9-105.100
Introduction
The Federal statutes proscribing money laundering were enacted
in 1986 with the passage of the Money Laundering Control Act,
codified at 18 U.S.C. §§ 1956 and 1957. In order to
promote consistency and uniformity in the use of these statutes,
certain approval, consultation and notification requirements have
been promulgated. These requirements are set forth below. It should
be noted that, pursuant to the notification requirement in
9-105.310, copies of all filed
indictments and criminal complaints containing money laundering
charges must be sent to the Asset Forfeiture and Money Laundering
Section regardless of whether the charges required prior approval
or consultation with the Section.
The Criminal Resource Manual contains an extensive treatment of
the money laundering statutes, with indictment forms and jury
instructions, at 2101. A table of contents for these materials is
at 2100.
[cited in
Criminal Resource Manual 2186]
9-105.300
Approval Requirements
for Money Laundering Cases
There are four categories of
money laundering prosecutions which require prior authorization
from the Criminal or Tax Division:
- Extraterritorial Jurisdiction.
Criminal Division
(Asset Forfeiture & Money Laundering Section) (AFMLS) approval
is required before the commencement of any investigation where
jurisdiction to prosecute is based solely on the extraterritorial
jurisdiction provisions of §§ 1956 and 1957. Due to
the potential international sensitivities, as well as proof
problems, involved in using these extraterritorial provisions, no
grand jury investigation may be commenced, no indictment may be
returned, and no complaint may be filed without the prior approval
of AFMLS, Criminal Division when jurisdiction to prosecute these
offenses exists only because of these extraterritorial
provisions.
- Tax Division Authorization.
Tax Division authorization
is required prior to any prosecution under
§ 1956(a)(1)(A)(ii) where the sole or principal purpose
of the financial transaction was to evade the payment of taxes.
Such approval shall be given in accordance with the prosecution
policies set forth in USAM 9-105.750.
- Prosecutions of Attorneys.
Criminal Division approval
is required for prosecutions of attorneys (under either
§ 1956 or § 1957) where the financial
transaction is one involving attorneys' fees. This approval is
required regardless of whether the fee was received in a criminal
or civil case. Such approval shall be given in accordance with the
prosecution policies set forth in
USAM 9-105.600 et seq.
- Prosecution of a Financial Institution.
In any criminal
case under §§ 1956 or 1957 of Title 18, or
§ 5322 of Title 31, in which a financial institution, as
defined in 18 U.S.C. § 20 and 31 C.F.R.
§ 103.11, would be named as a defendant, or in which a
financial institution would be named as an unindicted
co-conspirator or allowed to enter into a Deferred Prosecution
Agreement, AFMLS, Criminal Division approval is required before any
indictment, complaint, information, or Deferred Prosecution
Agreement is filed. In cases where the financial institution
involved is a "non-bank financial institution," such as a
check-cashing service or a casa de cambio, which is a stand-alone
business and not a branch of a larger institution, the requirement
does not apply. However, when such institutions are part of a
larger business or a branch of an international institution,
Criminal Division approval is required.
The review and approval function for prosecutions under 18
U.S.C. §§ 1956 and 1957, and 31 U.S.C.
§ 5322 prosecutions, requiring Criminal Division approval
has been centralized within the AFMLS. In the case of any
prosecution requiring Criminal Division approval under these
provisions, a copy of the proposed indictment, complaint,
information, or Deferred Prosecution Agreement, and a prosecution
memorandum should be sent as soon as possible before the
anticipated date of indictment to the Chief of the Asset Forfeiture
and Money Laundering Section. The preferred method of transmittal
is by overnight carrier. Attorneys are encouraged to seek guidance
from the Asset Forfeiture and Money Laundering Section prior to the
time an investigation is undertaken and well before a final
indictment, complaint, information, or Deferred Prosecution
Agreement, and prosecution memorandum are submitted for review.
