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Money Laundering and Federal Sentencing Guidelines

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Money laundering is a big deal here in the Lone Star State, at least for federal prosecutors.  In fact, Texas looks to be the number one state in the country for federal money laundering prosecutions. 

Texas is Number One for Federal Money Laundering Cases

According to the United States Sentencing Commission (USSC), in fiscal year 2017, two federal districts in Texas made the top five in the country for filings based upon money laundering offenses.    They were the Southern District of Texas (number 1) and the Western District of Texas (number 3).

What is Money Laundering According to Federal Prosecutors?

From the perspective of the United States Attorney General’s Office, according to their Criminal Resource Manual, “money laundering” can involve any one of three kinds of conduct:

  • domestic money laundering transactions;
  • international money laundering transactions; or
  • undercover “sting” money laundering transactions.

When someone is charged on federal money laundering charges, the federal prosecutor will have evidence from investigators that he or she believes is sufficient to support charges that the accused (a) tried to process a financial transaction (it does not have to be completed, just attempted), while (b) knowing the funds have been generated in some kind of illegal activity.

To win his case, the federal prosecutor now must prove two things.

First, the AUSA (Assistant United States Attorney) must prove beyond a reasonable doubt the defendant knew that the money was generated via criminal (felonious) acts as defined under federal, state, or foreign law.  However, the prosecutor does not have to prove that the defendant had any specific knowledge of that underlying criminal business operation.

Second, the federal case must also include proof the accused initiated or concluded, or participated in initiating or concluding, a financial transaction (i.e., purchase, sale, loan, pledge, gift, transfer, delivery, other disposition, and with respect to a financial institution, a deposit, withdrawal, transfer between accounts, loan, exchange of currency, extension of credit, purchase or sale safe-deposit box, or any other payment, transfer or delivery by, through or to a financial institution).

The “financial transaction” here is a transaction which (a) affects interstate or foreign commerce and (b) involves one of the following:

(1) the movement of funds by wire or by other means; or

(2) the use of a monetary instrument; or

(3) the transfer of title to real property, a vehicle, a vessel or an aircraft; or

(4) the use of a financial institution which is engaged in, or the activities of which affect, interstate or foreign commerce.

Now, for the criminal defense perspective.

Each defendant must understand going into the criminal defense of his case exactly how the money laundering charges are developed against him.  The AUSA will look to the evidence in the case, and file as many different counts of violating federal money laundering laws as he can find.

This becomes extremely important, not only in negotiating any plea deal (these cases are rarely tried) but also in sentencing.

Specifically, the AUSA is given the following “PRACTICE TIP” in the Manual (emphasis added):

The legislative history indicates, and several cases have held, that each separate financial transaction should be charged separately in an individual count. For example, if an individual earns $100,000 from offense. If he then withdraws $50,000, he commits a second offense. If he then purchases a car with the withdrawn $50,000, he commits a third offense. Each transaction should be charged in a separate count. Charging multiple financial transactions in a single count is duplicitous. See, e.g., United States v. Prescott, 42 F.3d 1165 (8th Cir. 1994); United States v. Conley, 826 F. Supp. 1536 (W.D. Pa. 1993).

See how fast the money laundering charges can snowball, and how serious these charges can be?

Who’s Getting Convicted on Federal Money Laundering Charges

From the USSC, we also know that most of those sentenced on federal money laundering charges have the following characteristics:

  • They are likely to be men. In fact, the overwhelming majority of money laundering prosecutions are male defendants (76.1%).
  • Most are Hispanic or White. Three-fourths of all those sentenced on money laundering charges are either Hispanic (39.9%) or White (35.6%).
  • They’re not kids. The average age of someone sentenced for money laundering is 42.
  • They probably don’t have any prior criminal history. Only 29% of those sentenced for money laundering have any past criminal record.

That last fact – the defendant’s past criminal history – is very important in federal cases, because it is used to calculate the suggested sentence under the United States Sentencing Guidelines.  (We’ll discuss how this works in more detail below.)

It’s also important because it points out that most money laundering defendants have never been arrested before, much less on a federal felony charge. These are often established businessmen whose family and friends are shocked to learn that the defendant is facing money laundering charges.

Money Laundering Crimes under Federal Law

The crime of “Money Laundering” is not just one offense that can be alleged against an individual by the federal government.  Congress has created all sorts of charges that the federal prosecutors working at the Office of the United States Attorney General’s office can use against defendants they suspect are involve in laundering money.

To date, there are over a dozen federal crimes defined in the United States Code that come within money laundering parameters and can result in sentencing based upon money laundering charges. 

