Money laundering involves the illegal conversion of “dirty” or ill-gotten money from activities like drug trafficking, corruption, embezzlement, or gambling into seemingly legitimate sources such as business sales or offshore bank accounts.
Unfortunately, money laundering costs the world economy a staggering 2% to 5% of its GDP- roughly $2 to $5 trillion in 2023. Hence, governments and law enforcement agencies worldwide are aggressively trying to solve the unlawful activity.
With the United States being the first to make money laundering illegal, it’s no surprise that this criminal activity can have severe consequences, including jail time.
This article demystifies the world of money laundering, from understanding what it is and how it works to exploring the potential consequences and the evolving global efforts to combat it.
Introduction: Crime of Laundering Money and Enforcement
Money laundering charges are serious criminal offenses that federal and state anti-money laundering (AML) policies such as the Bank Secrecy Act (BSA), the Money Laundering Control Act (MLCA), and the USA PATRIOT Act punish.
But what exactly does “laundering” money mean? How does it work? What are the potential penalties you may face for committing such a crime? Read on to find out.
What Is Money Laundering?
Money laundering involves attempting to conceal the proceeds of illegal activities, such as drug trafficking, embezzlement, or terrorist funding, by “cleaning” this “dirty money” through seemingly legitimate financial transactions.
Concealment of Proceeds
The primary objective of money laundering is to hide the origins of unlawfully obtained funds. Funneling the funds through a series of transactions makes it difficult for governments and law enforcement to trace the money back to its illegal origins.
Proceeds From Illegal Activity
Money launderers handle funds gained from various illegal activities, such as racketeering and white-collar crimes like tax evasion or bribery. Whether the funds come from these crimes or other criminal enterprises, money laundering aims to legitimize ill-gotten money.
Can I Get a Job After a Sentence for Money Laundering in the U.S.?
Money laundering charges may result in a prison sentence and a criminal record. While many employers are willing to hire ex-inmates, it’s well within a company’s right to deny your application, especially if you’re applying for a position related to your previous conviction.
In other words, don’t expect a company to hire you as an accountant if you’ve committed a money laundering crime through embezzling funds. That said, some states restrict the scope of background checks, such as with “ban the box” policies.
Ban-the-box laws require hiring managers to hold off asking a job applicant about their criminal history until after an actual interview or a job offer.
Still, it would be best to seek support from a criminal defense attorney to determine how a prior conviction can affect your employment. Alternatively, you can visit LookUpInmate.org for contact information for correctional facilities, which may have the state-specific information you need.
Do People Convicted of Money Laundering Really Pay Fines Up to 500k?
Although money laundering penalties can vary depending on the state, jurisdiction, court discretion, and other factors like the amount of money involved and whether it’s your first offense, fines can reach up to $500,000.
Here are some AML policies that specifically state this hefty amount:
- Domestic money laundering (18 USC section 1956(a)(1)) and international money laundering offenses (section 1956(a)(2)) include a 20-year incarceration and as much as $500,000 or twice the value of the property involved in the violation, whichever is greater.
- “Sting” violations (1956(a)(3)) result in prison time of up to 20 years and fines of up to $250,000 and $500,000, depending if you’re an individual or part of an organization.
- Section 1957 offenses lead to a maximum 10-year prison sentence and a fine of up to $500,000 or twice the value of the dirty funds, depending on which is more significant.
Types of Money Laundering Offenses
Because AML policies vary between states and jurisdictions, money laundering interpretations can take many forms.
However, three critical legislations and provisions outline and govern what money laundering is and how one commits it.
- Money Laundering Control Act (MLCA)
- Bank Secrecy Act (BSA)
- Bulk Cash Smuggling Act (BCSA)
Domestic Money Laundering
Under the MLCA, you’re committing money laundering if you willingly carry out financial transactions to legitimize funds, such as depositing the money to an account, moving the money, or buying something using the proceeds you know come from illegal activities.
International Money Laundering
As the name suggests, international money laundering involves transactions that span multiple countries and bank accounts to obstruct the money trail. This type of money laundering often involves complex schemes and collaboration between individuals from different countries.
The MLCA defines “international” money laundering as you transporting or attempting to transport monetary instruments involving crossing a border, regardless of whether the funds originated or terminated in the United States.
Money Laundering Sting Operations
Law enforcement agencies frequently conduct money laundering sting operations to catch criminals. These undercover operations aim to identify and apprehend individuals engaged in money laundering schemes.
The federal court may charge you with a money laundering offense if law enforcement catches you intending to conceal or disguise the origin of money during these sting operations, regardless of whether the attempt was successful.
Money Laundering Spending
According to the MLCA, money laundering spending refers to “cleaning” illicit funds over $10,000 by using them to make seemingly legitimate monetary transactions like purchases or investments.
