Author: Leff, Douglas
Date published: April 1, 2012
Journal code: PFBI
As all law enforcement officers quickly learn, most crimes have monetary gain as their motive. Investigators must begin the financial component of their investigations as early as practicable. When on the side of the officer, time can serve as a valuable ally.
This article explains modern means employed by criminals to launder the profits of their crimes, techniques investigators can use to locate and seize those proceeds, and legal issues associated with these efforts. Law enforcement officers can initiate most of these techniques during an investigation's covert stage.
Simply put, money laundering entails taking criminal profits and moving them in a prohibited manner.1 Specifically, criminals or persons acting on their behalf generate proceeds in the form of money or property as a result of committing a crime designated as a specified unlawful activity (SUA).2 Criminals then move that money, often with the intent to disguise the nature, location, source, ownership, or control of the funds, which is known as "concealment" money laundering.3 Alternatively, in "promotion" money laundering, they reinvest the money in their criminal activities. Either theory suffices for a money laundering charge.4
Fortunately, most profitbased crimes are designated as SUAs. Thus, the movement of any of those SUA proceeds either to conceal them or to promote the same or a different SUA will provide the foundation for a money laundering charge. Investigators do not need to prove that the money launderer knew of the spécifie SUA from which the proceeds were generated. Rather, all that need be proven is that the person laundering the money believed it was dirty. Often, this permits investigators to prove the knowledge element entirely through circumstantial evidence by showing that the launderer received or handled the money in a way different from an innocent money transfer.5 Juries can relate well to this evidence.
In sum, the elements needed to prove a basic charge of money laundering under Title 18, Section 1956, U.S. Code are 1) SUA proceeds; 2) knowledge by the perpetrator that the profits resulted from some type of felony; and 3) a financial transaction intended to conceal the proceeds or to promote an SUA.6
Provided that subjects move the money to or from the United States to promote an SUA, investigators need not prove that the money is dirty. Even clean money sent internationally to promote an SUA will sufficiently support a charge of money laundering.7 Thus, the only elements requiring proof include l)the movement or attempted movement of funds; 2) to or from the United States; and 3) with the intent to promote an SUA.8
Under the money laundering sting provision, money launderers can be charged as long as they believe they are moving SUA proceeds, even when the profits actually consist of case funds or other government property,9 This opportunity regularly presents itself when undercover employees or confidential human sources in covert roles get introduced to money launderers. Similarly, an undercover officer or informant can represent themselves as seeking a professional money launderer. In either case, law enforcement can engage in a reverse money laundering transaction with these criminals who then can be charged with money laundering. Often, proceeding in this manner also will reveal the network of individuals and bank accounts involved in a professional money laundering network, thus leading to large-scale asset forfeiture.
The elements necessary for a charge of reverse money laundering include 1) transferor attempted transfer; 2) of funds believed to be SUA profits; and 3) with intent to conceal the proceeds or promote an SUA.10 The maximum sentence for violating Section 1 956 is 20 years imprisonment.
In addition to the money laundering violations in Section 1956, a second, oftenoverlooked money laundering charge exists in Title 18, Section 1957, U.S. Code. Also known as the money spending statute, a 10-year maximum penalty exists for moving SUA proceeds in an amount greater than $10,000 into or through a financial institution. Two important facts about the money spending statute inure to the benefit of the investigator.
