117TH INTERNATIONAL SEMINAR
VISITING EXPERTS’ PAPERS

THE FIGHT AGAINST MONEY LAUNDERING:THE U.S. PERSPECTIVE
Susan L. Smith *I. INTRODUCTION
Money laundering occurs in almost every
crime where there is a financial motive.
Because of the need to hide the fact thatthe wealth came from a criminal act,
criminals need to disguise the money. 1
These proceeds of crime, particularly cash,
must be laundered for reinvestment. This
involves a series of complicated financialtransactions (structured deposits, wiretransfers, purchase of money orders or
cashier’s checks, etc.) which ultimately
results in criminal money becoming “clean”
and acceptable for legitimate businesspurposes.2 This laundering of criminallyderived proceeds has become a lucrativeand sophisticated business in the UnitedStates and is an indispensable element of
the drug cartels’ and organized crime’s
activities.3 By moving and concealing theexistence of enormous amounts of wealth,money laundering gives large scalecriminal activity a flexibility and scope
which would otherwise be impossible.4 In
his 1995 remarks to the United Nations on* Senior Trial Attorney, Asset Forfeiture and Money
Laundering Section, Criminal Division, UnitedStates Department of Justice, U. S. A.
1 William F. Bruton, Money Laundering: Is It Now a
Corporate Problem?, 17 Dick. J. Int’l L. 437.
2 William C. Gilmore, Dirty Money: The Evolutionof Money Laundering Countermeasures, 2d Ed.,Council of Europe Publishing, 1999.
3 See James D. Harmon, Jr., United States Money
Laundering Laws: International Implications, 9
N.Y.L. SCH. J. INT’L & COMP. L. 1, 2 (1988).
4 Kirk McCormick and Brian Stekloff, Money
Laundering, 37 Am. Crim. L. Rev. 729, (2000).

the Occasion of the 50th Anniversary of its
Creation, then President Clinton said:“Criminal enterprises are moving vast
sums of ill-gotten gains through theinternational financial system withabsolute impunity. We must not allow
them to wash the blood off profits fromthe sale of drugs, from terror, or fromorganized crime.”
It is the goal of the United States toensure that criminals and their laundered
money can find no safe haven anywhere
and to destroy criminal organizations bytaking the profit out of crime. The
increased threat from internationalorganized crime, coupled with theglobalization of the economy and the
explosion of communications technology,
requires the United States’ anti-money
laundering efforts to be multi-dimensional.
At the federal level, the United States’
efforts to combat money laundering involvethe coordinated work of broad array offederal agencies. The Treasury and JusticeDepartments lead the nation’s law
enforcement efforts, while the federal
financial regulators (the Federal Reserve
Board, the Office of the Comptroller of theCurrency, the Federal Deposit Insurance
Corporation, the Office of Thrift
Supervision, the National Credit Union
Administration and the Securities
Exchange Commission) are responsible forthe examination of financial institutions
within their respective jurisdictions toensure that those institutions have createdeffective internal systems to detect
potential money laundering.5 The UnitedStates’ primary line of attack against

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domestic and international drug and othermoney launderers has been and continues
to focus on denying our financial system tomoney launderers through theimplementation of the Money Laundering
Control Act6 and the Bank Secrecy Act7.
This core group of statutory tools wereenacted by Congress in order to meet thethreats posed by domestic andtransnational organized crime and toenhance law enforcement’s ability tosucceed in disrupting and dismantling thebusiness of organized crime.
II. OVERVIEW OF MONEY
LAUNDERING STATUTES
A. Background
The United States criminalized money
laundering on October 27, 1986. These
statutes are found at 18 U.S.C. § § 1956
and 1957. See Money Laundering Control
Act of 1986, Pub. L 99-570. These statutes
fully criminalized money laundering, withpenalties of up to 20 years and fines of up
to $500,000 for each count. Highlights of
the Act include:
(i)

(ii)

extended criminality to persons
knowingly conducting or
attempting to conduct financialtransactions with proceeds
generated by certain specified
crimes, as well as to persons whoare “willfully blind to” such
unlawful activity;
extended extraterritorial
jurisdiction over the conductprohibited by the statutes;

5 The National Money Laundering Strategy Act for2000.
6 Pub. L. 99-570, Title XIII (October 27, 1986), as
amended, codified at 18 U.S.C. § 1956 and § 1957.
7 Pub. L. 91-508 (October 26, 1970), as amended,
codified at 12 U.S.C. § 1829b, 12 U.S.C. §§ 195159, and 31 U.S.C. §§ 5311-5330.

328(iii) extended civil and criminal
forfeiture to commissions received
for conducting a money launderingtransaction, (18 U.S.C. § § 981 and
982);(iv) outlawed structuring or “smurfing”
operations to avoid the Bank
Secrecy Act (BSA) reporting
requirements (31 U.S.C. § 5324);and(v) mandated compliance procedures
to be required of banks; (theprocedures were created by 1987
regulations issued by the Secretaryof the Treasury).
Over the years, emerging money
laundering typologies, international
requirements, prosecutorial experiences,and case law interpretations haveindicated the need for legislative changes
to the money laundering statutes. Thechanges have increased the number ofcrimes which can generate proceeds for themoney laundering laws to approximately
170 criminal offenses. The following is abrief summary of the legislative
amendments to the money laundering
laws:
(i)

The Anti-Drug Abuse Act of 1988,
effective on November 18, 1988,
further criminalized money
laundering to include financialtransactions conducted with illegal
proceeds with the intent to commit
tax evasion and extended
criminality to persons who conducttransactions involving property“represented by a law enforcement
officer to be the proceeds ofspecified unlawful activity” (SUA).
The Act also increased the civil andcriminal forfeiture statutes toinclude forfeiture of any property
or assets involved in an illegal
financial transaction related tomoney laundering. The Act also

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added a number of criminal
offenses to be included in the term
“SUA,” such as smuggling of goods
into the United States, copyright
infringement, and violations of theArms Control Act.
(ii) The Annunzio-Wylie Anti-Money
Laundering Act of 1992, whichbecame effective on October 28,
1992, enlarged the definitions of“transaction” and “financialtransaction” to include the use ofa safe-deposit box and the transferof title to any real property, vehicle,
vessel or aircraft. The Act also
enlarged “SUA” to include offenses
against a foreign nation involving
kidnaping, robbery, extortion, or
fraud against a foreign bank, andseveral other criminal offenses,
including food stamp fraud.
Additionally, the Act extended thecriminal penalties of § § 1956 and1957 to a conspiracy to violate themoney laundering statutes.
(iii) T h e M o n e y L a u n d e r i n g
Suppression Act of 1994, effective
September 23, 1994, incorporated
both substantive and technicalamendments to Titles 18 and 31(BSA). Of particular importancewere the following changes: (1) arequirement that Treasury issue
new regulations implementing a
new BSA provision, 31 U.S.C. §5330, requiring any person who
owns or controls a moneytransmitter business to registerwith the Secretary of the Treasury;(2) an amendment to 31 U.S.C. §5324 which legislatively
overturned the January 1994
Supreme Court decision (Ratzlaf v.
United States) concerning theproof required to establish a 31
U.S.C. § 5324(a)(3) structuring
violation; and (3) the requirementof additional record keeping and(iv)reporting of negotiable
instruments drawn on foreign
financial institutions.
The Terrorism Prevention Act,
passed by Congress on April 24,
1996, added approximately 20 new
crimes to the list of “SUAs” insection 1956. The Health
Insurance Portability andAccountability Act of 1996, Pub. L.
104-191, 110 Stat. 1936, effective
August 21, 1996, added certain
health care offenses to the list ofpredicates for money laundering
violations, and the newimmigration law signed by the
President on September 30, 1996,
added certain immigration
offenses, such as alien smuggling,
to the list of RICO predicates, thus
making them predicate offenses
under the money laundering
statutes.