Using the Appendix A of the United States Sentencing Manual, there are a variety of different federal crimes outlawing money laundering activities.  The federal criminal statutes related to money laundering are:

  1. 18 U.S.C. § 1006 – Federal credit institution entries, reports and transactions
  2. 18 U.S.C. § 1007 – Federal Deposit Insurance Corporation transactions
  3. 18 U.S.C.  1956 – Laundering of monetary instruments
  4. 18 U.S.C.   1957 – Engaging in monetary transactions in property derived from specified unlawful activity
  5. 18 U.S.C.   1960 – Prohibition of unlicensed money transmitting businesses (but only with respect to unlicensed money transmitting businesses as defined in 18 U.S.C. § 1960(b)(1)(A),(B), or(C)).
  6. 21 U.S.C. 854 – Investment of illicit drug profits
  7. 26 U.S.C. § 7206(1),(2),(3),(4),(5)Fraud and false statements
  8. 31 U.S.C. § 5313 – Reports on domestic coins and currency transactions
  9. 31 U.S.C. § 5314 – Records and reports on foreign financial agency transactions
  10. 31 U.S.C. § 5316 – Reports on exporting and importing monetary instruments
  11. 31 U.S.C. § 5318 – Compliance, exemptions, and summons authority
  12. 31 U.S.C. § 5318A(b) – Special measures for jurisdictions, financial institutions, international transactions, or types of accounts of primary money laundering concern
  13. 31 U.S.C. § 5322 — Criminal penalties
  14. 31 U.S.C. § 5324 – Structuring transactions to evade reporting requirement prohibited
  15. 31 U.S.C. § 5326 – Records of certain domestic transactions
  16. 31 U.S.C. § 5331 – Reports relating to coins and currency received in nonfinancial trade or business
  17. 31 U.S.C. § 5332 – Bulk cash smuggling into or out of the United States.

Money Laundering Often Coupled With Other Felony Charges

If the federal prosecutor proceeds with a prosecution under any one or more of the above crimes, then the defendant, once convicted, will face sentencing corresponding to one of two Sentencing Guidelines:  USSG 2S1.1 or USSG 2S1.3.

In sentencing, these charges will join together with any other charges that are brought against the defendant.  It’s more likely than not that anyone facing money laundering charges will be facing other felony charges. These are called the “underlying offenses,” and boil down to the illegal business operations that generated the money that needed to be laundered in order to be used in the marketplace.

According to the Sentencing Commission, most money laundering offenses are sentenced based upon an underlying offense that was connected to the laundering of the funds.  In 2017, for example, 68.7% of money laundering convictions were coupled with the following:

  • Drug Trafficking (61.0%) which added sentencing under USSG 2D1.1; and
  • Theft, Property Destruction, and Fraud (31.0%) with sentencing under  USSG 2B1.1.

For more on how the sentencing guidelines work with Drug Trafficking charges, read our earlier discussions in:

  1. Heroin Trafficking in Texas and Federal Sentencing Guidelines;
  2. Methamphetamine Trafficking and Federal Sentencing;
  3. Federal Sentencing Guidelines: Conspiracy to Distribute Controlled Substance Cases.

Sentencing Manual and Money Laundering

As for tallying a sentence that corresponds with violations of the various money laundering crimes (see the list of U.S.C.(United States Code) statutes above), Part S of the 2016 Federal Sentencing Guidelines Manual is entitled “Money Laundering And Monetary Transaction Reporting,” and provides the sentencing guidelines specific to money laundering charges.

Money Laundering Guidelines

Almost all the money laundering crimes listed above are covered by USSG 2S1.3; however, several are covered by USSG 2S1.1; and a few are covered by both these guidelines.  Specifically:

USSG 2S1.1 applies to:

USSG 2S1.3 applies to:

Both apply to:

  • 18 U.S.C.   1960 – Prohibition of unlicensed money transmitting businesses (but only with respect to unlicensed money transmitting businesses as defined in 18 U.S.C. § 1960(b)(1)(A),(B), or(C)).

What Do the Sentencing Guidelines Provide in Money Laundering Sentencing?

As for these specific sentencing guidelines, they may be used by the federal judge in determining what punishment the accused should receive for violating the money laundering laws.

For details on how the sentencing process works, including examples of the Sentencing Table calculations of “offense level” and “criminal history,” see our earlier discussion that goes through the process.

The Sentencing Guidelines for Money Laundering: USSG 2S1.1 and USSG 2S1.3

USSG 2S1.1.      Laundering of Monetary Instruments; Engaging in Monetary Transactions in Property Derived from Unlawful Activity

The Guideline Provides:

(a)       Base Offense Level:

(1)       The offense level for the underlying offense from which the laundered funds were derived, if (A) the defendant committed the underlying offense (or would be accountable for the underlying offense under subsection (a)(1)(A) of §1B1.3 (Relevant Conduct)); and (B) the offense level for that offense can be determined; or

(2)       8 plus the number of offense levels from the table in §2B1.1 (Theft, Property Destruction, and Fraud) corresponding to the value of the laundered funds, otherwise.

