Kramer, 73 F.3d 1067 (11th Cir. 1996), in which the court reversed a money laundering conviction because that defendant participated only in a transfer of money from Switzerland to Luxembourg and not a transfer of money to or from the United States, the defendant in Tarkoff argued that since the two transactions occurred wholly outside the United State, they were not financial transaction under section 1956(c)(4). Id. The court, however, distinguished the two cases, noting that the Kramer defendant was charged with money laundering under 18 U.S.C. § 1956(a)(2)(B)(i), which specifically requires a transfer of funds to or from the United States, while the Tarkoff defendant was convicted of violating 18 U.S.C. § 1956(a)(1)(B)(i), which provides that the defendant can be convicted so long as he was involved in a "financial transaction." Id.
The court, furthermore, notes that there are two ways to establish that a defendant conducted a financial transaction. The government must prove either "(1) that [the defendant] participated in a transaction that in any way or degree affected interstate or foreign commerce and involved the transfer of funds or the use of one or more monetary instruments, or (2) that [the defendant] participated in a transaction that involved the use of a financial institution that was engaged in, or the activities of which affected, interstate or foreign commerce in any way or degree." Id. (emphasis in original). The government argued, and the court agreed that this was proven in two separate ways: the first, that the defendant traveled from the United States to Israel to conduct business with a bank there which required telephone communication between Israel and Miami, and between Miami and Curacao, to arrange fro the funds transfer from Curacao to Israel, since that affected foreign commerce "in any way or degree"; and second, alternatively, the transactions involved the use of an Israeli bank, which was a "financial institution that was engaged in, or the activities of which affected, foreign commerce in any way or degree" by virtue of it communicating with parties in the United States and providing banking services to United States citizens. Id. at 995.
The decision is worded loosely enough to allow the United States to expand its jurisdiction to a very wide set of individuals and acts.
Other Considerations
Both distinct transactions and deliberate concealment must be shown to support a money laundering conviction under section 1956(a)(1)(B)(i). United States v. Esterman, 324 F.3d 565, 569 (7th Cir. 2003). Furthermore, subsection (a)(1) does not require allegations or proof that the defendant knows the precise nature of the unlawful activity that produced the money he is accused of laundering. United States v. Hill, 167 F. 3d 1055, 1066-67 (6th Cir. 1999). In other words, the defendant doesn't need to know whether the offense is a felony or a misdemeanor; all the government needs to show is that "the defendant knew the money was from some form of unlawful activity and further shows that the unlawful activity at issue was in fact a felony under state, federal or foreign law." Id. Finally, a defendant can, in some circumstances, be properly charged with violating the money laundering statute on the basis of code provisions that are not specifically enumerated in section 1956(c)(7)(D). See United States v. Lee, 937 F.2d 1388, 1397 (9th Cir. 1991) (defendant charged with money laundering based on violation of Lacey Act which is not enumerated; court approved because 18 U.S.C. § 545, which penalizes importation of merchandise illegally, is enumerated and the Lacey Act concerns the importation of fish and wildlife, which are considered merchandise).