Unlike other money laundering offenses, the federal court can charge you with money laundering spending if you’re aware that the money came from illegal activity, even without proof of your intention to conceal the origins of the amount.
Other Money Laundering-Related Crimes
Apart from money laundering crimes mentioned above, certain related offenses can lead to severe legal consequences, including the following:
Bank Secrecy Act (BSA) Violations
The BSA is a U.S. legislation that prevents criminals from using financial institutions like banks as tools to hide laundered funds. It requires financial institutions to provide documentation involving currency transactions over $10,000.
If you’re part of a financial institution and you violate the BSA, such as by failing to file necessary reports, the federal court may charge you with a money laundering offense, which can result in criminal charges and significant penalties.
Bulk Cash Smuggling
Willfully transporting or attempting to conceal and transport large sums of cash (more than $10,000) across borders without the proper disclosure or avoiding currency reporting requirements can lead to money laundering charges.
Activities Related to Money Laundering
The activities related to money laundering can vary widely, depending on how criminals obscure the origins of their illicit funds.
However, prosecutors may charge you with money laundering if you gained or used laundered funds to engage in the following activities:
- Child pornography
- Drug trafficking
- Human trafficking
- Organized crime
- Sexual crimes
- Violent crimes
What Are the 3 Levels of Money Laundering?
Money laundering operates through a cyclical process comprising three stages, with each level playing a crucial role in allowing illicit funds to enter and flow through the financial system legitimately.
Here are the three levels of money laundering:
- Placement: “Placement” is the initial stage, wherein you introduce cash proceeds into the legitimate financial system by depositing your dirty money in offshore accounts, which helps hide the account holder’s identity.
Other forms of “placement” include combining legitimate proceeds with illegal funds, altering invoices, or depositing portions of the fund into multiple bank accounts.
- Layering: The second stage, known as layering, involves disguising your illegal money through complex and sophisticated financial transactions to obscure its origin and make it challenging for authorities to trace it to the source.
For instance, you convert the cash into traveler’s checks, money orders, stocks, and bonds or purchase valuable assets like artwork or jewelry using your ill-gotten funds.
- Integration: With integration, the launderer retrieves the laundered funds from the legitimate financial system as seemingly clean wealth.
Many criminals accomplish integration by incorporating real estate, stocks and bonds, and cryptocurrencies into their money laundering schemes. Unfortunately, at this point, a criminal has successfully “laundered” their money.
Key Components of a Money Laundering Case in the U.S.
While states and jurisdictions vary on how it handles money laundering cases, three key components significantly influence how the prosecution convicts you of the crime, including:
- Whether you’re aware of the illegal origins of the fund
- Whether you’re involved in an unlawful monetary transaction at a financial institution
- Whether you intended to carry out or fund an illicit activity
The prosecution must demonstrate that you knew where the funds came from, engaged in at least one illegal monetary transaction, and intended to commit or support a criminal activity through these financial moves for a successful case.
If you’re facing money laundering charges, contact a law firm specializing in money laundering laws or a money laundering attorney to help you navigate the complexities of the legal process and form a solid defense strategy.
How Serious of a Crime Is Money Laundering?
While the severity of the penalties for committing money laundering depends on factors like the amount of money involved and the jurisdiction’s laws on the crime, it’s a felony offense, which can potentially result in staggering fines and lengthy jail sentences.
According to a 2021 report by the United States Sentencing Commission (USSC), there were 821 reported money laundering cases in the U.S. Around 90% of the offenders were incarcerated, with the average jail time being 69 months.
In that same report, the USSC pointed out that 70.4% of the offenders have minimal to no prior criminal records. The median loss from these money laundering activities was $293,359.
Current Trends in Money Laundering Cases
With the advent of the internet and technological advancements, criminals are finding new ways to launder their dirty money, giving rise to a new form known as electronic money laundering.
Here are some new ways criminal organizations conduct their money laundering activities:
- Online banking: The rise of online banking institutions, anonymous online payment services, and peer-to-peer (P2P) transfers via mobile phones makes detecting illegal money transfers even more challenging for authorities to trace the money flow.
- Virtual gaming and auction sites: Online auctions, virtual gaming sites, and gambling websites allow criminals to convert illegal funds into gaming currency and back into untraceable “clean” money, effectively disguising their illicit origins.
- Cryptocurrencies: Digital currencies or “cryptos,” such as Bitcoin, have opened a new frontier for money laundering, as they provide a relative level of anonymity compared to traditional currencies, making them attractive for criminal activities.
Money Laundering Fines and Penalties
As mentioned, the punishment for money laundering offenses varies depending on the jurisdiction. For instance, penalties for committing such federal money laundering can lead to 10 to 20 years in prison and fines of as much as $500,000.