B. 18 United States Code, Section
1956
Section 1956, “laundering of monetary
instruments,” is divided into subsections(a) through (h). The substantive provision,
subsection 1956(a), is divided into threesubsections dealing with domestic financialtransactions, international transportationof monetary instruments or funds, andsting operations, respectively. Subsection
1956(b) provides a civil penalty for
violations of the first two provisions ofsubsection (a). Subsection 1956(c) defines
most of the terms used in § 1956 (as wellas in § 1957). Subsections 1956(d), (e), and(f) discuss the relationship of § 1956 toother federal statutes, agency investigative
responsibilities, and extraterritorial
jurisdiction, respectively. Subsection (g)requires the Attorney General to inform theappropriate regulating agency of any
conviction under 18 U.S.C. § § 1956, 1957,
1960 or 31 U.S.C. § 5322 of a financial
institution or any officer, director, or

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employee of a financial institution.
Subsection (h) raises the penalties forconspiracies to violate § 1956 and § 1957
to the level of the substantive offense. The
focus of this discussion is on the elementsof the crimes set forth in § 1956(a), withreference to the definitions set forth insubsection (c) where appropriate.

v. Posters ‘N’ Things, 969 F.2d 652, (8th Cir.
1992), cert. granted, 113 S.Ct. 1410 (1993);
United States v. Brown, 944 F.2d 1377,
1387 (7th Cir. 1991); United States v.
Jackson, 935 F.2d 832 (7th Cir. 1991);
United States v. Blackman, 904 F.2d 1250
(8th Cir. 1990); United States v. Massac,
867 F.2d 174 (3rd Cir. 1989).

As stated above, section 1956(a) is
divided into three parts. Subsection
1956(a)(1) primarily addresses domestic
money laundering and prohibits theknowing participation in financialtransactions with criminal proceeds.
Subsection 1956(a)(2) addresses
international money laundering andprohibits the knowing transportation ortransfer of criminally derived monetary
instruments in foreign commerce.
Subsection 1956(a)(3) explicitly authorizes
the use of government undercover “sting”
operations to expose money laundering.

1. A Financial Transaction
Subsection 1956(c)(4) defines a “financialtransaction” as either:(A) a transaction8 (i) involving the
movement of funds by wire or othermeans or (ii) involving one or moremonetary instruments, which in any
way or degree affects interstate or
foreign commerce, or(B) a transaction involving the use ofa financial institution which isengaged in, or the activities of which
affect, interstate or foreign commercein any way or degree.

C. Essential Elements of Section
1956(a)(1)
The elements of an offense under Section
1956(a)(1) are: (1) that the defendantconducts or attempts to conduct a financialtransaction; (2) that the defendant knewthat the property involved in the financialtransaction represents the proceeds ofsome form of unlawful activity; (3) that thefinancial transaction in fact involves theproceeds of specified unlawful activity; and(4) that the defendant conducted thefinancial transaction with one of four
purposes: (i) with the intent to promote thecarrying on of specified unlawful activity;(ii) with the intent to evade taxes; (iii)knowing that the transaction was designed
in whole or in part to disguise the nature,
location, source, ownership, or control ofthe proceeds of the specified unlawful
activity or (iv) to avoid a transaction
reporting requirement under State orFederal law. United States v. Awan, 966
F.2d 1415 (11th Cir. 1992); United States

The statute defines “financialtransaction” very broadly. See S.Rep. No.
433, 99th Cong. 2d Sess. 12-13 (1986). The
statute contains four alternative
definitions of “financial transaction”
presented in subsection 1956(c)(4): (i) the
movement of funds by wire or other means;(ii) the use of a monetary instrument; (iii)the use of a financial institution; and (iv)the transfer of title to any real property
vehicle, vessel, or aircraft, which in any
way or degree affects interstate or foreigncommerce.

330

8

As defined in subsection 1956(c)(3), the term“transaction” includes a purchase, sale, loan,pledge, gift, transfer, delivery, or other disposition,
and with respect to a financial institution includes
a deposit, withdrawal, transfer between accounts,
exchange of currency, loan, extension of credit,
purchase or sale of any stock, bond, certificate ofdeposit, or other monetary instrument, or any otherpayment, transfer, or delivery by, through, or to afinancial institution, by whatever means effected.

117TH INTERNATIONAL SEMINAR
VISITING EXPERTS’ PAPERS(i) The Movement of Funds by Wire or
Other Means
The word “funds” is not defined in thestatute. Moreover, there is no legislative
history to explain its meaning. This
subdefinition apparently includes all formsof wire or electronic funds transfer that
affect interstate or foreign commerce.
Thus, if an individual wire transfers theproceeds of criminal activity, he or she will
have engaged in a financial transaction.
United States v. Herron, 97 F.3d 234, 237(8th Cir. 1996). The language of the statuteis not so limited, however. The word
“funds” has been defined as “available
money” or “money available for use”. Thus,
in a broader sense, one who transfers funds
by other means could also be said to haveengaged in a financial transaction as
defined in this subdefinition. Included in
the “transfer of funds” could be debit cardtransfers and barter exchanges. Therefore,
if an individual exchanged the proceeds ofa crime for a work of art as a means oflaundering money, such an exchange could
fall within the ambit of this subdefinition.
Generally, courts have interpreted“funds movement” broadly. Included
within this subdefinition is the transfer ofcashier’s checks, United States v. Arditti,
955 F.2d 231 (5th Cir. 1992) (noting that §1956(c)(5) defines “bank checks” but notcashier’s checks as monetary instruments),
as well as the mere transfer of illegal
proceeds from one person to another,
United States v. Reed, 77 F.3d. 139 (6th Cir.
1996) (giving drug proceeds to a courier
involves the movement of funds by meansof the courier).
(ii)The Use of a Monetary Instrument9
Under this subdefinition, the term
“financial transaction” includes thepurchase, sale or disposition of any kind of
property as long as the disposition involves
a monetary instrument. United States v.
Blackman, 904 F.2d at 1257. As an

example, an individual who transfers any“monetary instrument” to another, whether
or not that instrument ever finds its way
into a financial institution, has engaged ina “financial transaction.” See UnitedStates v. Gallo, 927 F.2d 815 (5th Cir.
1991)(transfer of a box of currency from one
individual to another is a financialtransaction); United States v. Hamilton,
931 F.2d 1046 (5th Cir. 1991)(the mailingof the proceeds of drug transactions toanother is a financial transaction); UnitedStates v. Castano-Martinez, 859 F.2d 925(11th Cir. 1988)(financial transactions
included various “transfers” of currency
from the defendant’s house to vehicles
parked outside).
(iii)Use of a Financial Institution
This definition cross references the term
“financial institution” which is defined atsubsection 1956(c)(6) by further crossreference to 31 U.S.C. § 5312(a)(2) and its
implementing regulations. 10 The mostcommon transactions involving banks andsimilar institutions are covered by thisdefinition. The writing of a check drawn

9

Monetary instrument is defined in subsection
1956(c)(5) as: (i) coin or currency of the UnitedStates or of any other country, traveler’s checks,
personal checks, bank checks, and money orders,or (ii) investment securities or negotiable
instruments in bearer form or otherwise in suchform that title passes upon delivery.
10 31 U.S.C. § 5312(a)(2) includes within the meaningof “financial institutions” such entities as banks;
thrift institutions; securities brokers and dealers;
investment bankers or companies; currency
exchanges; issuers, redeemers, or cashiers oftravelers’ checks, checks, or money orders; credit
card companies; insurance companies; travel
agencies; licensed senders of money; telegraphcompanies; vehicle dealers; realtors; the United
Postal Service; government agencies involved in the
aforementioned activities; and, other businesses as
designated by the Secretary of the Treasury.

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on an account maintained in such afinancial institution, whether for cash or
to a vendor who has provided services,
clearly falls within the definition of afinancial transaction contained in §1956(c)(4)(B). United States v. Jackson,
935 F.2d at 841. See also S.Rep. No. 433,
99th Cong. 2d Sess. 12-13 (1986); UnitedStates v. Martin, 933 F.2d 609 (8th Cir.
1991), and United States v. Blackman, 904
F.2d at 1257.
(iv) The Transfer of Title
This subdefinition includes any transferof title to real estate, vehicles, vessels or
aircraft. United States v. Kaufmann, 985
F.2d 884 (7th Cir. 1993) (sale of car for cash
is a financial transaction.) This
subdefinition was added in 1992 to close aloophole in the definition of “financialtransaction” under §§ 1956 and 1957 wherea transfer involved neither a monetary
instrument, a transfer of funds, nor afinancial institution.11(v) A f f e c t s I n t e r s t a t e o r F o r e i g n
Commerce
All the subdefinitions of “financialtransaction” contained in subsection
1956(c)(4) require that the transaction“affect interstate or foreign commerce” orbe conducted through or by a financial
institution which engaged in or theactivities of which affect interstate offoreign commerce “in any way or degree.”
The term “affect commerce in any way ordegree” is derived from the Hobbs Act, 18
U.S.C. § 1951, and is intended to reflect
the full exercise of Congress’ powers under

11 See § 1527 of the Annunzio-Wylie Anti-Money

Laundering Act of 1992. Even before theamendment, there was case law supporting this
proposition. See United States v. Blackman, 904
F.2d 1250, 1257 (8th Cir. 1990)(transfer of title on
defendant’s truck qualified as “financialtransaction”).

