According to the Internal Revenue Service, crimes involving money constitute the bulk of criminal activity in the United States. Money laundering is a complex offense that can encompass multiple financial outlets and transactions. Paper trails are key in money laundering investigations, and the IRS often plays a significant role in tracking the path of funds throughout the country and even around the world.
What Is Money Laundering?
The Federal Bureau of Investigation defines money laundering as “concealing or disguising” the financial proceeds from a criminal activity, often by converting the money into goods or services. The process allows criminals to funnel money they’ve obtained illegally into legitimate commerce.
In Pennsylvania, state law also defines the crime as dealing with proceeds of criminal activities, including financial transactions that attempt to hide or shield funds.
Money laundering often is related to criminal activity that results in financial gain, including:
- Fraud, such as Ponzi schemes and insurance scams.
- Identity theft and other cyber crimes.
- Drug trafficking.
- Organized crime.
In most cases, money laundering is not a “standalone crime,” because the money from another criminal activity is an essential component. The U.S Department of the Treasury notes that money laundering makes possible a wide range of other criminal offenses — including the funding of terrorist organizations — and, ultimately, poses a threat to the global financial system.
Money Laundering Prosecutions
Because money laundering can serve as a cover for so many types of criminal offenses, investigations can include state and local authorities, along with the FBI and other agencies at the federal level.
To secure a conviction on money laundering charges in Pennsylvania, prosecutors must establish that a defendant participated in at least one of three scenarios:
- Was aware that the money resulted from criminal activity and acted purposefully to continue or promote the activities.
- Knew that criminal activity was the source of the money and knew that a financial transaction would hide or disguise the funds.
- Took action to evade a reporting requirement under state or federal law.
Various categories of financial transactions — through a variety of institutions, including credit card companies, banks, lenders and others — can qualify as money laundering under Pennsylvania law. Criminal investigations often focus on money laundering when underlying criminal activity violates income tax regulations or the Bank Secrecy Act, according to the IRS. In the view of the IRS, money laundering is a means of avoiding payment of taxes on illegal income.
U.S. Immigrations and Customs Enforcement is another federal agency that can have an interest in money laundering, because the crime is often used by drug trafficking organizations to hide ill-gotten profits. In many cases, criminal organizations use international trade systems and complex documentation to shift wealth globally — in what otherwise would be legitimate commerce transactions.
How Does Money Laundering Work?
Money launderers use a vast array of ever-changing strategies to hide funds, the FBI notes. With new technologies constantly creating new avenues for hiding funds, the FBI works with partners at the local, state, federal and international levels to fight the crime.
Common methods for hiding funds include:
- Disguising the source.
- Changing the form.
- Moving them to a more-obscure location.
These methods can include the use of multiple bank accounts, wire transfers, international tax havens and other tools.
Penalties for Money Laundering
The basic offense of money laundering at the federal level falls under U.S. Code Title 18 USC §1956. The law includes three parts relating to:
- Financial transactions within the United States.
- Transporting monetary instruments or funds internationally.
- Sting operations.
For a violation of the first two sections, the penalty is a fine of as much as $500,000, or twice the value of monetary instruments that were used — whichever is greater. The penalty also can include imprisonment up to 20 years. The third section calls for a penalty of imprisonment for as long as 20 years, a fine of an undetermined amount, or both.
A violation of the second section also can result in a civil penalty that is no more than $10,000 or the value of the monetary instruments, funds or property involved in the crime — whichever is greater. The civil penalty can be levied in addition to any criminal penalty.
Anyone convicted under 18 USC §1956 is prohibited from owning or being employed by an institution insured by the Federal Deposit Insurance Company for a minimum of a decade from the time of conviction.
In Pennsylvania, money laundering is prosecuted as a first-degree felony. Penalties include a fine of as much as $100,000 or twice the value of any financial transactions that were involved in the crime. In addition, a convicted individual can be sentenced to as long as 20 years in prison.
Pennsylvania state law also provides for the possibility of civil penalties of $10,000 or equal to the value of the specified financial transaction.
Work with an Experienced Criminal Defense Attorney
Money laundering is an extremely serious crime that can result in large fines and long prison sentences. If you’ve been charged with money laundering, it’s critical that you work with an experienced criminal defense attorney. For a free consultation contact the office of DeLuca, Ricciuti & Konieczka.