[cited in
USAM 6-4.210;
Tax Resource Manual 14]
[updated July 2005]
9-105.310
Notification of the Asset
Forfeiture and Money Laundering SectionReporting
Requirement
In light of the scope of the money laundering statutes, it is
essential that the Asset Forfeiture and Money Laundering Section be
kept abreast of the way the statutes are being used. While prior
review and approval of all §§ 1956 and 1957 prosecutions
are not required, it is necessary that the Asset Forfeiture and
Money Laundering Section be advised of all prosecutions under those
statutes. Therefore, on October 1, 1992, the following notification
requirement was implemented:
In all criminal cases involving charges under
§ 1956 or § 1957, or in forfeiture cases
involving § 981 or § 982, the United States
Attorney's Office or Department component handling the case must
notify the Asset Forfeiture and Money Laundering Section by sending
a copy of the indictment or complaint to the Section as soon as
possible after the return of the indictment or the serving of the
complaint.
The form which can should be used to transmit the indictment or
complaint to the Section can be found in the
Criminal Resource Manual at 2184.
Following sentencing, the Assistant United States Attorney or
Department attorney should inform the Section of the nature of the
disposition of the case.
Prosecutors are encouraged to consult the Asset Forfeiture and
Money Laundering Section prior to bringing charges under
§§ 1956 or 1957, either by telephone or by submitting
a draft indictment or complaint to the Section in advance of the
date of filing. Similarly, prior to the filing of a complaint in
any civil forfeiture case under § 981(a)(1) when no
related criminal indictment under § 1956 or
§ 1957 will be returned, the prosecutor handling the case
is encouraged to consult with the Section.
[cited in
USAM 9-105.100]
9-105.320
Reporting Requirements Pertaining to
Financial Institutions
Section 1504(c) of the Annunzio-Wylie Anti-Money Laundering
Act, which was signed and became effective on October 28, 1992
(except as provided otherwise in the bill), added the following
subsection to § 1956:
(g) NOTICE OF CONVICTION OF FINANCIAL
INSTITUTIONS.If any financial institution or any officer,
director, or employee of any financial institution has been found
guilty of an offense under this section, section 1957 or 1960 of
this title, or section 5322 of title 31, the Attorney General shall
provide written notice of such fact to the appropriate regulatory
agency for the financial institution.
In order to implement this requirement, all United States
Attorneys Offices or Department components must notify the Asset
Forfeiture and Money Laundering Section of such convictions.
Attached to the notification letter must be a certified copy of the
order of conviction from the court rendering the decision.
See §§ 1502(a)-(c) and 1503(a)-(b) of the
Annunzio-Wylie Act. In addition, the notification should include a
file-stamped copy of the indictment, the name of the Assistant
United States Attorney who handled the case, and the name of the
primary investigative agency involved.
With regard to this notification requirement, three factors
should be noted:
First, since this provision was added to § 1956, the
relevant definition of the term "financial institution" is that set
forth in § 1956(c)(6), which is very broad and includes
numerous kinds of businesses other than depository institutions.
Based on the prior history of this provision and the context in
which it was enacted, it is the position of the Criminal Division
that the notification requirement in § 1956(g) be limited
to national banks, Federal savings associations, Federal credit
unions, federally insured State depository institutions and
federally insured State credit unions.
Second, this requirement will apply to persons who were
officers, directors or employees of a financial institution either
at the time of the offense or at the time of the conviction (i.e.,
if the offense was committed prior to the defendant's employment at
the financial institution).
Third, it should be noted that § 5322 of Title 31 is
the penalty provision for violations of other sections of
subchapter II of chapter 53 of Title 18 (i.e.,
§§ 5311-5328); § 5322 does not set out an
offense which can be committed. However, we will interpret this
provision to include violations of other sections of Title 31 which
are punishable under § 5322.
Notifications pursuant to this provision should be sent to:
Chief, Asset Forfeiture and Money Laundering Section, Criminal
Division. The form which should be used for this notification can
be found in the Criminal Resource Manual at
2185.
9-105.330
Consultation
Requirements
Consultation with the Criminal Divisions Asset Forfeiture and
Money Laundering Section (AFMLS) will provide a means to ensure the
orderly development of the case law and to assist prosecutors in
applying these statutes in a consistent manner. In the following
instances, United States Attorneys' Offices must consult with AFMLS
prior to the filing of an indictment or a civil or criminal
complaint:
- Forfeiture of Businesses.