332

the Commerce Clause of the Constitution.
United States v. Gallo, 927 F.2d at 823. The
broad language of the Hobbs Act manifests
an intention “to use all the constitutional
power Congress has to punish interferencewith interstate commerce ...” United States
v. Eaves, 877 F.2d 943 (11th Cir. 1989) cert.
denied 493 U.S. 1977 (1990), quoting
Stirone v. United States, 361 U.S. 212, 215(1960). The appropriate inquiry is whether
a defendant’s conduct constitutes asufficient threat to interstate commerce so
as to implicate an area of federal concern
sufficient to give rise to federal jurisdiction.
United States v. Jannotti, 673 F.2d 578 (3rdCir.), cert. denied 457 U.S. 1106 (1982).
The purpose of the interstate commerce
nexus in the money laundering statute is
to provide a predicate for federal legislative
jurisdiction. United States v. Koller, 956
F.2d 1408 (7th Cir. 1992). See UnitedStates v. Kelley, 929 F.2d 582 (10th Cir.)cert. denied 112 S.Ct. 341 (1991). There issubstantial agreement that the “in oraffecting interstate commerce”
requirement is broadly construed and a“minimal effect” on interstate commerce issufficient to establish federal jurisdiction.
Id. at 586; United States v. Eaves, 877 F.2d
at 946. See, e.g., United States v. Lucas,
932 F.2d 1210 (8th Cir.) cert. denied 112
S.Ct. 399 (1991); United States v. Tuchow,
768 F.2d 855, 870 (7th Cir. 1985); UnitedStates v. Robinson, 763 F.2d 778, 781 (6thCir. 1985); United States v. Sorrow, 732
F.2d 176, 189 (11th Cir. 1984).
2. Knowing That the Property Represents
the Proceeds of Some Form of Unlawful
Activity
The government must establish, withdirect or circumstantial evidence, that thedefendant actually or constructively knewthat the property involved in the financialtransaction was the proceeds of some state,federal, or foreign felonious activity.12 Thisknowledge element is separate and distinct
from the specified unlawful activity

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element. The defendant need not knowthat the property was in fact proceeds ofspecified unlawful activity. Rather, it issufficient if he knows the property to be
the proceeds of some form of felonious
conduct under state, federal or foreign law.
United States v. Campbell, 977 F.2d 854,
858 (4th Cir. 1992); United States v. Awan,
966 F.2d at 1424-1425; United States v.
Jackson, 935 F.2d at 838; United States v.
Sutera, 933 F.2d 641, 644-646; UnitedStates v. Ortiz, 738 F. Supp. 1394, 1399
(S.D.Fla. 1990); S. Rep. No. 433, 99th
Cong., 2d Sess. 12 (1986).
The knowledge element can be met inseveral ways. The defendant’s knowledge
may be either actual, constructive, ordeemed by operation of the defendant’s
willful blindness to the facts. Id. at 9-10;
United States v. Campbell, 977 F.2d at 85759; United States v. Ortiz, 738 F. Supp. at
1400, n. 3. See also United States v.
Giovannetti, 919 F.2d 1223 (7th Cir. 1990);
United States v. Nersesian, 834 F.2d 1294
(2nd Cir. 1987); United States v. Jewel, 532
F. 2d 697 (9th Cir. 1976), cert. denied, 426
U.S. 951 (1976). Circumstantial evidence
will suffice to establish the requisiteknowledge. See United States v. Campbell,
977 F.2d at 859 (evidence of drug dealer’s
lifestyle, defendant’s statement that themoney “might have been drug money,” andthe fraudulent nature of the transaction inwhich the defendant participated sufficient

12 The term “knowing that the property involved in

the financial transaction represents the proceedsof some form of unlawful activity” is defined in §1956(c)(1) to mean that the person knew theproperty involved in the transaction represented
proceeds from some form, though not necessarily
which form, of activity that constitutes a felony
under State, Federal, or foreign law, regardless ofwhether or not such activity is specified inparagraph (7). Paragraph (7) defines the term
“specified unlawful activity.”

to allow jury to find that defendant was
willfully blind as to the source of themoney); United States v. Atterson, 926 F.2d
649, 656 (7th Cir.) cert. denied, 111 S.Ct
2909 (1991) (jury may conclude that
defendant who wires cash for drug dealing
boyfriend knew the cash was the proceedsof unlawful activity); United States v. Gallo,
927 F.2d at 822 (jury may conclude that
defendant who meets a drug dealer in aparking lot and receives a box of currency
wrapped in aluminum foil packets fromhim knew that the cash was the proceedsof unlawful activity); United States v.
Isabel, 945 F.2d 1193 (1st Cir. 1991) (jurymay conclude that defendant knew the
cash was the proceeds of unlawful activity
when the defendant receives cash from anindividual with no legitimate source ofincome and had previously been arrested
on drug charges); United States v. Brown,
944 F.2d 1377, 1387 (7th Cir. 1991)(defendant received over $70,000 througha number of “elaborate and timeconsuming transfers,” carefully engineered
to avoid the reporting requirements and heknew that the individuals had access tolarge amounts of marijuana).
3. Proceeds of Specified Unlawful Activity
This element requires proof that theproperty involved in the transaction was,in fact, the “proceeds of specified unlawful
activity,” as defined in § 1956(c)(7). While
the government must only establish that adefendant knew that the property wasderived from “some” form of felonious
activity under state, federal or foreign law,
the government must prove that theproceeds were in fact derived from“specified unlawful activity.” However, thegovernment is not required to trace theproceeds back to a particular offense.
United States v. Blackman, 904 F.2d at
1257. Frequently, defendants willcommingle the proceeds of specified
unlawful activity with legally derived
funds. In United States v. Jackson, the333

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court addressed this issue and stated,§1956(a)(1)(B)(i) require[s] only thata transaction “involve[ ]” the proceedsof an activity which the participant
knows is unlawful, and which in fact
“involves” the proceeds of one of thetypes of criminal conduct identified in§ 1956(c)(7). We do not read Congress’
use of the word “involve” as imposing
the requirement that the government
trace the origin of all the funds
deposited into a bank account todetermine exactly which funds wereused for what transaction. Moreover,
we cannot believe that Congress
intended that participants in
unlawful activities could prevent theirown convictions under the money
laundering statute simply bycommingling funds derived from both
“specified unlawful activity” and otheractivities.
935 F.2d at 840. See also United States
v. Johnson, 971 F.2d 562 (10th Cir. 1992);
United States v. Poster ‘N’ Things, 969 F.2d
652 (8th Cir. 1992).
4. Specific Intent - Intent to Promote
Specified Unlawful Activity
This element requires the government
to prove that the defendant conducted or
attempted to conduct a financialtransaction with the intent to promote a
specified unlawful activity. Courts havefound that the reinvesting of illegal
proceeds into an illegal enterprise are thetypes of activities which can show an intent
to promote a specified unlawful activity.
United States v. Hildebrand, 152 F.3d 756,
762 (8th Cir. 1998) (payments for officesupplies, secretarial services and staff
wages constitute transactions with intent
to promote an on-going fraud scheme);
United States v. Mirabella, 73 F.3d 1508
(9th Cir. 1996) (using fraud proceeds to pay
commissions to persons who brought in334

more victims promoted specified unlawful
activity); Unites States v. Munoz-Romo,
947 F.2d 170 (5th Cir. 1991) (purchase ofhouse in which cash from drug sales were
hidden, and purchase of cars used to drive
to sites of drug sales are transactions that
promote specified unlawful activity).
Additionally, where a defendant distributes
the proceeds to other co-conspirators oruses the proceeds to keep the scheme
ongoing are instances which the courts
have found to promote the specified
unlawful activity. United States v.
Coscarelli, 105 F.3d 984, 990 (5th Cir. 1997),
aff ’d en banc, 149 F.3d 342 (5th Cir. 1998)(using proceeds of telemarketing fraud to
pay co-conspirators and overhead expenses
promote the fraud scheme); United States
v. Masden, 170 F.3d 790 (7 th Cir. 1999)(using money from new investors to pay off
earlier investors - as in a classic Ponzi
scheme - promotes the scheme because it
foster good will and nurtures false
impression that investors who want theirmoney back will be paid).
5. Specific Intent - Intent to Engage in a
Violation of § 7201 or § 7206 of theInternal Revenue CodeThis element requires the government
to prove that the defendant conducted afinancial transaction with the intent toevade Federal taxes. In an analysis
explained by the chairman of the Senate
Judiciary Committee:[This provision] is vital to the effective
use of the money laundering statuteand would allow the Internal Revenue
Service with its expertise ininvestigating financial transactions toparticipate in developing cases under§1956. Under this provision any
person who conducts a financialtransaction that in whole or in part
involves property derived fromunlawful activity, intending to engage
in conduct that constitutes a violationof the tax laws, would be guilty of a