First, unlike the money laundering violations in Section 1956, investigators do not need to prove any intent by subjects to promote an SUA or conceal the proceeds thereof. The simple fact of the transaction is all that is required. For this reason, law enforcement should charge Section 1957 along with Section 1956 whenever ample proof supports both. Ajudge or jury disagreeing with proof of intent to conceal or promote would have to dismiss or acquit on that count of Section 1956 but still could convict on the corresponding Section 1957 charge. Section 1957 is not a lesser-included offense of Section 1956, so a jury can convict on both charges.11
Second, the broad définition of what constitutes a financial institution goes well beyond banks and credit unions. It includes most merchants, such as jewelry stores, car and boat dealerships, casinos, travel agencies, pawnbrokers, and many others, through which a criminal ordinarily would spend criminal proceeds.'2
The elements required to charge a violation of Section 1 957 are 1 ) transfer of SUA proceeds in a transaction over $10,000; 2) involving a financial institution; and 3) knowing that the proceeds are dirty.13
Each act of money laundering must be charged as a separate offense.14 To charge money laundering as a continuing course of conduct, it must be charged as a conspiracy.15 Additionally, investigators are not required to prove that conspirators knew the precise SUA that generated the laundered proceeds but only that two or more criminals intended to launder dirty money.16
Venue for a money laundering conspiracy includes any district where the agreement to launder money took place or where any act occurred in furtherance of the conspiracy.17 However, unlike most conspiracies, no overt act is necessary to charge a conspiracy to commit money laundering.18
Federal asset forfeiture laws permit the government to take title to money and property belonging to criminals based on proof often developed in conjunction with an overall investigation. Unfortunately, asset forfeiture often is neglected or misunderstood, thereby allowing criminals to enjoy the fruits of their crimes even after conviction. For this reason, the different types of asset forfeiture and the procedure for each are set forth here.19
State and local law enforcement officers can benefit from federal asset forfeiture law through the adoption process whereby a federal law enforcement agency processes a seizure that state or local officers originally had made. This permits the state or local agency to make an equitable sharing request. Subject to U.S. Department of Justice (DOJ) approval, those agencies can receive up to 80 percent of the net forfeiture to use for enumerated law enforcement purposes.20
Many federal agencies have authority to forfeit certain types of lawfully seized property without court proceedings, provided the forfeiture is uncontested.21 Any amount of cash can be forfeited administratively. Other personal property can be forfeited only if it is worth $500,000 or under unless it is a conveyance, such as a car, truck, or airplane, to traffic narcotics, in which case no limit on the value exists. Often, criminals will not contest an administrative forfeiture because of the requirement that they swear to their interest in the property under penalty of perjury. However, the agency must send notice within 60 days after seizure, or the administrative forfeiture is time barred.22 If the notice results in the timely submission of a claim from the property's owner, the matter must be referred to the U.S. Attorney's Office for prosecution of a criminal or civil forfeiture, or the property must be returned.
When a forfeiture allegation is added to an indictment or information, only the interest of a convicted defendant can be forfeited and only if the individual is convicted of a qualifying violation. Thus, property belonging to uncharged third parties cannot be forfeited criminally. The forfeiture allegation is simple; the government need only advise the defendants that upon conviction of the charges in the referenced counts of the indictment, it will seek forfeiture as part of the sentence.23 Specific property not named in the indictment or information can be listed in a bill of particulars and served on the defendants. However, if no forfeiture allegation is put into the indictment or information, the court will have no jurisdiction to enter an order of forfeiture.24 Provided the forfeiture is properly alleged and the defendant is convicted by a jury on a charge for which forfeiture is permitted, either the defendant or the government can retain the jury to hear the matter. In this instance, the jury will hear any new evidence presented and then deliberate to decide the forfeiture.25 Because forfeiture encompasses part of the sentencing phase, the government's burden of proof is only a preponderance of the evidence. And, criminal forfeiture is the only means through which the government can get a forfeiture money judgment, a finding by the court or jury as to the total dollar amount of proceeds generated by the defendants' crimes. Upon entry of an order of forfeiture containing a money judgment, the government then may execute on any property traceable to the defendants even if the proceeds are unrelated to the crimes for which the defendants were convicted.26 This type of property is known as a substitute asset. Title 18, Section 982, U.S. Code is the general statute referencing crimes for which criminal forfeiture is available.27
Regardless of whether there is a criminal conviction, a civil forfeiture complaint can be filed against any specific property, real or personal, subject to forfeiture based on the underlying criminal activity.28 Anyone with an ownership interest in the property can challenge the civil forfeiture by filing a notice of claim followed by an answer to the complaint. Either the government or a claimant can demand a jury.29 The government has the burden of proving the forfeitability of each property by a preponderance of the evidence. Once satisfied, all interests in the property are forfeited unless claimants can prove by a preponderance of the evidence that they were innocent owners.30 To prevail on this defense, claimants who owned the property during the time period alleged in the complaint must prove that they either had no knowledge of the conduct giving rise to the forfeiture or that they took all reasonable steps to terminate the illegal conduct.31 Claimants who took title to the property after the criminal activity occurred must prove that they were bona fide purchasers for value without knowledge of the prior criminal activity.32 One of the main concerns of bringing a civil forfeiture action is the broad discovery involved, which far exceeds the boundaries of criminal discovery.33 For this reason, the government routinely makes motions to stay a civil forfeiture where the discovery likely will adversely affect a related pending criminal case.34 Title 18, Section 981, U.S. Code is the general statute referencing crimes for which civil forfeiture is available.