In any case where
forfeiture of a business is sought under the theory that the
business facilitated the money laundering offenses, no forfeiture
action, either criminal or civil, may be filed without prior
consultation with AFMLS, Criminal Division.
Cases Filed Under § 1956(b). Section 1956(b)
provides for the imposition of a civil penalty (of not greater than
$10,000 or the value of the property, funds, or monetary
instruments involved in the transaction) against anyone who
violates the criminal provisions of § 1956(a)(1) and
(a)(2). In any case where a civil action under § 1956(b)
is going to be brought against a business entity, no complaint may
be filed without prior consultation with AFMLS, Criminal
Division.
Cases Involving Financial Crimes. In any case in which
the conduct to be charged as "specified unlawful activity" under
§§ 1956 and 1957 consists primarily of one or more
financial or fraud offenses, and in which the financial and money
laundering offenses are so closely connected with each other that
there is no clear delineation between the underlying financial
crime and the money laundering offense, no indictment or complaint
may be filed without prior consultation with AFMLS, Criminal
Division. (This issue is often referred to as the "merger"
issue.)
Explanation: Sections 1956 and 1957 both require that the
property involved in the money laundering transaction be the
proceeds of specified unlawful activity at the time that the
transaction occurs. The statute does not define when property
becomes "proceeds," but the context implies that the property will
have been derived from an already completed offense, or a completed
phase of an ongoing offense, before it is laundered. Therefore, as
a general rule, neither § 1956 nor § 1957
should be used where the same financial transaction represents both
the money laundering offense and a part of the specified unlawful
activity generating the proceeds being laundered.
Prosecutions in Receipt and Deposit Cases: In any case
when the conduct to be charged as money laundering under
§ 1956 or § 1957, or where the basis for a forfeiture
action under § 981 consists of the deposit of proceeds of
specified unlawful activity into a domestic financial institution
account that is clearly identifiable as belonging to the person(s)
who committed the specified unlawful activity, no indictment or
complaint may be filed without prior consultation with the Asset
Forfeiture and Money Laundering Section.
Explanation: One of the major concerns expressed about the use
of the money laundering statutes involves a class of money
laundering cases often referred to as "receipt and deposit" cases.
"Receipt and deposit" cases are those kinds of cases where a person
obtains proceeds from specified unlawful activity, which that
person committed, and then deposits the proceeds into a bank
account that is clearly identifiable as belonging to that person.
In that type of transaction, there is generally no concealment
involved and the transaction is conducted so that the person can
use or enjoy the proceeds of the specified unlawful activity.
The concern has been expressed that "receipt and deposit" cases
should not be sentenced as severely as money laundering cases
involving more active forms of concealment or promotion because,
arguably, the money laundering activity in "receipt and deposit"
cases creates little or no additional harm to society above that
which was caused by the commission of the underlying offense and,
in some cases, merely constitutes the completion of the underlying
offense. Such concerns have been responsible, in part, for attempts
by the Sentencing Commission to amend the sentencing guidelines in
a manner that would reduce the offense levels for money laundering
offenses.
While §§ 1956 and 1957 apply to "receipt and
deposit" transactions, for reasons of policy, "receipt and deposit"
transactions should not be charged unless there are extenuating
circumstances. However, a "receipt and deposit" transaction may be
charged when the transaction involves other indicia of money
laundering such as an effort to conceal or disguise the illegal
proceeds, when a financial transaction is conducted to promote
further unlawful activity, or when the transaction is
designed to avoid a transaction reporting requirement.