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money laundering offense13
The scope of subsection (a)(1)(A)(ii) is
controlled to a large extent by the reach of§ § 7201 and 7206 of the Internal Revenue
Code of 1986. Consequently, in seeking todetermine whether a defendant has actedwith intent to violate § 7201 or § 7206,
those sections must be consulted. In
general, § 7201 covers attempted tax
evasion (willfully attempt in any manner
to evade or defeat any tax or the payment
thereof) and § 7206 covers the preparationand filing of false tax returns and otherfalse documents. The subsection, therefore,
essentially extends to a person who
engages in a financial transaction involving
proceeds derived from specified unlawful
activity with the intent to evade thepayment of taxes or with the intent tosubmit a materially false tax return or
document to the IRS. Conduct evidencing
this type of intent has been found where
the defendant failed to report thelaundered funds as income or disguise thetransfer of illegal proceeds as a loan
payment. United States v. Suba, 131 F.3d.
662 (11th Cir. 1998) (defendant’s failure toreport three checks on him income tax
return is evidence that he laundered themwith intent to evade taxes); United Statesv. Zanghi, 189 F.3d 71 (1 st Cir. 1999)(transferring fraud proceeds in a mannerdesigned to make it appear to be a loan
payment instead of income violates the tax
laws and is sufficient to show an intent toevade taxes). This intent element is rarely
charged by prosecutors because of thenecessity of obtaining approval by the Tax
Division of the U.S. Department of Justice.

13 134 Cong. Rec. S17367 (daily ed. November 10,1988) (statement of Sen. Biden).

6. Specific Intent - Intent to Conceal or
Disguise the Nature, Location, Source,
Ownership, or Control of Proceeds ofUnlawful Activity
This element requires the government
to prove that the defendant conducted or
attempted to conduct a financialtransaction knowing that the transaction
was designed, in whole or in part, to conceal
the nature, the location, source, ownershipor control of the proceeds of specified
unlawful activity. The Tenth Circuit inUnited States v. Sanders, 929 F.2d 1466,
1470-1473 (10th Cir.), cert. denied, 112
S.Ct. 143 (1991), explored the requirementsof this element. In reversing the money
laundering convictions of the defendants
who had used drug proceeds to purchaseautomobiles, the court noted that merely
spending the proceeds of illegal activities
did not violate the money laundering
statute. The court further stated that,the purpose of the money laundering
statute is to reach commercial
transactions intended (at least inpart) to disguise the relationship of
the item purchased with the person
providing the proceeds and that theproceeds used to make the purchasewere obtained from illegal activities.
Id. In reversing the conviction, the courtemphasized that no third-parties wereinvolved and no effort was made to conceal
the identity of the defendants as thepurchasers. Id.
The Tenth Circuit further clarified its
holding concerning this issue in UnitedStates v. Edgmon, 952 F.2d 1206 (10th Cir.
1992), cert. denied, 1992 WL 127032(1992), and United States v. Lovett, 964
F.2d 1029 (10th Cir. 1992). In Edgmon, thecourt upheld the defendant’s money
laundering conviction where the factual
circumstances suggested a complicatedscheme which used a third-party to conceal

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RESOURCE MATERIAL SERIES No. 58
the true ownership of the proceeds. The
court stated, “The involved transactions,unlike the simple automobile purchases in
Sanders, certainly support a finding underthe money laundering statute of intent toconceal the origin or nature of the proceedsof unlawful activity.” United States v.
Edgmon, 952 F.2d at 1211. In Lovett, thedefendant was charged, among otherthings, with four counts of money
laundering under § 1956(a)(1)(B)(i). The
court applied the standards relied on in
Sanders to each of the four counts. The
court upheld Lovett’s convictions on two
counts where he instructed his brother not
to tell the victim about the purchase of thepick-up truck and where he gave a numberof conflicting statement regarding thesource of the cash used in the purchase ofa home. The court reversed the remaining
two counts, where the defendant had
purchased a car for his own use and adiamond ring for his wife, by concludingthat the government had failed to introduce
any direct evidence supporting thedefendant’s intent to conceal or disguise theorigin of the proceeds used in thosetransactions. The court found, however,that neither the money laundering statutenor its holding in Sanders created arequirement that “every money launderingconviction must be supported by evidence
of intent to conceal the identity of theparticipants of the transaction.” UnitedStates v. Lovett, 964 F.2d at 1034. The
court further stated,
To find that the money laundering
statute is aimed solely at thosetransactions designed to conceal theidentity of the participants to thetransaction is to ignore the broad
language of the statute. We see noreason why the concealment
requirement may not be met by otheraffirmative acts related to thecommercial transaction — acts
designed to quell the suspicions of336

third parties regarding the nature,
location, source, ownership or controlof the proceeds of the defendant’s
unlawful activity. . . [T]he statute is
aimed broadly at transactions
designed in whole or in part to conceal
or disguise in any manner the nature,
location, source, ownership or controlof the proceeds of unlawful activity.
Id. at 1034, n. 3.
The Seventh Circuit, while endorsing thecourt’s reasoning in Sanders, upheld themoney laundering conviction of the
defendant in United States v. Jackson, 935
F. 2 d a t 8 4 1 , w h e r e t h e d e f e n d a n t
commingled the proceeds of his drug
distribution operation with the “legitimate”
funds deposited in the business accounts.
The court found that the very act ofcommingling the funds was itself
suggestive of a design to hide the source of
ill-gotten gains. Id. at 840. The court
further explained that:[t] he conversion of cash into goods
and services as a way of concealing or
disguising the wellspring of the cash
is a central concern of the money
laundering statute... To convict under§ 1956(a)(1)(B)(i) the government
must prove not just that the defendant
spent ill-gotten gains, but that theexpenditures were designed to hide
the provenance of the funds involved.
Id. at 841-842. See also United States v.
P o s t e r s ‘ N ’ T h i n g s , 9 6 9 F. 2 d 6 5 2(defendant’s commingling in one accountof legitimate business receipts andillegitimate receipts was evidence ofdefendant’s intent to disguise the natureor source of the proceeds from her unlawful
business); United States v. Beddow, 957
F.2d 1330, 1335 (6th Cir. 1992) (evidence
of defendant’s convoluted financial dealings
with his banks and his charter boat