(b)      Specific Offense Characteristics

(1)       If (A) subsection (a)(2) applies; and (B) the defendant knew or believed that any of the laundered funds were the proceeds of, or were intended to promote (i) an offense involving the manufacture, importation, or distribution of a controlled substance or a listed chemical; (ii) a crime of violence; or (iii) an offense involving firearms, explosives, national security, or the sexual exploitation of a minor, increase by 6 levels.

(2)       (Apply the Greatest):

(A)       If the defendant was convicted under 18 U.S.C. § 1957, increase by 1 level.

(B)       If the defendant was convicted under 18 U.S.C. § 1956, increase by 2 levels.

(C)       If (i) subsection (a)(2) applies; and (ii) the defendant was in the business of laundering funds, increase by 4 levels.

(3)       If (A) subsection (b)(2)(B) applies; and (B) the offense involved sophisticated laundering, increase by 2levels.


From the Guideline Commentary, regarding money laundering crimes:

“Criminally derived funds” means any funds derived, or represented by a law enforcement officer, or by another person at the direction or approval of an authorized Federal official, to be derived from conduct constituting a criminal offense.

“Laundered funds” means the property, funds, or monetary instrument involved in the transaction, financial transaction, monetary transaction, transportation, transfer, or transmission in violation of 18 U.S.C. § 1956 or § 1957. 

“Laundering funds” means making a transaction, financial transaction, monetary transaction, or transmission, or transporting or transferring property, funds, or a monetary instrument in violation of 18 U.S.C. § 1956 or § 1957.

USSG 2S1.3.      Structuring Transactions to Evade Reporting Requirements; Failure to Report Cash or Monetary Transactions; Failure to File Currency and Monetary Instrument Report; Knowingly Filing False Reports; Bulk Cash Smuggling; Establishing or Maintaining Prohibited Accounts

The Guideline Provides:

(a)       Base Offense Level: 

(1)       8, if the defendant was convicted under 31 U.S.C. § 5318 or § 5318A; or

(2)       6 plus the number of offense levels from the table in §2B1.1 (Theft, Property Destruction, and Fraud) corresponding to the value of the funds, if subsection (a)(1) does not apply.

(b)      Specific Offense Characteristics

(1)       If (A) the defendant knew or believed that the funds were proceeds of unlawful activity, or were intended to promote unlawful activity; or (B) the offense involved bulk cash smuggling, increase by 2 levels.

(2)       If the defendant (A) was convicted of an offense under subchapter II of chapter 53 of title 31, United States Code; and (B) committed the offense as part of a pattern of unlawful activity involving more than $100,000 in a 12-month period, increase by 2 levels.

(3)       If (A) subsection (a)(2) applies and subsections (b)(1) and (b)(2) do not apply; (B) the defendant did not act with reckless disregard of the source of the funds; (C) the funds were the proceeds of lawful activity; and (D) the funds were to be used for a lawful purpose, decrease the offense level to level 6.

(c)       Cross Reference

(1)       If the offense was committed for the purposes of violating the Internal Revenue laws, apply the most appropriate guideline from Chapter Two, Part T (Offenses Involving Taxation) if the resulting offense level is greater than that determined above.


From the Guideline Commentary, regarding money laundering crimes:

  1. Definition of “Value of the Funds”.—For purposes of this guideline, “value of the funds” means the amount of the funds involved in the structuring or reporting conduct.  The relevant statutes require monetary reporting without regard to whether the funds were lawfully or unlawfully obtained.
  2. Bulk Cash Smuggling.—For purposes of subsection (b)(1)(B), “bulk cash smuggling” means (A) knowingly concealing, with the intent to evade a currency reporting requirement under 31 U.S.C. § 5316, more than $10,000 in currency or other monetary instruments; and (B) transporting or transferring (or attempting to transport or transfer) such currency or monetary instruments into or outside of the United States.  “United States” has the meaning given that term in Application Note 1 of the Commentary to §2B5.1 (Offenses Involving Counterfeit Bearer Obligations of the United States). 
  3. Enhancement for Pattern of Unlawful Activity.—For purposes of subsection (b)(2), “pattern of unlawful activity” means at least two separate occasions of unlawful activity involving a total amount of more than $100,000 in a 12-month period, without regard to whether any such occasion occurred during the course of the offense or resulted in a conviction for the conduct that occurred on that occasion.

Background: Some of the offenses covered by this guideline relate to records and reports of certain transactions involving currency and monetary instruments.  These reports include Currency Transaction Reports, Currency and Monetary Instrument Reports, Reports of Foreign Bank and Financial Accounts, and Reports of Cash Payments Over $10,000 Received in a Trade or Business.