[cited in
USAM 9-119.116]
9-105.600
Prosecution StandardsBona
Fide Fees Paid to Attorneys for Representation in a Criminal
Matter
Section 1957, as originally enacted, granted no exemptions
based upon the kind of trade or business engaged in by a potential
defendant or the purpose for which a particular "monetary
transaction" was undertaken. Thus, the statute, on its face, would
have allowed the prosecution of a defense attorney who knowingly
received and deposited more than $10,000 in criminally derived
funds as legal fees for representation of a client in a criminal
case. At that time, several Congressmen expressed concern that such
an application of the statute might infringe upon the Sixth
Amendment right to counsel in a criminal case and contemplated
adding language to the proposed statute exempting such "attorney
fee" transactions. Although no prosecution of a defense attorney
had been brought or submitted for consideration, Congress reversed
course in 1988 and enacted an express, but extremely
limited, exemption under § 1957 for "attorney fee"
transactions. It did this by enacting § 6182 of the 1988
Act which added the following language at the end of the definition
of "monetary transaction" in subsection 1957(f)(1): but such term
does not include any transaction necessary to preserve a
person's right to representation as guaranteed by the Sixth
Amendment of the Constitution. Pub. L. 100-690, 102 Stat. 4354
(emphasis added).
There is no legislative history to clarify this provision and
its scope is open to differing interpretations. The statutory
exemption would allow criminal prosecution of defense attorneys who
knowingly "receive and deposit" tainted funds either as part of a
sham or fraudulent transaction, or as legal fees for representation
of a client in any non-criminal matter. See, e.g., Hullom
v. Burrows, 266 F.2d 547, 548 (6th Cir.), cert. denied,
361 U.S. 919 (1959) (Sixth Amendment right to counsel does not
apply in civil litigation). It would also permit prosecution of a
defense attorney who "receives and deposits" tainted funds from a
third-party payor as legal fees for representation of a client in
a criminal case. Such third-party payments can hardly be said to be
necessary to preserve the client's right to counsel in a criminal
case because, in the absence of such payments, the client would
still be free to retain private counsel with his own funds or to be
represented by a public defender or court-appointed counsel if he
could not afford to retain private counsel.
Further, in cases involving the civil forfeiture of attorney
fees, the Supreme Court has ruled that there is no Sixth Amendment
right to use criminally derived property to retain counsel of
choice in a criminal case. See Caplin & Drysdale v.
United States, 109 S. Ct. 2646 (1989); United States v.
Monsanto, 109 S. Ct. 2657 (1989).
In any event, any prosecution of an attorney under § 1957
for the receipt and deposit of funds allegedly derived from a
specified unlawful activity (when the fee appears to be bona fide)
is a highly sensitive area and must be approached with great care.
Attorneys in such situations, unlike all others who may deal with
criminal defendants, may be required to investigate and pursue
matters which will provide them with knowledge of the illicit
source of the property they receive. Indeed, the failure to
investigate such matters may be a breach of ethical standards or
may result in a lack of effective assistance to the client.
Because the Department firmly believes that attorneys
representing clients in criminal matters must not be hampered in
their ability to effectively and ethically represent their clients
within the bounds of the law, the Department, as a matter of
policy, will not prosecute attorneys under § 1957 based
upon the receipt of property constituting bona fide fees for the
legitimate representation in a criminal matter, except if (1) there
is proof beyond a reasonable doubt that the attorney had actual
knowledge of the illegal origin of the specific property received
(prosecution is not permitted if the only proof of knowledge is
evidence of willful blindness); and (2) such evidence does not
consist of (a) confidential communications made by the client
preliminary to and with regard to undertaking representation in the
criminal matter; or (b) confidential communications made during the
course of representation in the criminal matter; or (c) other
information obtained by the attorney during the course of the
representation and in furtherance of the obligation to effectively
represent the client.
What constitutes "representation in a criminal matter" depends
on the facts and circumstances of the particular case. In deciding
if representation in different but related proceedings constitutes
"representation in a single matter," consideration will be given to
whether the proceedings relate to investigations or cases arising
out of the same facts or transactions, for example, a civil RICO
case which arises out of a criminal RICO prosecution.
This prosecution standard applies only to fees received for
legal "representation in a criminal matter." Attorneys who receive
criminally derived property in exchange for carrying out or
engaging in other commercial transactions unrelated to the
representation of a client in a criminal matter or for representing
a client in a civil matter should be treated the same as any other
person.
Proper application of this policy requires examination of three
issues:
- what constitutes bona fide fees;
- what constitutes actual knowledge; and
- what evidence may be relied upon to meet the knowledge
requirement of the policy.