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business supported a conclusion that heintended to disguise the illegal source of
his money); United States v. Isabel, 945
F.2d 1193 (1st Cir. 1991) (receiving cashfrom drug dealer with no legitimate sourceof income and issuing false payroll checkin return is evidence of intent to conceal
the illegal source of the money); UnitedStates v. Sutera, 933 F.2d 641, 648 (8th Cir.
1991) (defendant deposited illegal
gambling proceeds into business accountwhich he used to pay personal bills andgambling expenses; while the money could
have been better hidden, a reasonable jury
could find that the defendant had the intent
to hide the gambling proceeds); UnitedStates v. Martin, 933 F.2d 609 (8th Cir.
1991) (evidence which showed the purchaseof stock with drug proceeds and theissuance of the stock certificates in thename of a third party instead of thepurchaser was sufficient to prove
defendant’s intent to conceal or disguise);
United States v. Massac, 867 F.2d 174, 178(3d Cir. 1989) (intent to conceal foundwhere defendant, a drug dealer, used a cashtransmitting business, rather than a bank,to transfer $22,000 in cash to Haiti over a
five month period). Cf. United States v.
Gonzalez-Rodriguez, 966 F.2d 918, 925-926(5th cir. 1992) (no evidence of concealment
found where defendant readily cooperated
with law enforcement officers, voluntarily
disclosing her possession of the cash andturning it over to the agents for counting,and she made no false exculpatory
statements to the agents).
Specific Intent - Intent to Avoid aFederal or State Reporting
Requirement
This element requires the government
to prove that the defendant conducted or
attempted to conduct a financialtransaction knowing that the transaction
was designed, in whole or in part, to avoid
a federal or state reporting requirement.
In this context, the federal or state
7

reporting requirements include all thefederal and state currency transaction
reports as well as state campaign financereporting laws. Most cases in which thecourts have found evidence of this intent
involve instances where the defendant“structured” deposits or payments underthe $10,000 reporting threshold. See
United States v. Morales, 108 F.3d 1213
(10th Cir. 1997) (purchase of bar with 50
payments under $10,000 evidenced intent
to avoid a reporting requirement); UnitedStates v. Griffin 84 F.3d 912 (7th Cir. 1996)(converting $99,810 in drug proceeds tocashier’s checks in amounts under $10,000
is a violation of this element); United States
v. Patino-Reyes, 974 F.2d 94 (8th Cir. 1992)(defendant buys two cashier’s checks inamounts under $10,000, evading CTR
requirement, and uses checks to buy boat,
evading Form 8300, reporting
requirement).
D. Elements of Section 1956(a)(2)Subsection 1956(a)(2) provides that
whoever transports, transmits, ortransfers, or attempts to transport,
transmit, or transfer a monetary
instrument or funds from a place in the
United States to or through a place outside
the United States or to a place in the
United States from or through a placeoutside the United States (A) with theintent to promote the carrying on of
specified unlawful activity; or (B) knowingthat the monetary instrument or funds
involved in the transportation,transmission, or transfer represent theproceeds of some form of unlawful activity
and knowing that such transportation,transmission, or transfer is designed inwhole or in part (i) to conceal or disguisethe nature, the location, the source, theownership, or the control of the proceedsof specified unlawful activity; or (ii) to avoid
a transaction reporting requirement under
State or Federal law... [is guilty of an
offense].

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RESOURCE MATERIAL SERIES No. 58
Unlike § 1956(a)(1), which has threeelements common to all of its subdivisions,the elements of this statute differ from
subdivision to subdivision. Only the“transportation, transmission, or transfer”
element, which corresponds to the“financial transaction” element of §1956(a)(1), is common to all parts of thestatute.
1. Transportation, Transmission, orTransfer
Prior to the 1988 amendments,
subsection 1956(a)(2) prohibited “monetarytransportation” offenses using theoperative term “transports or attempts totransport.” The term “transport” wasundefined and the Department of Justiceconcluded that the term encompassed allmeans of transporting funds or monetary
instruments, including wire transmissions,electronic fund transfers, etc. Thisconclusion was reinforced by the fact thatthe statute proscribed the transportationof “funds” in addition to “monetary
instruments” and left the term “funds”
undefined. Thus, the transportation of“funds” arguably included electronic fundtransfers and other forms of non-paper
financial transfers.
Subsection 6471(b) of the Anti-Drug
Abuse Act of 1988 amended the statute to
replace the phrase “transports or attempts
to transport” with the phrase “transports,
transmits, or transfers, or attempts totransport, transmit, or transfer.” Thelegislative history indicates that by adding
the terms “transmit” and “transfer,”
Congress intended only to clarify the scopeof activities that it thought was alreadyembraced within the term “transport.” 14
Section 1531 of the Annunzio-Wylie AntiMoney Laundering Act of 1992 replaced theterm “transportation,” as it appeared in §14 See 134 Congressional Record, S17360 (daily ed.,November 10, 1988) (statement of Sen. Biden).

338

1956 (a)(2) and (b), with “transportation,transmission, or transfer.”
All of the subdivisions of subsection
1956(a)(2) apply to situations in which aperson transports or attempts to transport“monetary instruments” (as defined insubsection 1956(c)(5)) or funds into or outof the United States for certain illicit
purposes. Which of the other elements
apply depends on which of the specificintent alternatives is alleged.
2. With the Intent to Promote theCarrying on of Specified Unlawful
Activity
The offense described in § 1956(a)(2)(A)requires that the transportation,transmission, or transfer, or attemptedtransportation, transmission, or transfer
be carried out “with the intent to promote
the carrying on of specified unlawful
activity.” Unlike the corresponding
provision in subsection 1956(a)(1)(A)(i),there is no requirement in this subsectionthat the monetary instrument or funds be
the product of specified unlawful activity.15
Nor is there any “knowledge” requirement.
Prosecutors must only establish that thedefendant transported, transmitted, ortransferred, or attempted to transport,
transmit, or transfer the monetary
15 See United States v. Piervinazi et al., Nos.

921473,1474 (2nd Cir. May 2, 1994)(Noting thedistinction between § § 1956(a)(1), 1957 and1956(a)(2) with respect to the element of proceeds).
It is important to note that the absence of arequirement that the monetary instruments orfunds be the proceeds of unlawful activity would
allow for the use of government funds in “sting”
and other types of operations where government
agents provide the instruments or funds to belaundered. Thus, if an individual or domestic
money laundering organization was willing tolaunder its money through outbound currencytransportation, the use of government funds would
not preclude an otherwise viable subsection

117TH INTERNATIONAL SEMINAR
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instrument or funds with the “intent topromote the carrying on of specified
unlawful activity.
In a Second Circuit case, United States
v. Piervinazi et al., 23 F.3d 670 (2d Cir.
1994), the court was called upon to examine
the promotion intent prong in a § 1956(a)(2)context. In this case, defendant argued
that the overseas transmission or attempt
must accomplish some “secondary”
criminal purpose separate and apart fromthe particular activity generating theproceeds in order to promote some future
criminal activity. The court there held thatthe intent to promote in an (a)(2)(A) context
was satisfied by finding that the purposeof the international transportation, ortransmission, or attempt, was to promote
the very activity underlying the transfer,and did not require proof that “thelaundering would promote subsequentcriminal activity.” Thus, assuming the
purpose of the transfer were proven to havebeen to promote an ongoing bank or wire
fraud, then § 1956(a)(2)(A)’s requirements
were satisfied.
3. With the Intent to Conceal or Disguisethe Nature, Source, etc., of the Proceedsof Specified Unlawful Activity
This subsection adds two or threeelements of proof to a subsection 1956(a)(2)prosecution. First, like subsection
1956(a)(1)(B)(i), it requires that thedefendant know that the monetary
instrument or funds involved in thetransportation or attempted transportation
1956(a)(2)(A) prosecution if it could be establishedthat the purpose of the transportation was topromote the carrying on of specified unlawful
activity (§ 1956 (c)(7)). The absence of arequirement that the monetary instruments orfunds be the proceeds of unlawful activity would
also be useful in a circumstance where legitimate
funds are transferred to influence participation ina specified unlawful activity.

represent the proceeds of some form of
unlawful activity. The analysis applicableto subsection 1956(a)(1) in regard to thiselement is applicable to subsection
1956(a)(2)(B)(i) prosecutions.
Second, like subsection 1956(a)(1)(B)(i),this subsection requires proof that thetransportation was designed in whole orpart “to conceal or disguise the nature, thelocation, the source, the ownership, or thecontrol of the proceeds of specified unlawful
activity.”16
Third, there is at least an implicationthat the transportation, transmission ortransfer must involve the proceeds ofspecified unlawful activity. The statute is
ambiguous in this regard. On the one hand,as mentioned above, § (a)(2), unlike
subsection (a)(1), contains no generally
applicable proceeds requirement.17 On theother hand, Congress included a reference
to “the proceeds of specified unlawful
activity” in subparagraph (a)(2)(B)(i),suggesting that for the purposes of thisprovision only, a violation of § 1956(a)(2)
occurs only when the proceeds of specified
unlawful activity are involved.
Section 108 of the Crime Control Act of1990 eases the government’s burden of
proof with respect to both of the knowledge
requirements in 18 U.S.C. § 1956(a)(2)(B).
The amendment specifically makes it
possible to satisfy these requirements byhaving an undercover agent or confidential
informant make representations to thedefendant concerning the source of themoney and the purpose of the transaction.
Thus, in a case under § (a)(2)(B), the16 The legislative history of this section is Sec. 510 of

S.1970; and Sec. 1410 of S. 1972, 101st Cong. See
135 Congressional Record, S16760 (daily ed.,November 21, 1989).
17 See United States v. Hamilton, 931 F.2d 1046, 1052
(5th Cir. 1991).