Most federal crimes giving rise to forfeiture do so under the proceeds theory, whereby any money or property directly or indirectly traceable to the underlying crime is subject to forfeiture. Thus, if the money earned while committing a predicate crime was used to buy a home or car, those properties would be subject to forfeiture. The government has authority to forfeit all proceeds of an SUA.
A select group of federal crimes also provide for the forfeiture of any property used in furtherance of committing a crime regardless of whether the property was purchased with criminal proceeds. An example of facilitating property would be a vehicle used to transport cocaine. Another would be clean money in a bank account used to conceal criminal proceeds laundered into the same account. The most common examples of crimes for which facilitating property is subject to forfeiture are 1 ) money laundering; 2) narcotics trafficking; 3) human trafficking; 4) unlicensed money remitting; 5) racketeering; and 6) trafficking in counterfeit goods.
Assets of a Terrorist
The broadest area of forfeiture permitted under U.S. law concerns terrorism violations. Essentially, all property used in an act of terrorism or owned by a terrorist is subject to forfeiture without the need for tracing or connecting the property to criminality.35
While investigating money laundering and asset forfeiture cases, investigators have numerous sources of information at their disposal. Nine prove as particularly useful.36
1) Bank Secrecy Act reports: Financial institutions, including some casinos and merchants, must file currency transaction reports, foreign bank account reports, suspicious activity reports (SARs), and similar documents with the Financial Crimes Enforcement Network (FinCEN). These can help investigators connect laundered or concealed assets. SARs provide a tremendous source of intelligence, often actionable, and can help to proactively launch new investigations. They also assist investigations reactively by identifying accounts, no-show jobs, previously unknown associates, and many other valuable forms of information. SAR review teams exist around the country where multiple agencies examine the reports with prosecutors and choose viable targets. Financial institutions must provide the supporting documentation behind a SAR upon request from law enforcement. No subpoena is required.37
2) EGMONT: This network consists of the financial intelligence units of over 100 countries and permits law enforcement to request data in support of a significant money laundering or terrorist financing investigation. At a minimum, the information will include the requested country's equivalent of SARs filed on the subjects of the request. No subpoena, prosecutor, or court involvement is needed, and law enforcement can make the request through FinCEN.
3) Mutual Legal Assistance Treaty: A formal request for records or enforcement action by a foreign country is made through DO J 's Office of International Affairs.38
4) FEDWIRE: The New York Federal Reserve Bank can search names, addresses, and account numbers for any fund transfers done through its system. Often, this will reveal previously unknown beneficiaries and accounts.39
5) Clearing House Interbank Payment Systems (CHIPS): A subpoena can be served to search the CHIPS network, used by financial institutions to process wire transfers.40
6) Mail covers: A request through the U.S. Postal Inspection Service will provide the information featured on the outside of envelopes. Often, this will identify financial institutions the subjects of the investigation deal with, as well as shell corporations, virtual offices, and phone companies.
7) Tax returns: Through a court order obtained by the U.S. Attorney's Office, the investigator can examine relevant tax returns, which often will yield the location of accounts, as well as front companies and shell corporations through which individuals launder money.41 Investigators or prosecutors working with a subject who is cooperating or proffering can request the individual to sign IRS Form 8821, which authorizes the release of the subject's tax records without the need for a court order.
8) Patriot Act 314(a) search: This likely is the most important money laundering tool available. Investigators can request FinCEN to post on a secure Web site the names of any individuals or entities who are subjects of a significant money laundering or terrorist financing investigation. All U.S. financial institutions then must advise the inquiring investigator of any accounts in the names of the requested subjects along with contact information for service of a subpoena. This method is far superior to serving a subpoena on the credit bureaus because the investigator will learn of all domestic accounts and not just those linked to some form of credit. No subpoena, prosecutor, or court involvement is needed, and law enforcement can make the request through FinCEN.
