5 Things to Know About Money Laundering in Texas

Major money laundering arrests make the news here in North Texas all the time, and it’s a crime that seems to be a favorite plot device in movies and TV shows.

But what exactly is money laundering – and more to the point, if you think that you are being investigated for money laundering, then what are some key things you should know about it?

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1.  Money Laundering is defined by Statute

Money laundering violates both state and federal law.  In federal investigations, the Money Laundering Control Act (18 U.S.C. §§ 1956–1957) defines the crime and its prosecution.  In the State of Texas, Chapter 34 of the Texas Penal Code controls as part of the legislation that establishes state crimes against property.

Texas’ Definition of Money Laundering

In Texas Penal Code Sec. 34.02, Money Laundering is defined as a person who “knowingly” does one of the following:

(1)  acquires or maintains an interest in, conceals, possesses, transfers, or transports the proceeds of criminal activity;

(2)  conducts, supervises, or facilitates a transaction involving the proceeds of criminal activity;

(3)  invests, expends, or receives, or offers to invest, expend, or receive, the proceeds of criminal activity or funds that the person believes are the proceeds of criminal activity; or

(4)  finances or invests or intends to finance or invest funds that the person believes are intended to further the commission of criminal activity.

The statute also states that “knowledge of the specific nature of the criminal activity giving rise to the proceeds is not required to establish a culpable mental state under this section,” and that “… a person is presumed to believe that funds are the proceeds of or are intended to further the commission of criminal activity if a peace officer or a person acting at the direction of a peace officer represents to the person that the funds are proceeds of or are intended to further the commission of criminal activity, as applicable, regardless of whether the peace officer or person acting at the peace officer’s direction discloses the person’s status as a peace officer or that the person is acting at the direction of a peace officer.”

Federal Money Laundering Categories

Sounds complicated, doesn’t it?  Well, it is.  The federal government tries to deal with that complexity by breaking it down into three different kinds of crime:

1. domestic money laundering (Section 1956(a)(1));
2. international money laundering (Section 1956(a)(2)); and
3. undercover money laundering transactions (Section 1956(a)(3)).

In the federal system, all indictments and criminal complaints of money laundering have to be approved by the Asset Forfeiture and Money Laundering section of the Office of U.S. Attorney General.

There are also indictment forms (templates) prepared in advance for the federal prosecutors to use in each of these three kinds of money laundering categories.  They can be found online.

2.  Money Laundering is tied to Civil Asset Forfeiture

From the prosecution’s perspective, the crime of money laundering harkens back to the early 1980s and the passage of the Comprehensive Crime Control Act of 1984.  It allowed the federal government to use the seizure of assets (forfeiture) as a means of fighting the War on Drugs.

Money laundering involves law enforcement tracking down “illicit financing” of illegal operations.  First, the money laundering is investigated for charges under the money laundering laws, and then the government uses its forfeiture powers to seize assets.

For details on the government’s perspective here, read “Overview of Asset Forfeiture and Money Laundering Program,” written by Jaikumar Ramaswamy, Chief of the USAG’s Asset Forfeiture and Money Laundering Section, as published in the September 2013 issue of the United States Attorneys’ Bulletin.

3.  What is Money Laundering? It Depends….

So, what is money laundering?  In reality, what money laundering involves depends upon the situation.

Sometimes It’s Not Doing Something

Recently, a McKinney newsstand operator pled guilty to money laundering charges after he was found to have cashed over $16 Million in U.S. Treasury checks without getting the proper identification.

The problem here wasn’t that he was laundering his own “illicit financing.”  The problem in his case was that the government found that he wasn’t doing enough to prevent it.

Since he was cashing checks, he was supposed to have “an effective anti-money laundering program” in place, to make sure that he wasn’t helping anyone cash bad checks or “illicitly finance” something.

No one suggested that the checks weren’t good.  They were checks from the United States Treasury.  The newsstand guy was arrested and pled guilty after the agents discovered he didn’t have a fancy system of verification, records retention, etc. in place.

So sometimes, the crime of money laundering means not doing enough to make sure it’s not happening.

Usually, It’s Cleaning Up Cash Revenues from Criminal Activities

Most money laundering that is “illicit financing” involves criminal operations with large amounts of cash revenue seeking avenues to convert that cash into something that can be used to buy and sell things without getting anyone caught for the crimes that make the profits. (Or having to pay taxes on it.)

Drug cartels, illegal gambling operations, etc., all have empires built on cash that has been turned into usable assets (i.e., it’s been “laundered.”)  It often crosses state or international lines.  As the United Nations Office of Drugs and Crime explains money is usually “laundered” or “cleaned” by:

1. moving the cash from its criminal origins (placement);
2. covering up the trail from any investigation (layering); and then
3. making the assets available to the criminal who generated the cash for use without its origins being discernable (“integration”).

4.  The Players in Money Laundering Systems

Sure, there are huge global banks that get caught in money laundering operations.  In his U.S.A.G. article, for instance, the section chief mentions the charges and convictions made against Bancomer and Banco Serfin in “Operation Casablanca” back in 1998.

In recent years, there have also been successful money laundering prosecutions against big banks like Wachovia ($16Million); Deutsche Bank ($10Billion); and HSBC ($1.9Billion).

The tragedy that many criminal defense lawyers see here in Texas are the mom-and-pop operations that get targeted by law enforcement and end up with destroyed lives in  strange and bizarre money laundering and forfeiture stings.  We’ve discussed this before.

And earlier this year, the U.S. Treasury’s Inspector General for Tax Administration (TIGTA) issued its opinion on the current state of federal enforcement of financial crimes like money laundering and forfeiture.

According to TIGTA, its audit of the IRS’ Criminal Investigation unit revealed that the IRS was seizing lots of property under money laundering rules’ forfeiture provisions, mostly in structuring cases (like we warned about).

“[The] IRS should ensure that protections are in place so that people have rights and that innocent people do not feel compelled to settle a civil forfeiture matter under the pressure of possible criminal prosecution,” said J. Russell George, the Treasury Inspector General for Tax Administration.

5.  Defenses against Money Laundering Charges

Anyone who thinks that they be the target of an investigation for money laundering is wise to seek out the support of a criminal defense attorney, given the state of today’s investigatory environment and the very real history of overreaching and abuse of these laws.

There are things that can be done.  Defenses exist within the statutes themselves.  For instance, under the Texas Money Laundering laws, two defenses are specifically defined (Texas Penal Code 34.02 (c),(d)):

1. It is a defense to prosecution under this section that the person acted with intent to facilitate the lawful seizure, forfeiture, or disposition of funds or other legitimate law enforcement purpose pursuant to the laws of this state or the United States.
2. It is a defense to prosecution under this section that the transaction was necessary to preserve a person’s right to representation as guaranteed by the Sixth Amendment of the United States Constitution and by Article 1, Section 10, of the Texas Constitution or that the funds were received as bona fide legal fees by a licensed attorney and at the time of their receipt, the attorney did not have actual knowledge that the funds were derived from criminal activity.

Additionally, the actions and activities undertaken by the government have to be very carefully reviewed.  A key defense argument may be the investigatory violations of due process and search and seizure laws that form the basis of a motion to suppress which may end up reducing the charges or getting them dismissed.

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For more information, check out our web resources, read Michael Lowe’s Case Results, and read his in-depth article,” Pre-Arrest Criminal Investigations” as well as:

• Money Laundering and Texas Drug Cartels
• North Texas Banks, Drug Cartels, and Money Laundering in Dallas
• Money Laundering Arrests Very Common & Sometimes in Surprising Situations.