What is the Federal Money Laundering Statute?

The Federal Money Laundering statute criminalizes three types of activities: domestic financial transactions, international money laundering, and government sting operations. The statute requires that the person conducting the transaction knows that the property involved represents the proceeds of some form of unlawful activity and that the transaction is intended to promote unlawful activity, conceal the nature of the proceeds, or avoid transaction reporting requirements. This is found at 18 USC (United States Code) 1956. 18 USC Section 1957 criminalizes engaging in monetary transactions in property derived from specified unlawful activities, with the knowledge that the property is derived from such activities. This statute focuses on the act of spending or depositing criminal proceeds in financial institutions.

The federal statutes have extremely detailed case law interpreting their provisions. One common question focuses on which activities deemed criminal are covered by the statute. The prohibited forms of criminal activity are identified in 18 U.S.C. § 1956(c)(7) and the law also references and bootstraps activity prohibited under the RICO statute (18 U.S.C. § 1961(1)).

What is Necessary to Prove Money Laundering?

To prove a violation of § 1956(a)(1), the prosecutor must prove, either by direct or circumstantial evidence, that the defendant knew that the property involved was the proceeds of any felony under State, Federal or foreign law. The prosecutor need not show that the defendant knew the specific crime from which the proceeds were derived; the prosecutor must prove only that the defendant knew that the property was illegally derived in some way. See § 1956(c)(1). The prosecutor must also prove that the defendant initiated or concluded, or participated in initiating or concluding, a financial transaction.

You then get into definitions of “transaction” (See: 18 USC 1956(c)(3)) and many of the other terms in the statute. Lawyers raise many objections to charges and courts in different federal districts often have inconsistent interpretations of the law. In the 8th District in the case United States v. Prescott, 42 F.3d 1165 (8th Cir. 1994) the lawyers succeeded in stopping the prosecution from splitting multiple money laundering transactions into separate counts. They had to be combined with a single total dollar amount. This significantly reduced their clients risk at sentencing (sentencing exposure).

Is Cryptocurrency Covered by the Federal Money Laundering Statute?

Cryptocurrency has been included under the federal money laundering statutes. State or in United States v. Harmon, 474 F.Supp.3d 76 (2020) the District of Columbia’s money laundering statute has been held to include cryptocurrency. In United States v. Lossifov, the court found that cryptocurrency constituted "funds" within the meaning of 18 USC § 1956. The court noted that the ordinary meaning of "funds" includes any currency that can be used to pay for things, and cryptocurrency at issue was used to pay for things or as a medium of exchange that was subsequently converted to currency to pay for things (United States v. Lossifov, 45 F.4th 899 (2022)) See also: United States v. Murgio, 209 F.Supp.3d 698 (2016) United States v. Murgio, 209 F.Supp.3d 698 (2016))