The penalties for each money laundering degree are as follows:
Money Laundering in the First Degree
First-degree money laundering charges are the most severe and can lead to substantial fines and lengthy prison sentences.
If the laundered funds are over $10,000, you can expect to pay up to $500,000 in fines and incarceration of 20 years.
Money Laundering in the Second Degree
With a second-degree money laundering charge, the court may levy a fine of up to $100,000 and sentence you to 10 years in federal prison.
In Arizona, this charge means you are more involved in illegal monetary activities, such as transporting, receiving, or obstructing ill-gotten funds.
Money Laundering in the Third Degree
While still a felony similar to the previous two, third-degree money laundering charges have less severe penalties.
If charged with this type of money laundering, you can expect a maximum fine of up to $50,000 and jail time of up to 5 years.
Various factors can influence the sentencing of money laundering convictions. These factors play a significant role in shaping the outcome of your case. Here are some critical elements that prosecutors may consider:
- Your level of knowledge: The extent to which you’re aware of the money laundering scheme is crucial. If the federal court proves that you know the illegal origin of the funds and actively participated in the laundering process, expect the maximum penalties.
- Your level of involvement: The depth of your participation in the illicit activity is another critical aspect. What role did you play? How much control did you have over the illegal funds?
- The amount of money involved: Generally, more significant sums may lead to more severe penalties. For example, if the amount of money is under $3,000, the court may only charge you with a misdemeanor offense instead of a felony crime in some states.
- Connection to other criminal activities: If the money laundering is linked to other criminal endeavors like drug trafficking, you may receive penalties for the trafficking and money laundering charge.
Other Factors That May Be Considered
The prosecution may also consider other factors when determining your money laundering conviction, including the following:
- Your prior criminal record: If you have prior convictions or involvement in other illegal activities, you can expect more severe penalties for committing money laundering.
- Your cooperation with authorities: Cooperating with governments and law enforcement to provide substantial assistance in investigating or prosecuting other individuals involved in money laundering may help reduce your punishment.
Likelihood of Receiving the Maximum Sentence
While the maximum penalties for money laundering can be severe, the chances of the maximum sentence are unlikely, considering that the average jail time for convicted individuals is only 5.75 years (69 months).
According to the USSC’s 2021 report, out of the people convicted of money laundering, around 30.9% faced the mandatory minimum penalty, with 59.7% of the offenders exempted from that minimum.
Money laundering offenses have decreased since 2017. With so few cases, it’s easy to understand why several misconceptions persist regarding this criminal activity and its investigation.
Here are some common misconceptions about money laundering:
- Involvement in illegal activity: One common misconception is that prosecutors must prove your involvement in the money laundering scheme to secure a conviction. However, prosecutors only need to establish that you intended to conceal the fund’s illicit origins.
- First-time offenders: Another misconception is that you won’t face jail time if you’re a first-time offender.
In reality, even first-time offenders typically receive jail sentences. The USSC reports that 70.4% of convicted launders have little to no prior offense.
- Difficulty in detection: While movies like The Wolf of Wall Street make money laundering appear easy to identify, estimates suggest that authorities have only succeded in seizing 1% of globally laundered money.
Money Laundering in Connection With Controlled Substance Charges
Money laundering charges can be interconnected with controlled substance crimes in states like California, leading to harsher penalties. If you’re facing this offense, the prosecution must establish three key elements to secure a conviction:
- Receipt or engagement in financial transactions: The prosecution must prove that you received or engaged in financial transactions involving money or tangible property that you know was from a drug-related activity.
- Concealment or disguise: The prosecution must demonstrate that you willfully engaged in concealing or obstructing the source, ownership, or control of the dirty money.
- Monetary threshold: The court may convict you of money laundering in connection with controlled substance charges if the amount involved exceeds $25,000 over 30 days.
How Long Do You Go to Jail for Money Laundering in the U.S.?
The length of jail time for money laundering convictions can vary based on several factors, including the state and federal laws governing the case. Under federal law, you may spend up to 20 years in jail if convicted of money laundering.
However, state laws on this criminal activity can vary wildly. For instance, California may punish money laundering crimes as misdemeanors, resulting in up to a year in county jail. Conversely, some states consider money laundering a felony, resulting in up to 20 years of imprisonment.
What Is the Average Sentence for Money Laundering?
In the USSC’s 2021 report, the average sentence length for convicted money launderers was 69 months, which was approximately 7% higher than 2020’s 64-month average.
Examples of Money Laundering
Understanding how money laundering works can be challenging, especially if you’re new to the topic. Here are a few examples:
In the thrilling TV series Ozark, financial planner Marty Byrde finds himself in a dangerous money laundering scheme after getting involved with a Mexican drug cartel. The money laundering method in the show involves using offshore investments to wash the cartel’s money.