This guideline also covers offenses under 31 U.S.C. §§ 5318 and 5318A, pertaining to records, reporting and identification requirements, prohibited accounts involving certain foreign jurisdictions, foreign institutions, and foreign banks, and other types of transactions and types of accounts.

Money Laundering Conviction Usually Means Prison Time

Anyone facing money laundering charges needs to be ready for imprisonment.  Any allegation of money laundering is a serious felony, even before you consider the “underlying offenses.”

The current Attorney General has instructed his federal prosecutors to be aggressive in charging and sentencing.  AG Sessions’ position is that “…it is a core principle that prosecutors should charge and pursue the most serious, readily provable offense.”  For full details, read his May 2017 Memorandum entitled “Department Charging and Sentencing Policy” as well as our discussion in “New 2017 Federal Drug Policy From Attorney General Jeff Sessions.”

Once the money laundering charge comes alongside other charges, then the defendant can expect even harsher sentencing recommendations from the Sentencing Guidelines.  Given the instructions given to prosecutors by Attorney General Sessions, Texas defendants facing federal money laundering charges should expect to face additional charges as well.

Things remain serious even if there is no additional charge besides the money laundering.  Even if the accused is charged with only a single criminal violation of laundering funds, he faces a prison sentence that may be increased by sentencing guideline “enhancements.”

For instance, in USSG 2S1.1, the Guideline advises that there can be the following enhancement for the business of laundering funds:

  1. Enhancement for Business of Laundering Funds.—

(A) In General.—The court shall consider the totality of the circumstances to determine whether a defendant who did not commit the underlying offense was in the business of laundering funds, for purposes of subsection (b)(2)(C).

(B) Factors to Consider.—The following is a non-exhaustive list of factors that may indicate the defendant was in the business of laundering funds for purposes of subsection (b)(2)(C):

(i) The defendant regularly engaged in laundering funds.

(ii) The defendant engaged in laundering funds during an extended period of time.

 (iii) The defendant engaged in laundering funds from multiple sources.

(iv) The defendant generated a substantial amount of revenue in return for laundering funds.

(v) At the time the defendant committed the instant offense, the defendant had one or more prior convictions for an offense under 18 U.S.C. § 1956 or § 1957, or under 31 U.S.C. § 5313, § 5314, § 5316, § 5324 or § 5326, or any similar offense under state law, or an attempt or conspiracy to commit any such federal or state offense. A conviction taken into account under subsection (b)(2)(C) is not excluded from consideration of whether that conviction receives criminal history points pursuant to Chapter Four, Part A (Criminal History).

(vi) During the course of an undercover government investigation, the defendant made statements that the defendant engaged in any of the conduct described in subdivisions (i) through (iv).

 

Defending Money Laundering in Federal Sentencing Hearings

What does this mean for those facing a sentencing hearing after being charged with money laundering?  The defense here looks to several things.  The defense fight may include:

Counts Facing the Accused.  The defense lawyer will evaluate not only the number of counts facing the accused, but he will investigate each and every count facing the accused.

The prosecutor has been instructed to find each financial transaction as a separate count of violating federal law in the official prosecutorial manual.  That directive is in addition to the May 2017 Sessions Memorandum instituting an aggressive sentencing policy.  So, are some counts superfluous or otherwise too weak to stand?

Evidence Supporting Each Count. For each count, there must a consideration of the underlying evidence.  Is it sufficient?  Does it meet the government’s burden of proof?  Was it obtained legally?  There may be a need for a Motion to Suppress Hearing.

Legal Bases for the Charges. Another defense strategy will be to look into the legal arguments supporting the prosecution’s case.  Is this really a money laundering scenario?  Have the legal elements of the crime been met? Is this true for each count?  Briefing of the law may be necessary.  A motion for partial summary judgment may be required if negotiations with the AUSA fail.

Sentencing Recommendations.  Finally, there will be a detailed analysis of the sentencing recommendations that the federal government is submitting to the court.  The defense must not only counter the assertions made by the prosecution, but prepare its own sentencing proposal as well.  See, e.g., “Relevant Conduct In The Federal Sentencing Guidelines: Acquittals And Uncharged Conduct.”

Importance of Criminal Defense

It is vital that anyone worried they may be facing federal money laundering charges, as well as those who have been charged, obtain experienced criminal defense counsel to help them in defending against the allegations.

These charges will not be tried in Texas, they will be negotiated and the real battleground will be the courtroom during the sentencing hearing.  The sooner a defense strategy can begin to work, the better the potential results.

To learn more about federal money laundering charges, see:

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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 .”

 

 


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