9) Correspondent bank accounts: Virtually all foreign banks maintain correspondent accounts, also known as interbank accounts, in the United States to conduct American dollar transactions on behalf of their customers. These simply are accounts opened at U.S. banks in the name of a foreign financial institution. Even without jurisdiction over a foreign bank, investigators can serve a grand jury subpoena and receive records of any checks or wire transfers that cleared through the U.S. correspondent account on behalf of the foreign bank.42 By learning the senders or beneficiaries of these transactions, the investigator can determine the likely beneficial owners of the foreign account, as well as other foreign and domestic accounts involved in the money laundering cycle. And, where forfeitable funds are traced to a financial institution in a country that will not cooperate with the United States, DOJ can authorize the use of Section 981(k), a Patriot Act provision, which permits the seizure from a U.S. correspondent account of a sum equivalent to the amount of criminal proceeds laundered to the foreign bank. The U.S. correspondent bank relinquishes the money and provides the foreign bank with the seizure warrant so that the foreign bank can recoup the amount seized from its correspondent account by taking the same sum from its account holder. The foreign bank usually is not complicit in the money laundering but is subject to the seizure based on its role in holding the money launderer's funds overseas. The Section 981(k) seizure authority can often be obtained within a few weeks.43
The 21st Century has ushered in a wave of technologically savvy professional money launderers. While the challenges in apprehending them are apparent, an investigator familiar with money laundering and asset forfeiture tools and laws will find the means to disrupt and dismantle any criminal activity done for profit. This includes transnational criminal enterprises, which depend on earning and moving large sums of money for survival.
Sending a convicted criminal to prison is a significant deterrent to the commission of future crimes. However, the deterrence becomes much more powerful when combined with the arsenal of asset forfeiture laws available to deprive criminals of everything that motivated them to commit the crimes in the first place.
1 DOJ's Asset Forfeiture and Money Laundering Section (AFMLS) has produced a flip chart, an excellent tool to assist investigators in applying the elements of a money laundering case. Also known as the Money Laundering Flipper, law enforcement officers can obtain it free of charge by calling AFMLS at 202-514-1263.
2 Many crimes fall within the definition of an SUA. The entire catalogue of these violations is located at 18 U.S.C. §1956c) (7), which also incorporates other criminal statutes.
3 The movement can be as simple as the handing of money from one party to another. See 18 U.S.C §1956(cX3) for the full definition of "financial transaction," which encompasses most forms of transfer, including physical.
4 18 U.S.C. §1956(a)(l). Concealment and promotion are the two most common money laundering theories and, therefore, serve as the focus of the article. The less frequently prosecuted theories involve the movement of SUA proceeds to either 1 ) evade taxes, 1 8 U.S.C. § 1956a)(l )(A)ii); or 2) avoid currency reporting requirements, 18 U.S.C. §1956(a)( I)(B)(U).
5 See, e.g.. United States v. Persaud, 411 Fed. Appx. 43 1 , 434 (2d Cir. 20 1 1 ); United States v. Frazier, 605 F.3d 1271, 1282 (llth Cir. 2010); United States v. Gallardo, 497 F.3d 727, 737 (7th Cir. 2007), cert, denied, 129 S.Ct. 288 (2008); United States v. Pizano, 421 F.3d 707, 723 (8th Cir. 2005), cert, denied, 546 U.S. 1204 (2006).
6 18 U.S.C. §1956(a)(l).
7 18 U.S.C. §I956(a)(2)(A).
8 There also is a provision for charging the international movement of money for concealment, but to prevail on that theory the funds must be SUA proceeds. 1 8 U.S.C. § 1 956(a)(2)(B)(i). Also, moving SUA proceeds to avoid currency reporting requirements may be charged. 18 U.S.C. §1956(a) (3)(C).
9 Subject to availability, the DOJ Asset Forfeiture Fund may be used to finance reverse money laundering transactions. See 28 U.S.C. §524(c). The Treasury Forfeiture Fund has similar authority. See 3 1 U.S.C. §9703(a)(2)(B)(i). Investigators should contact their headquarters components to apply for forfeiture funds when needed to carry out a money laundering sting. The author would like to acknowledge DOJ Asset Forfeiture Management Staff Director Candace Olds, Deputy Director Robert Marca, AFMLS Chief Jennifer Shasky, and Business Manager Tim Virtue for their contributions to many FBI money laundering stings over the years, none of which would have been possible without them.
10 18 U.S.C. §1956(aX3). Also, moving SUA proceeds to avoid currency reporting requirements may be charged. 1 8 U.S.C. §1956(a)(3)(C).
11 United States v. Huber, 2002 WL 257851 (D.N.D. 2002); UnitedStates v. Caruso, 948 F.Supp. 382, 390-91 (D.N.J. 1996).
12 31 U.S.C. §5312(a)(2).
13 18 U.S.C. §1957(a).