Using shell companies in tax havens, Marty moves the ill-gotten funds between various accounts and businesses, making it extremely difficult for the FBI agents to trace the origins of the funds.
In the movie Ocean’s Eleven, a group of skilled and charismatic thieves plans to rob three of Las Vegas’ most luxurious casinos. They also devise an elaborate money laundering scheme to ensure their stolen spoils appears legitimate.
After successfully stealing millions of dollars from the casinos, the thieves establish a front business, a seemingly innocent and high-end art gallery, where they “purchase” expensive artworks with the stolen money.
By the film’s end, the money laundering operation successfully converts the stolen cash into “legitimate” art investments, allowing the thieves to evade law enforcement scrutiny and enjoy their ill-gotten gains without raising suspicion.
How Money Laundering Investigations Work
While money laundering investigations can vary in complexity, depending on the circumstances of the case, the process is similar to other federal crimes, which start with an investigation.
Generally, investigating money laundering charges involves tracing the illegal funds back to their origin, reviewing financial records from banks and companies, and gathering evidence to build a case against suspected individuals or organizations.
If the prosecution believes the money laundering scheme involves offshore entities, the federal court will collaborate with other governments, law enforcement agencies, and other regulatory bodies in G7 nations.
The G7 countries are the United States, the United Kingdom, Germany, Italy, Canada, France, and Japan.
If the investigation discovers illegally acquired assets, authorities may freeze or confiscate them, which the prosecution may use as evidence against the launderers once the analysis is complete.
Potential Defense Strategies
When facing money laundering charges, working with a skilled criminal defense attorney is crucial, as they can create compelling defense strategies designed to get you the best possible outcome from your specific case.
In some instances, what appears to be money laundering may result from accounting errors or improper business practices. If you can demonstrate your innocence, it may weaken the prosecution’s case.
Lack of Intent
Money laundering requires knowingly engaging in illegal financial transactions. If you’re unaware that the money came from illegal activity or were not involved in any criminal conspiracy, lack of intent can be a viable defense.
In rare cases, individuals may participate in money laundering under threat or coercion. It could be a valid defense if you show that entities forced you into the scheme due to fear for your safety.
The 4th Amendment protects against unlawful searches and seizures. If law enforcement obtained evidence through an illegal search or seizure, your attorney could work to suppress that evidence in court, potentially weakening the prosecution’s case.
Financial institutions and other regulatory bodies in the U.S. must have robust AML compliance programs to combat the threat of money laundering. These programs must include specific policies related to customer due diligence, transaction screening, and monitoring for suspicious activities.
AML policies must also require entities to maintain records of transactions and report currency transactions exceeding $10,000 to the U.S. Financial Crimes Enforcement Network (FinCEN).
Who Is Held Accountable in Money Laundering Cases?
While the perpetrator of the federal crime is accountable for the case, several other parties also hold responsibility, depending on the specific circumstances of the money laundering charge.
The players accountable for money laundering cases include the following:
- Financial institutions: Banks and other entities are responsible for complying with AML policies and sanctions. If they fail to do so, they may face significant fines and legal action.
- Governments: Governments have a vital role in enforcing AML regulations and prosecuting individuals involved in money laundering. They may also collaborate with international partners to combat money laundering globally.
- Law enforcement agencies: Law enforcement agencies are crucial in investigating money laundering cases. They work to identify and prosecute those involved in money laundering activities.
- Regulators: Regulators oversee financial institutions, ensuring compliance with AML and sanctions. If financial institutions fail to comply, regulators must take action against them.
How an Attorney Can Help Build a Defense
Consulting with a criminal defense lawyer is essential when facing federal charges like money laundering offenses. They can offer guidance and construct a strong defense tailored to your case’s specific circumstances.
For assistance in finding an inmate or correctional facility, visit LookUpInmate.org. With an extensive database of over 7,000 correctional facilities in the U.S., you have access to information you may need, such as prison contact information.
- History of Anti-Money Laundering Laws
- Money Laundering: What It Is and How to Prevent It
- Ban the Box
- 22.9 Bulk Cash Smuggling (31 U.S.C. § 5332(a))
- Bank Secrecy Act (BSA): Definition, Purpose, and Effects
- What Is The Minimum Sentence For Money Laundering In California?
- The Three Stages Of Money Laundering: The Characteristics Of The Money Laundering Stages
- WHAT IS MONEY LAUNDERING?
- Quick Facts — Money Laundering Offenses —
- Money Laundering
- How Much Jail Time For a 1st, 2nd, or 3rd Degree Money Laundering Charge in Arizona?
- WHAT ARE THE DIFFERENT DEGREES OF MONEY LAUNDERING?
- Federal and State Money Laundering Crimes Explained
- MONEY LAUNDERING FEDERAL CRIMES IN TEXAS
- What Does the Fourth Amendment Mean?
- What We Do