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Bont: Taking a dramatic look at money laundering

May 16, 2018

criminal-justice-bontThe Winter of 2018 was cold, dreary and seemingly without end, but if there was a silver lining somewhere in all those clouds, it was the “freedom” to watch otherwise embarrassing hours of Netflix without feeling like a total degenerate. If you’ve never embraced the creative genius that is “Narcos,” you need to stop reading, obtain access to Netflix by any means necessary, put on a pair of noise-cancelling headphones and binge watch until your eyeballs physically are not able to focus on the screen. As you’re coming down from that high and start to realize that at some level you’re rooting for drug dealers and terrorists, cue up “Ozark,” which is more of an unemotional leap into moral depravity without all the bells and whistles. Both of these fine examples of internet cinematography delve into the criminal act of money laundering. (See Season 3, Episode 3 of “Narcos” (clip on YouTube)).

Money laundering is transferring the proceeds of an unlawful activity by means and methods that are designed to conceal the nature or source of the money. 18 U.S.C. § 1956. The Bank Secrecy Act requires financial institutions in the United States to file a report for any deposit or withdrawal of more than $10,000. As such, those with concerns about their criminal liability tend to get creative with their currency transactions in order to evade law enforcement detection. Numerous sources (including the Netflix originals mentioned above) break money laundering down into a three-step process: 1) placement (of criminal proceeds into a seemingly legitimate business enterprise); 2) layering (by running the money through transactions associated with that business); and 3) integration (sending the money back out into the financial system). There is often no clear distinction between these steps and, while money laundering can take many forms, some schemes are quite simple.

In evaluating liability for money laundering, there are two threshold issues to keep in mind. First, the general policy of the government is against invoking the money laundering statutes when the same financial transaction constitutes both the unlawful activity itself and would also constitute money laundering. In other words, a prosecution for money laundering usually contemplates an already-completed criminal offense, whether it is embezzlement, financial fraud or drug dealing.

Second, there must be evidence that the defendant acted with the specific intent to conceal or disguise the source of the money. A conviction for money laundering requires more evidence than that the defendant spent criminal proceeds on extravagant purchases. United States v. Sanders, 929 F.2d 1466 (10 Cir. 1991). Even transferring criminal proceeds into a separate account and spending from that account has been held insufficient to sustain a conviction for money laundering. See, e.g., United States v. Esterman, 324 F.3d 565 (7th Cir. 2003). The transactions must be “highly irregular.” Id. at 571. For example, in United States v. Edgmon, a father sold and collected the proceeds from the sale of his son’s cattle, which was collateral for the son’s Farmers Home Administration loan. 952 F.2d 1206 (10th Cir. 1991). This amounted to conversion of FHA collateral in violation of 18 U.S.C. § 658. The father then purchased land and equipment, which he used as collateral to obtain another loan, the proceeds of which he gave to his son. Based on these facts, the district court held there was sufficient evidence to support a conviction for money laundering.

A person who is convicted for money laundering faces up to 20 years in prison. I strongly recommend against any sort of confined living arrangement that restricts your access to Netflix.•

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Jonathan Bont practices in the areas of criminal defense, business litigation and government compliance at Paganelli Law Group. Opinions expressed are those of the author.

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