Money laundering is often included with financial crimes including tax evasion, terrorism financing, and avoiding international sanctions. Money laundering may take various forms, from the rather simple to extremely sophisticated undertakings moving money around the world. Understanding what money laundering entails can help to avoid any wrongdoing.
What is Money Laundering?
Money laundering is the process of taking the proceeds of illegally obtained money, and transforming it into what appears to be legitimate money or other assets. This "dirty" money could otherwise raise suspicion with banks or financial institutions, and needs to be cleaned so that it appears to have come from a non-criminal source.
What are the Sources of Illegally Obtained Money?
Money to be laundered can come from a variety of sources. These include money from drug trafficking, extortion, illegal gambling, tax evasion, or even insider trading. Money laundering regulations also target terrorism funding, to prevent transmitting money to terrorist organizations, and relating to where the money ends up. Banks and financial institutions may be violating money laundering regulations when they hid assets of foreign countries which the US has sanctioned, including Cuba and Iran.
What is the Process of Money Laundering?
Money laundering generally consists of a three-part process: placement, layering and integration. First, the "dirty" money is brought into the legitimate financial system. Then, the money is moved, often through wiring or transfer through a number of different accounts, in a way to confuse the source of the money. Lastly, the money is integrated back into the financial system through various transactions, so that the ill gotten money now appears legitimate, or "clean."
Who Prosecutes Money Laundering Cases?
Money laundering can be both a state and a federal crime. A number of federal agencies can be involved in investigating financial crimes and money laundering, including the Department of Justice, Immigration and Customs Enforcement (ICE), Federal Bureau of Investigation (FBI), US Postal Inspection Service, and the Internal Revenue Service (IRS).
Who Can be Charged with Money Laundering?
While criminals trying to make illegal monies clean can be prosecuted, a number of other individuals along the money laundering process can also be charged. Transporting or facilitating the process can be an offense. Even large banks and financial institutions who participate in transferring or hiding the money can be in violation of the law.
What are the Penalties for Money Laundering?
Under federal law, individuals face a fine of up to $500,000, or double the value of the property involved. Individuals can also face up to 20 years in prison. In addition, other crimes related to the underlying criminal source of the funds can also apply.
State money laundering penalties vary by state, and can also vary by degree. State penalties often include the chance at facing both large monetary fines, as well as jail time. The Commonwealth of Massachusetts, for example, provides for up to 8 years in prison and a $500,000 fine or more, for a second offense.
How to Avoid Charges for Money Laundering?
A number of federal laws establish record-keeping and reporting requirements for money transfer since the Bank Secrecy Act of 1970. Banks, financial institutions, and even private individuals are required to report cash transactions of more than $10,000, including properly identifying the persons conducting the transactions, and maintaining records of the transfers.
Since that time, the laws have been expanded to include car dealers and real estate closing personnel required to file large cash transactions, and required verifying identification of some purchases over $3,000.
Who Reports Money Laundering Suspicions?
Banks, financial institutions, and even check-cashing or money order businesses are required to file a suspicious activity report (SAR), when certain transactions are conducted, or even attempted, if they have reason to suspect the funds are part of a transaction designed to conceal illegal funds, and evade reporting.
Informants and whistleblowers are other sources of detecting money laundering. Federal agencies such as the IRS even offer monetary rewards of up to $150,000 for reports of money laundering which leads to recovery.
What to do When You Learn of a Money Laundering Investigation?
Whether as the target of an investigation, a witness, or upon receiving a subpoena, you may not know where to turn. Once you become aware of an investigation, legal counsel can help to make the difficult decisions in what to do next. The question of cooperation with the government is a critical decision, which could lead to resolution or could expose the individual to criminal and civil liability.
Defending Charges of Money Laundering
Defenses can include arguing that the individual had a lack of knowledge that the transaction was from from illegal proceeds, and the lack of intent to conceal the money, or the nature of the funds. Others include demonstrating that the source of the funds were from legal proceeds. A variety of other legal defenses could be mounted depending on the individual circumstances of the case.
However, the laws surrounding money laundering and financial fraud are very complicated and specialized. An experienced attorney focused in these practice area will be able to clarify the issues facing a client investigated by a state or federal agency for money laundering. A dedicated lawyer can help identify the elements required to prosecute a case of money laundering, and best defend their client.