Bob has a cash-only diner downtown that does a so-so amount of business, even though Bob drives a Rolls Royce around town. Turns out, he also operates one of the city's biggest methamphetamine operations. Authorities suspect his real source of income is something much shadier than selling omelettes and pie at the diner, but they can't yet prove it. Turns out, Bob uses the diner to "launder" money from the illicit drug trade in an attempt to hide its true source.
Money laundering statutes make it a crime to transfer money derived from almost any criminal activity (including organized crime, white-collar offenses, terrorist activities, and drug transactions) into seemingly legitimate channels, in an attempt to disguise the origin of the funds.
A number of laws have been passed intending to prevent and punish money laundering activities. These laws were initially intended for use in combating the Mafia and other criminal organizations, though the focus subsequently shifted to the war on drugs, and later to anti-terrorist activity.
The first such laws arose in the 1970s. The Bank Secrecy Act (BSA) refers to a series of laws that require financial institutions to report certain transactions to the U.S. Department of Treasury. These laws require that financial institutions report large cash transactions, initially those in excess of $5,000, later increased to $10,000. Financial institutions are also required to report suspicious transactions, either those they have reason to believe are related to criminal activity or those that appear intended to avoid triggering the BSA reporting requirements.
The Money Laundering Control Act of 1986 prohibits individuals from engaging in financial transactions with the proceeds of certain crimes. In this context "financial transaction" was defined very broadly, including transferring money from one private individual to another. The penalties were strengthened with the Annunzio-Wylie Anti-Money Laundering Act of 1992. The Money Laundering Suppression Act of 1994 increased review, training, and examination procedures, as did the Money Laundering and Financial Crimes Strategy Act of 1998.
Following the attacks of September 11, 2001, Congress passed the USA Patriot Act, which includes provisions that strengthen and expand the regulation of financial transactions. Title II of the Patriot Act is known as the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001 and focuses almost entirely on money-laundering issues.
The Patriot Act's provisions expanded upon the BSA's applicability and introduced new requirements. It has required the creation and implementation of new anti-money laundering programs and creates potential criminal liability for institutions that are "willfully blind" to money-laundering taking place within their institutions. The law also requires that companies designate a compliance officer, implement training programs, and conduct independent audits.
The Patriot Act also requires that financial institutions implement procedures to verify the identity of their customers and check their identities against lists of known or suspected terrorists. These requirements are known as the "forthcoming requirements." These requirements strengthened the BSA "know your customer" requirements.
Among other outcomes, these laws can trigger an investigation of a suspect financial institution by the Federal Reserve and the Office of the Comptroller of Currency, which may impose civil fines or refer matters for criminal prosecution.
Not all institutions or individuals that deal with capital are regulated by these laws. The BSA's definition of "financial institution" was fairly broad. It included banks, credit card companies, insurance companies, and broker-dealers in securities, but "covered financial institutions" was defined differently.
Under both the BSA and the Patriot Act, the definition doesn't include investment advisors or transfer agents. Investment companies straddle the line. It's generally understood that only companies required to be registered under the Investment Company Act of 1940 are covered by either of these laws.
Financial crimes can be complicated, both for prosecutors and defense attorneys, and require a certain level of expertise. Whether you were charged with the crime or are in some way involved in such a case, it helps to know the intricacies of the law. Get the help you need from an experienced criminal defense attorney near you.