339

RESOURCE MATERIAL SERIES No. 58
government could satisfy the knowledge
requirements by having a confidential
informant, working under the direction ofa federal agent, tell the defendant that theproperty being sent into or out of the wasto disguise the ownership of the property.
4. With the Intent to Avoid a Transaction
Reporting Requirement under State orFederal Law
This element, like subsection (B)(i)above, requires proof that the defendant
knew that the monetary instruments orfunds involved in the transportation,transmission, or transfer or attemptedtransportation, transmission, or transfer
represent the proceeds of some form of
unlawful activity. But this provision
already does not require the government
to prove that the property was, in fact, theproceeds of specified unlawful activity. In
addition, subsection (a)(2)(B)(ii) adds theelement of proof that such transportation
be designed in whole or part “to avoid atransportation reporting requirement
under State or Federal law.” Thus, all thathas to be proven in addition to thetransportation element is that: (1) the
defendant knew the funds to be the productof some kind of unlawful activity; and (2)the defendant knew that the purpose of the
movement in or out of the country was to
avoid a reporting requirement. Both ofthese elements may, after the 1990
amendments, be established with evidenceof a proper representation by a law
enforcement officer, and evidence that thedefendant believed the law enforcement
officer’s representation to be true.
In United States v. Ortiz, 738 F.Supp.
1394, 1398-1400 (S.D. Fla. 1990), theportion of § 1956(a)(2) that requires thegovernment to prove that the defendant
dealt with proceeds “knowing” the proceeds
were criminally derived was challenged as
ambiguous. In Ortiz, the defendant was
charged with attempting to transport

340$497,000 in U.S. currency from Miami toa place outside the United States knowingthat the money was the proceeds of someunlawful activity and knowing that the
movement of the funds was designed to
avoid the transaction reporting
requirement. The court found no
ambiguity. Citing § 1956(c)(1)’s definitionof “knowing that the property involved ina financial transaction represents theproceeds of some form of unlawful activity,”
the court said the following: “Thisdefinition suggests that the statute isapplicable to the transportation of theproceeds of any felonious activity where thedefendant has knowledge that the proceeds
are derived from felonious activity”. See
also United States v. Levine, 750 F. Supp.
1433 (D. Colo. 1990) (language inindictment charging defendant acted“knowing that the transactions were
designed ... to conceal or disguise thenature ... of the proceeds of these specified
unlawful activities” is a sufficient chargethat the defendant also knew thattransactions involved illegal proceeds);
United States v. Lizotte, 856 F.2d 341 (1stCir. 1988).
E. Elements of Subsection 1956(a)(3)- Undercover “Sting” Operations
In 1988, § 6465 of the Anti Drug Abuse
Act created an entirely new money
laundering offense that may be committed
as a result of a government “sting”
operation. 18 U.S.C. § 1956(a)(3)18 states:
Whoever, with the intent (A) to promote thecarrying on of specified unlawful activity;(B) to conceal or disguise the nature,
location, source, ownership or control ofproperty believed to be the proceeds ofspecified unlawful activity; or (C) to avoid
a transaction reporting requirement under
State or Federal law conducts or attempts
18 Enacted by § 6465 of the Anti-Drug Abuse Act of1988, Pub. L. 100-690, 102 Stat. 4375, eff. Nov. 18,
1988.

117TH INTERNATIONAL SEMINAR
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to conduct a financial transaction involving
property represented to be the proceeds ofspecified unlawful activity, or property used
to conduct or facilitate specified unlawful
activity, shall be fined under this title or
imprisoned for not more than 20 years, or
both.
The term “represented” is defined in thissubsection as meaning any representation
made by either a law enforcement officer
or by another person at the direction of, orwith the approval of, a federal official
authorized to investigate or prosecute
violations of 18 U.S.C. § 1956. Subsection
1956(a)(3) was added to the statuteexpressly to permit prosecution where thedefendant believed the proceeds were
derived from specified unlawful activity
because of a representation made by a law
enforcement officer or an informant
working under the officer’s control. In his
analysis of § 6465 of the Anti-Drug Abuse
Act of 1988,19 which added subsection (a)(3)
to 18 U.S.C. § 1956, Senator Joseph R.
Biden, Jr., Chairman of the Senate
Judiciary Committee, said the following:This amendment to the money
laundering statute, 18 U.S.C. § 1956,
would permit undercover law
enforcement officers to pose as drugtraffickers in order to obtain evidence
necessary to convict money
launderers. The present statute does
not provide for such operations
because it permits a conviction only
where the laundered money “in fact
involves the proceeds of specified
unlawful activity.” 18 U.S.C. §1956(a)(1). Since money provided byan undercover officer posing as a drugtrafficker does not “in fact” involve
drug money, the laundering of suchmoney is not presently an offense
under the statute.20
19 Pub. L. 100-690, 102 Stat. 4375.

1. The Representation ClauseA s a m e n d e d i n 1 9 9 2 , 21 t h e
representation clause of § 1956(a)(3) reads
as follows:“... involving property represented to be
the proceeds of specified unlawful activity,or property used to conduct or facilitate
specified unlawful activity ...” Thus, it is
an offense under § 1956(a)(3) if a law
enforcement officer says, “this is drugmoney” and the defendant uses the money(or attempts to use the money) to conduct
a financial transaction with one of thealternative intents specified insubparagraphs (A), (B) or (C), i.e., topromote future specified unlawful activity(such as buying an airplane to be used for
drug smuggling); to conceal or disguise theownership of the money (such as by wiring
it to an account held by a fictitious
corporation); or to violate a currency
reporting requirement (such as byengaging in structured deposits). It is also
an offense under § (a)(3) if the officer says,“this is an airplane/firearm/farm used tofacilitate drug trafficking” and thedefendant then engages in a financialtransaction involving that property with
one of the specific intents.
Congress saw the elimination of theknowledge and proceeds requirements asjustified only because the representation
requirement was to be added. The
legislative history makes clear that the
representation element was seen as an
20 134 Cong. Rec. S17365 (daily ed. November 10,1988). Section 6465 was derived from § 2353 of
S.2852, 100th Cong., 2d Sess., the Senate versionof what became the Anti-Drug Abuse Act of 1988.
The original Senate language of the provisionappears at 134 Cong. Rec. S14335 (daily ed. October
3, 1988). An analysis of that language appears, id.
at pp. S14072 and S14096.
21 See § 1531 of the Annunzio-Wylie Anti-Money
Laundering Act of 1992.

341

RESOURCE MATERIAL SERIES No. 58
essential element of the new statute. Thus
the proper reading of the representation
clause is that, whereas a representation isessential, the officer or other authorizedindividual may make either of two kindsof representations: 1) that the property is
the proceeds of criminal activity, or 2) thatthe property was used to conduct or
facilitate criminal activity.
The representation need not be explicit.
Ambiguous statements concerning theillegal derivation of the funds are sufficient
to satisfy the representation element aslong as the agent suggests that he isinvolved in an illegal activity. In UnitedStates v. Breque, 964 F.2d 381 (5th Cir.),cert. denied, 113 S.Ct. 1253 (1993), forexample, the undercover IRS agent never
explicitly told the defendant that themoney he was laundering through hiscurrency exchange business was drugmoney. However, based on the defendant’s
responses to the agent’s veiled references
to drug dealing, including a suggestion tohis co-conspirator that they charge a higher
commission because of the dangers
involved in dealing with drug traffickers,
the court held that a jury could infer thatthe defendant knew that the money had
been represented as drug money. Similarly,
in United States v. Kaufmann, 985 F.2d 884(7th Cir. 1993), a government agent buying
a Porsche automobile from the defendant
never explicitly stated that the $40,000 in
cash he was using was drug proceeds. The
court held that the government need notprove that the agent expressly indicatedthe source of the cash to the defendant, butrather “[i] t is enough that the government
prove that an enforcement officer orauthorized person made the defendant
aware of circumstances from which a
reasonable person would infer that theproperty was drug proceeds.” Id. at 893.
In addition, there is no requirement thatagents in sting operations “recite thealleged source” of the represented tainted342