See the Criminal Resource Manual at
2102 through 2104, for a discussion
of each of these issues.
[cited in
USAM 9-105.300]
9-105.700
Prohibition on Giving Notice of the Criminal Derivation of
Property
No Department attorney shall, either orally or in writing,
inform an attorney who is legitimately representing a client in a
criminal matter that the property the attorney is receiving is or
may be criminally derived solely for the purpose of meeting the
requirements of knowledge imposed by this prosecution policy or by
the statute.
9-105.750
Money Laundering
Offenses Under § 1956(a)(1)(A)(ii)
The Anti-Drug Abuse Act of 1988 (Pub L. 100-690) amended the
money laundering provisions of 18 U.S.C. § 1956 by adding
a provision which makes it a crime to conduct or attempt to conduct
a financial transaction involving the proceeds of criminal activity
with the intent to violate § 7201 (attempted tax evasion)
or § 7206 (false tax return) of the Internal Revenue Code
of 1986 (26 U.S.C.). Thus, § 6471 of the Act amends
§ 1956 (a)(1) as follows:
Whoever, knowing that the property involved in a
financial transaction represents the proceeds of some form of
unlawful activity, conducts or attempts to conduct such a financial
transaction which in fact involves the proceeds of specified
criminal activity
- (i)with the intent to promote the carrying on of
specified unlawful activity; or
(ii)with intent to engage in conduct constituting a violation
of § 7201 or § 7206 of the Internal Revenue
Code of 1986; ....
According to the legislative history of the amendment (134
Cong. Rec. S17367 (daily ed. November 10, 1988)):
[The provision] is vital to the effective use of
the money laundering statute and would allow the Internal Revenue
Service with its expertise in investigating financial transactions
to participate in developing cases under § 1956. Under
this provision any person who conducts a financial transaction that
in whole or in part involves property derived from unlawful
activity, intending to engage in conduct that constitutes a
violation of the tax laws, would be guilty of a money laundering
offense.
This amendment was intended to facilitate and enhance the
prosecution of money launderers. It was not intended to provide a
substitute for traditional Title 18 and Title 26 charges related to
tax evasion, filing of false returns, including the aiding and
abetting thereof, or tax fraud conspiracy. Consequently,
appropriate tax-related Title 18 and Title 26 charges are to be
utilized when the evidence warrants their use.
The use of the specific intent language set forth in 18 U.S.C.
§ 1956(a)(1)(A)(ii) in a proposed indictment for a violation of
18 U.S.C. § 1956 requires Tax Division authorization: (1) when
the indictment also contains charges for which Tax Division
authorization is required, including allegations of tax frauds
(e.g., Klein-type) conspiracy; or (2) when the intent to engage in
conduct constituting a violation of 26 U.S.C. § 7201 or
26 U.S.C. § 7206 is the sole or principal purpose of the
financial transaction which is the subject of the money laundering
count. Such authorization would be preceded by IRS Regional Counsel
review in accordance with normal review procedures, except in
Organized Crime Drug Enforcement Task Force cases. (See
USAM 6-4.210.
Tax Division authorization is not required for use of such
language in a money laundering indictment that does not fall in
either of the above two categories. It is assumed in situations
where Tax Division authorization is not requested that: (1) the
principal purpose of the financial transaction was to accomplish
some other covered purpose, such as carrying on some specified
unlawful activity like drug trafficking; (2) the circumstances do
not warrant the filing of substantive tax or tax fraud conspiracy
charges; and (3) the existence of a secondary tax evasion or false
return motivation for the transaction is one that is readily
apparent from the nature of the money laundering transaction
itself.
Section 1956 also directs that the authority to investigate
money laundering violations is controlled by a Memorandum of
Understanding which has been entered into by the Departments of
Justice and Treasury and the Postal Service. See
§ 1956(e). Prosecutors should be aware of the provisions
of this memorandum and do nothing to cause its abrogation. A copy
is contained in the Criminal Resource Manual
at 2186.
[updated September 2007]
[cited in
USAM 6-2.000;
USAM 9-105.300]
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