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Money Laundering: An Overview

by Stephen M. Moskowitz, J.D., LLM 8. December 2010 07:44

In our white collar crime/financial crime defense practice, we often see money laundering schemes.  Money laundering is a term used for the criminal practice of moving illegally-acquired funds through various transactions so that the money ends up “looking” like it came from some legal activity.  Money launderers attempt to hide the truth when it comes to the nature, location, source, ownership or control of funds.  Or they may move funds in order to avoid a transaction reporting requirement under State or Federal law (further concealing the funds).

Money laundering can be done with cash in hand, cash in accounts or any other type of fund or monetary instrument.  It may involve transferring funds between the United States and another country or it can be started and finished all within the same city.  It may involve terrorist activity or simple business people.

Elements

The U.S. Office of Comptroller of the Currency describes money laundering as involving three independent steps that may occur all at the same time:

1.      Placement: unlawful proceeds are placed into the financial system

2.      Layering: proceeds of criminal activity are separated from their original source by putting them through complicated transactions

3.      Integration: additional transactions, such as asset purchases, are used to make the funds appear legal 

Penalties

The penalties for money laundering are high.  The United States Code sets the criminal penalty for some types of money laundering to be a fine of the greater of $500,000 or twice the amount of money laundered in addition to imprisonment for up to twenty years.  Civil penalties in the amount of the money laundered or $10,000, whichever is greater may also be imposed.

Money Laundering: Who Has Done It?

Many people remember the rise and fall of Enron, a huge energy company that claimed revenues of almost $101 billion in 2000.  It turns out that certain executives and others in the business were actually employing a very complicated scheme of accounting fraud.  Enron officials pled guilty or were convicted of money laundering counts in addition to other felony charges.  Money laundering was an essential part of their “elaborate scam” of hiding debts, lying about profits and other illegal dealings.

In March of 2009, Bernard (“Bernie”) Madoff pled guilty to eleven felony counts, three of which were money laundering.  Madoff is a former stock broker and investment advisor that pulled off one of the biggest Ponzi schemes in history, with losses to his clients in the billions of dollars.

U.S. House Representative William Jefferson was convicted last summer on eleven of the sixteen corruption charges against him, including three counts of money laundering.  Federal agents found $90,000 cash in his freezer and the accusations centered on using his political office to solicit and receive more than $400,000 in bribes in connection with brokering business deals in Africa.  He could have spent up to 150 years in prison but was sentenced to thirteen.

Former House Majority Leader Tom DeLay was convicted on November 24, 2010 of money laundering and conspiracy to commit money laundering.  He was charged with illegally funneling $190,000 of corporate money through the Republican National Committee to help elect GOP candidates to the Texas legislature.  DeLay pled not guilty to the charges but now could face up to life in prison.  DeLay’s former associates were also charged in the case and their trials will be held later.

The amount of money being laundered in the world was estimated more than a decade ago to be  between 590 billion and 1.5 trillion dollars.  As a result, banks, federal and world officials are continually working together to implement more controls and methods for detecting money laundering. 

Money Laundering:  Trends and Common Schemes

·         Casinos:

The government is increasing security and reporting requirements as authorized by the Bank Secrecy Act.

·         Horse Racing

·         Securities Accounts:   Use of margin accounts, smaller deposits

·         Trade based Money Laundering:   invoice manipulation, front companies,

·         Trade Based – Other: Use of restaurants and bars, cash discounts,

·         Mortgages,

·         Insurance,

·         Shell Corporations,

·         Virtual Money Laundering

Our law firm brings particular strengths when representing the accused that face criminal and related civil enforcement proceedings.  We have over thirty years of experience contesting government allegations.     Our years of experience provide you with extensive criminal defense with your case in chief and related matters such as civil tax consequences of criminal investigations that arise in these types of cases.   As a result of our wide-ranging legal practice, we have the experience you need to represent you before the US Department of Justice, State of California, and a variety of regulatory agencies. We understand that the best result is to avoid any prosecution, and our significant government experience helps our clients navigate the difficult and frightening process of investigation. Our extensive experience with compliance programs helps us advise on the best practices to prevent criminal problems from developing. But if you face criminal charges, we have the extensive trial experience to mount a vigorous defense on your behalf.

Our law firm's broad range of substantive experience permits us to offer an integrated approach to a full range of tax, criminal and civil situations. Criminal and government enforcement activity usually does not appear in isolation; they are often accompanied by parallel proceedings, civil litigation, and/or other governmental agency investigations. Our legal team enables an efficient and comprehensive defense.    We invite you to contact our law firm to discuss your legal questions including criminal tax defense.   Please feel free to use our contact form or phone us at (415) 394-7200.

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