funds at each transaction during the courseof a sting operation. According to the Fifth
Circuit, doing so would place an
unnecessary burden on the government’s
ability to carry out credible sting
operations. See United States v. Arditti,
955 F.2d 331, 339 (5th Cir. 1992).
2. Differences in Intent Requirements in(a)(1) and (a)(3)Congress recognized that thesubstitution of the representation
requirement in (a)(3) for the knowledge andproceeds requirements in (a)(1) was
imperfect: a knowledge requirement
applies to all defendants; to be convictedof an offense under (a)(1), even an aider
and abetter has to know that the property
was derived from some form of unlawful
activity. The representation requirement,
however, is not part of the mens rea of theoffense. To compensate for the eliminationof the knowledge requirement from themens rea, Congress made the intent
requirement in (a)(3) stricter than it is in(a)(1). Senator Biden addressed this point
as follows:
While this [the fact that the
representation requirement is notpart of the mens rea] would mean thateveryone involved in the financialtransaction would be guilty of thisoffense whether he was aware of thelaw enforcement officer ’s
representation or not, thestrengthened specific intent
requirement would guard against
innocent persons being prosecuted.22
The reference to the “strengthened
specific intent requirement” is todifferentiate between the language in §§1956(a)(1)(B)(i) and (ii) and the languagein §§ 1956(a)(3)(B) and (C). While the threealternative intent elements of subsection(a)(3) are very similar to the threecorresponding elements in the original

117TH INTERNATIONAL SEMINAR
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version of subsection (a)(1), they are not
identical. The second and third
alternatives in (a)(3) require proof of
specific intent “to conceal or disguise thenature, location, source, ownership, or
control” of the criminal proceeds, §1956(a)(3)(B), or “to avoid a transaction
reporting requirement,” § 1956(a)(3)(C). In
contrast, subsection (a)(1)(B) requires only
proof that the defendant had knowledge
that the purpose of the transaction was “toconceal or disguise the nature, location,
source, ownership, or control” of thecriminal proceeds, § 1956(a)(1)(B)(i), or “toavoid a transaction reporting
requirement,” § 1956(a)(1)(B)(ii). The
legislative history suggests that the “hadknowledge” requirement of (a)(1) is aweaker standard than the specific intent
requirement of (a)(3).23
F. 18 United States Code Section
1957 - Engaging in Monetary
Transactions in Property Derived
from Specified Unlawful Activity
Section 1957 contains an offense
entitled, “Engaging in monetarytransactions in property derived from
specified unlawful activity.” In essence,subsection 1957(a) proscribes the knowing
disbursement or receipt of over $10,000 of
criminally derived funds if a financial
institution is utilized at some point. The
statute does not require that these funds
be used for any additional criminal purpose
nor that the defendant engaged in thetransaction with any specific intent. For
example, assuming more than $10,000 was
involved, the deposit in a bank of theproceeds of a house sale by a seller who
knows that these proceeds were funds
derived from drug dealing would constitutea violation of this statute. Thus, § 1957 is
22 134 Cong. Rec. S14072, S14096 (daily ed., October

3, 1988).
23 134 Cong. Rec. S14072, S14096 (daily ed., October

3, 1988).

the equivalent of a financial transaction
offense under § 1956(a)(1) with the specificintent requirements replaced by therequirement that the transaction involve$10,000 and a financial institution.
1. Essential Elements
The elements of § 1957 are: (1) an
individual must engage or attempt toengage in a “monetary transaction”;24 (2)the defendant must know that the property
involved in the transaction is criminallyderived; and (3) the property must in fact
be derived from “specified unlawful
activity.”25

24 The term “monetary transaction”, as originallydefined in Subsection 1957(f)(1), included: thedeposit, withdrawal, transfer or exchange, in oraffecting interstate or foreign commerce, of funds
or monetary instrument . . . by, through, or to afinancial institution (as defined in 31 U.S.C. §5312(a)(2)). Additional language was added in 1988
to state that the term “monetary transaction” . . .
does not include any transaction necessary topreserve a person’s right to representation as
guaranteed by the Sixth Amendment to theConstitution. . . .” The term “monetary instrument”
in § 1957 as originally enacted was given the samedefinition as under 31 U.S.C. § 5312(a)(3) and 31
C.F.R. § 103.11(k). This definition includes U.S.
currency and all negotiable instruments that areeither in bearer form, endorsed without restriction,
made out to a fictitious payee, or otherwise in suchform that title thereto passes immediately upondelivery.
Effective November 18, 1988, § 6184 of the ADAA
amended 18 U.S.C. § 1957(f)(1) to specify that theterm “monetary instrument” was to have the samedefinition as in 18 U.S.C. § 1956(c)(5), which is asfollows:
1. coin or currency of the United States or of any
other country, travelers’ checks, personal checks,bank checks, money orders, or
2. investment securities or negotiable instruments
in bearer form or otherwise in such form that
title thereto passes upon delivery.

343

RESOURCE MATERIAL SERIES No. 58(a) Monetary Transaction
The term “monetary transaction” isnarrower than the term “financialtransaction” as used in § 1956 in that it
requires that a financial institution and at
least $10,000 be involved in thetransaction. This is the only substantive
provision of either § 1956 or § 1957 that
requires that a financial institution
participate or otherwise be connected to thetransaction in order for that transaction to
be criminal money laundering. But thedefinition of “financial institution” in §5312 of Title 31 is extremely broad. Thus,
for example, a transaction occurring at a
car dealership or a jewelry store is a“monetary transaction” under § 1957.
A defendant may violate § 1957 simply
through the deposit of proceeds from anunderlying offense. In United States v.
Griffith, 17 F.3d 865 (1994), the Court
affirmed the § 1957 conviction of the
defendant who deposited proceeds received
from the transfer of fraudulently procured
camera equipment. In United States v.
Lovett, 964 F.2d 1029 (10th Cir.), thedefendant embezzled funds from his
grandmother’s bank accounts, and used themoney as collateral for a loan. The Tenth
Circuit held that each time the defendantdeposited loan proceeds, which he had
divided into six separate checks, he violated§ 1957. Similarly, in United States v.
Hollis, 971 F.2d 1141 (10th Cir. 1992), thedefendant was convicted under § 1957 fordepositing checks from a completed wire
fraud scheme. One court has even held that
simply spending proceeds will violate §1957. See United States v. Kelley, 929 F.2d
582, 585 (10th Cir.), cert. denied, 112 S.Ct.
341 (1991)(defendant used proceeds offraudulently obtained loan to buy a car).

25 Subsection 1957(f)(3) defines “specified unlawful

activity” in accordance with the definition containedin subsection 1956(c)(7).

344(b) Knowledge and Proceeds
The knowledge requirement containedin § 1957 is only that the individual knowthat the monies involved are derived fromsome kind of criminal activity. There is norequirement of knowledge that the funds
be derived from any particular kind ofcrime or, indeed, that the funds were
derived from a felony rather than amisdemeanor. The proceeds requirement
is identical to the analogous provision in §1956(a)(1). Thus the knowledge andproceeds elements of a § 1957 offense are
not unlike the same elements under § 1956,
and the same case law is applicable to both.
III. RECENT DEVELOPMENTS IN
THE U.S. STRATEGY AGAINSTMONEY LAUNDERINGOn October 15, 1998, Congress passed
the Money Laundering and Financial
Crimes Strategy Act of 1998. The Act,
which was introduced by Congresswoman
Nydia Velazquez of New York and signed
into law by President Clinton, called upon
the President, acting through the Secretaryof the Treasury and in consultation with
the Attorney General, to develop a national
strategy for combating money launderingand related financial crimes. The Act called
for the first national strategy to be sent toCongress in 1999, and updated annuallyfor the following four consecutive years.
The first annual strategy was released on
September 23, 1999. The National Money
Laundering Strategy for 2000 was releasedon March 8, 2000, at a press conference cochaired by Deputy Attorney General Eric
Holder and Deputy Treasury Secretary
Stuart Eizenstat.
The 2000 Strategy is organizedaccording to four overarching goals:(1) to strengthen domestic enforcement
in order to disrupt the flow of illegalmoney;

