Money Laundering

By Camelio, Andrew J.; Pergament, Benjamin | American Criminal Law Review, Spring 1998 | Go to article overview

Money Laundering


Camelio, Andrew J., Pergament, Benjamin, American Criminal Law Review


I. INTRODUCTION

According to one former federal prosecutor, "[t]he white collar crime of the 1990's is here and it is money laundering."(1) "`Money laundering' is the process by which one conceals the existence, illegal source, or illegal application of income, and disguises that income to make it appear legitimate."(2) Laundering criminally derived proceeds has become a lucrative and sophisticated business in the United States and is an indispensable element of organized crime's activities.(3) Without the ability to move and hide its enormous wealth through laundering techniques, large scale criminal activity could operate only at a small fraction of current levels, and with far less flexibility.(4)

In recognition of this phenomenon, Congress passed the Money Laundering Control Act of 1986 (the "Act"),(5) holding criminally liable any individual who conducts a monetary transaction knowing, or with reason to know, that the funds involved were derived from unlawful activity.(6) Unlike earlier unsuccessful efforts to control the movement of illegal income through financial institution reporting requirements,(7) the act is aimed at "the lifeblood of organized crime:"(8) the act of converting funds derived from illegal activities into a spendable or consumable form.(9)

The Money Laundering Control Act defines and prohibits a category of activity known as "money laundering."(10) The Act not only reaches the proceeds of conduct characteristic of organized crime, such as narcotics trafficking, Racketeer Influenced and Corrupt Organizations Act (RICO)(11) predicates, or certain state offenses, but also encompasses a wide range of additional criminal offenses including espionage, trading with the enemy, and conducting financial transactions with intent to engage in violations of the Internal Revenue Code.(12)

The purpose of the Act is to bar all "monetary transactions" in "criminally derived property."(13) Although the proceeds of crime historically have been subject to seizure by warrant for use as evidence,(14) the Act makes the subsequent use of criminal proceeds in any transaction illegal in perpetuity. Long after the original statute of limitations on the criminal offense which generated the proceeds has run, those who conduct prohibited financial transactions or transport proceeds from those transactions are engaged in criminal conduct independent of the original income-producing crime.(15) Furthermore, the Act does not limit itself to transactions conducted through financial institutions,(16) but reaches a broad variety of routine commercial transactions which affect commerce.(17)

The Government has also attempted to use currency reporting laws, which forbid exporting more than $10,000 of undeclared cash,(18) to prevent money laundering. The Supreme Court has agreed to resolve a split in the circuits regarding the constitutionality of such laws and their penalties.(19) In United States v. Bajakajian, the Ninth Circuit held that the statutory forfeiture provision of all undeclared cash(20) was excessive and in violation of the Eighth Amendment.(21) The Ninth Circuit stated that the money was not an "instrumentality" of the crime(22) and, therefore, not subject to forfeiture. Although money laundering was not at stake in Bajakajian, the Government fears that if it is not overruled, the states within the Ninth Circuit's jurisdiction "could readily become a haven for drug dealers, money launderers and tax evaders intent on conducting non-traceable currency transactions."(23)

In a further attempt to crackdown on money launderers, the Treasury Department has proposed tough new rules to regulate businesses that wire money internationally.(24) The new rules would require all such companies to register with the government; to file a report with the government every time a customer wires more than $750; and to report suspicious activity by customers.(25) The businesses would be required to furnish the names of both the transferor and the recipient of the transfer. …

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