14 Uniteti States v. Prescott, 42 F.3d 1165(8thCir. 1994).
15 United States v. Robertson, 67 Fed. Appx. 257, 269 (6th Cir. 2003).
16 UnitedStates v. ThreadgiU. 172 F.3d 357, 367 (5th Cir. 1999), cert, denied. 528 U.S. 871(1999).
17 United States v. Angotti, 105 F.3d 539 (9th Cir. 1997).
18 UnitedStates v. Whitfield. 543 U.S. 209 (2005), rehearing denied. 544 U.S. 913(2005).
19 For a full review of federal asset forfeiture by an expert in this area of the law, see Stefan D. Cassella, Asset Forfeiture in ihe United States (Huntington, NY: JurisNet, 2006).
20 AFMLU manages the FBI's Money Laundering and Asset Forfeiture Programs and can facilitate any adoption for which FBI assistance is sought. The main number for unit personnel is 202-324-8628.
21 See 18 U.S.C. §983(a)(1), (2); !9 U.S.C. §1602 et seq.
22 Or 90 days if the property was seized by state or local law enforcement during a state investigation and adopted by federal law enforcement. 18 U.S.C. §983(a)(1) (A)(iv). There is a provision for delayed notice if it would jeopardize an ongoing investigation. 18 U.S.C §983(a)(1) (BUCUD).
23 Federal Rule of Criminal Procedure 32.2(a).
25 Federal Rule of Criminal Procedure 32.2(bX5).
26 Federal Rule of Criminal Procedure 32.2(e).
27 All crimes for which civil forfeiture is available also may serve as predicates for criminal forfeiture. 28 U.S.C. §2461(c).
28 See generally, Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions, 28 U.S.C. App. Civil forfeiture can be used even against a defendant acquitted of criminal charges. UnitedStates v, Ursery. 518 U.S. 267 (1996). However, if a criminal defendant was convicted of a crime but prevailed during the forfeiture phase of the trial, principles of resjudicata would preclude a subsequent civil forfeiture action.
29 See Federal Rule of Civil Procedure 38.
30 1 8 U.S.C. §983(d).
31 18 U.S.C. §983(d)(2).
32 8 U.S.C. §983(d)(3)(A).
33 See Federal Rules of Civil Procedure 26-37.
34 See 18 U.S.C. §98 1 (g).
35 See 1 8 U.S.C. §98 (a)(1)(G).
36 In addition to program management, AFMLU investigates Priority Internationa! Money Laundering Threat (PIMLAT) cases opened by the unit. AFMLU welcomes the opportunity to collaborate on best practices for investigating money laundering, as well as working joint PIMLAT and other money laundering investigations with other agencies. AFMLU can be reached at 202-324-8628.
37 31 C.F.R. §103.18(d).
38 The best way for an investigator to begin the formal process or to decide if it is worthwhile to proceed with a formal request is to contact DOJ's Office of International Affairs by calling 202-514-0000 and asking to speak to an attorney assigned to handle the country where the request will be sought.
39 A FEDWIRE search is initiated by serving a subpoena on the Federal Reserve, 33 Liberty Street, New York, NY 10045.
40 CHIPS subpoenas are served by mail to 100 Broad Street, New York, NY 10004.
41 The U.S. Attorney must personally approve an application for tax return orders. The investigator must show reasonable cause to believe: 1 ) federal criminal violations have been committed; 2) relevant evidence will be found in the tax returns; and 3) the evidence cannot reasonably be obtained from other sources, or the tax returns will provide the most probative form of evidence. 26 U.S.C. §6103(i).
42 Investigators can learn the location of a foreign bank's U.S. correspondent account by consulting the Bankers Almanac. DOJ's AFMLS, International Unit keeps current editions of this volume and can be consulted at 202-5141263. Also, Thomsons Global is a commercially available service that provides this information; its Web site is htlp://www. igbr.com.
43 AFMLS administers the 981(k) process. Requests and inquiries can be directed to the AFMLS International Unit at 202-514-1263.
44 United States v. Shafer. 608 F.3d 1056, 1067 (8th Cir. 20 10).
45 AFMLS has a chart, Forfeiture in a Box, referencing virtually all federal crimes giving rise to forfeiture. It is available by calling 202-514-1263.
46 See Federal Rule of Criminal Procedure 32.2(b)(1)(A) [forfeiture]; 18 U.S.C. §3556 [restitution].
47 18 U.S.C. §3664(m)(1)(A).
By DOUGLAS LEFF, J. D.