117TH INTERNATIONAL SEMINAR
VISITING EXPERTS’ PAPERS(2) t o e n h a n c e r e g u l a t o r y a n dcooperative public-private efforts toprevent money laundering;(3) to strengthen partnerships withstate and local governments to fightmoney laundering throughout theUnited States; and(4) t o s t r e n g t h e n i n t e r n a t i o n a lcooperation in order to disrupt the
global flow of illicit money.
These four goals are supported by
identified objectives which, in turn, are to
be accomplished through approximately 65
specific action items set out in the strategy.
The following are summaries of the mostsignificant action items:
A. Designation of High Intensity
Financial Crime Areas (HIFCAs)
The designation of HIFCAs was
mandated by the 1998 legislation and was
the first action item in the 1999 Strategy.
HIFCAs are defined as special, high-riskareas or sectors where law enforcement willconcentrate its resources and energy tocombat money laundering. The Justice andTreasury Departments led a process to
identify and designate the first HIFCAs.
As part of this process, the two
departments convened an interagency
HIFCA Working Group to collect andanalyze relevant information and makerecommendations to the Deputy Attorney
General and the Deputy Treasury
Secretary for the HIFCA designations. The
2000 Strategy designated the first HIFCAs:(1) the New York City/Northern New Jersey
area; (2) the Los Angeles, California,
metropolitan area; (3) San Juan, Puerto
Rico; and (4) a “systems” HIFCA to focus
and enhance current efforts addressing the
problem of cross-border currency
smuggling/movements between Mexicoand Texas and Arizona.
The HIFCA programme is intended toconcentrate law enforcement efforts at thefederal, state, and local levels to combat
money laundering in the designated highintensity money laundering zones. In orderto implement this goal, money laundering
action teams have been created or
identified within each HIFCA to spearheada coordinated federal, state, and local antimoney laundering effort. Future HIFCAs
will be selected from applications received
from prospective areas or from candidates
proposed by the Secretary of the Treasuryor the Attorney General.
B. Financial Crime-Free
Communities Support
Programme (C-FIC)
The 2000 Strategy announces thelaunching of the C-FIC programme. The
C-FIC programme is also the result of alegislative mandate which calls for theestablishment of a federal grant
programme to provide seed capital for
emerging state and local counter-money
laundering enforcement efforts. The
Bureau of Justice Assistance (BJA) is
assisting the Treasury Department in
administering this grant programme.
Congress appropriated $2.9 million in fiscal
year 2000 for the commencement of thisprogramme. The first nine recipients for
C-FIC grants were announced in
September 2000 and included a variety of
programs proposed by state and local law
enforcement agencies in New York, Illinois,
Arizona, Florida, Texas and California.
C. Money Service BusinessSuspicious Activity Report (SAR)
Reporting
In conjunction with the release of thestrategy, the Treasury Department
announced the issuance of final
regulations, effective December 31, 2001,
mandating that money transmitters,
issuers, sellers, and redeemers of moneyorders and traveler’s checks must reportsuspicious transactions to the Treasury
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D. Financial Crime Havens
The 1999 Strategy called for theformation of an interagency working group
to explore whether measures should be
adopted to restrict financial institutions in
the United States from opening ormaintaining correspondent banking
accounts for foreign banks that areorganized in “lax” offshore jurisdictions.
This initiative was pursued in conjunction
with the Financial Action Task Force’s
initiative which resulted in the naming offifteen Non-cooperative Countries andJurisdictions in June 2000. The issuanceof this list was followed by the issuance ofFinCEN Advisories to United States
financial institutions concerning the fifteen
designated jurisdictions.
E. “Gatekeepers”
Pursuant to the 1999 Strategy, aninteragency working group was created to
examine the responsibilities ofprofessionals, such as lawyers andaccountants, with regard to money
laundering. The 2000 Strategy directed theworking group to continue its review and“to make recommendations - ranging fromenhanced professional education,
standards or rules, to legislation - as might
be needed.” In April 2000, a meeting ofrepresentatives from the G-7 countries wasconvened in Washington, D.C. to discuss
this issue. Because of the difficult legal
and policy issues involved when
considering the responsibilities of lawyers
and accountants in this area, the working
group will continue to study this issue andprepare recommendations for the Steering
Committee in 2001.
F. Proposed Legislation
The Treasury Department announced
that, in conjunction with the 2000 Strategy,
the administration was sending new antimoney laundering legislation to Congress.
T h e I n t e r n a t i o n a l C o u n t e r- M o n e yLaundering Act of 2000 offered critically346

needed new authority to take calibrated
action against foreign financial crime
havens. In addition to seeking enactmentof the Treasury bill, the 2000 Strategy
called for the administration to seek
enactment of the Justice Department’s
Money Laundering Act of 2000, which was
submitted to Congress on November 10,
1999. This bill contained numerous
provisions which would enhance theeffectiveness of the money laundering
statutes. However, neither of these bills
was enacted in 2000. It is expected thatthese bills will be re-submitted to Congressin 2001.
In conjunction with the announcementof the 2000 Strategy, on March 7, 2000, theAttorney General and the Secretary of theTreasury issued a joint memorandum to all
U.S. Attorneys (USAs) and the heads ofall of the federal law enforcement agencies,
which emphasized the importance of antimoney laundering enforcement andrequested the implementation of several
action items recommended in the 1999
Strategy. Specifically, the memorandum
urged the USAs and the law enforcement
agencies:(i)to encourage below-thresholdinvestigations and prosecutions
that potentially have a systemic or
financial sector-wide effect onmoney laundering;(ii) to establish SAR review teams;(iii) to ensure that all informants andcooperating witnesses aredebriefed with respect to money
laundering methods and theirknowledge of money laundering
techniques;(iv) to increase the use of electronic
surveillance in appropriate money
laundering cases;(v) to enhance the support andanalysis of multi-district money
laundering investigations;

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to increase training for financial
investigations; and(vii) to increase the strategic use of
asset forfeiture in money
laundering cases.
The 2000 Strategy set out a far-reaching
and highly ambitious regimen of action
items and milestones to be addressed andaccomplished during 2000. The
implementation of the Money Laundering
Strategy was being guided by aninteragency Steering Committee co-chairedby the Deputy Secretary of the Treasury
and the Deputy Attorney General, with theparticipation of relevant departments andagencies. The Steering Committee has the
responsibility of tracking and identifying
progress toward fulfillment of the goals andobjectives identified in the 2000 Strategy
and this progress will be reported in the2001 Strategy.
IV. CONCLUSION
Today, more than ever before, money
laundering is a world-wide phenomenon
and an international challenge. While nohard numbers exist on the amount ofworldwide money laundering, former IMF
Managing Director Michel Camdessus has
estimated the global volume between two
and five per cent of the world’s grossdomestic product. Even at the low end ofthat range, the amount of proceeds fromnarcotics trafficking, arms trafficking,bank and securities fraud, and othersimilar crimes laundered worldwide eachyear amounts to almost $600 billion. In
light of American financial institutions’prominent role in the international
financial system, it is likely that asubstantial portion of that $600 billion will
be laundered through the United States.
The basic anti-money laundering objectiveof the United States must be, and iscurrently, to identify and prevent the initialplacement of illicit proceeds into ournation’s financial system. It is at this stage
that the launderers of illicit money are
most vulnerable to detection andprosecution, and their illicit proceeds aremost vulnerable to identification, seizureand forfeiture. Although the United States
has aggressively pursued the investigationand prosecution of those laundering illicit
funds, prosecuting approximately 2000
defendants per year, its objectives andstrategy must not remain static but must
continue to strengthen federal enforcementof the money laundering laws and tointensify its law enforcement efforts to
identify money launderers and disrupt theflow of illicit money in the United States.
Additionally, the United States must
continue to work closely with its
international partners in bilateral andmultilateral contexts to take coordinatedaction against the financial power of drugtrafficking and other criminalorganizations. While this action will not
eradicate international drug trafficking ortransnational organized crime, it will
create an increasingly hostile environment
for the money launderer and afford newelements of protection to economic andpolitical systems.26

26 William C. Gilmore, Dirty Money: The Evolutionof Money Laundering Countermeasures, 2d Ed.,Council of Europe Publishing, 1999.

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