“Money laundering” describes financial transactions made to further criminal activity or to process funds gained through criminal activity. Money laundering might be used as a way to hide money gained unlawfully.
How Does The Prosecutor Prove Money Laundering?
To prove money laundering has occurred under section 186.10 of the Penal Code, the prosecutor has to prove the following facts or elements1:
- The defendant conducted2 or attempted to conduct one or more financial transactions3
- Involving at least one monetary instrument
- through at least one financial institution4;
The following element applies when only one transaction is involved: The financial transaction involved a monetary instrument(s) with a total value of more than $5,000;
One of the following two elements applies only when multiple transactions are involved:
- $5,000 + The defendant conducted or attempted to conduct the financial transactions within a seven-day period and the monetary instrument(s) involved had a total value of more than $5,000.
Example: Joanna sells drugs for a living. On Monday she made $1,500 and deposited the proceeds into her bank account. Within another 8 days, Joanna makes another $6,000 and deposits into her bank account. Because Joanna did not make the deposit of $6,000 within a 7-day period, she cannot be convicted of money laundering because the amount of $1,500 is insufficient for a conviction.
- $25,000 + The defendant conducted or attempted to conduct the financial transactions within a 30-day period and the monetary instrument(s) involved had a total value of more than $25,000;
• One of the following two elements applies depending on whether there was INTENT or KNOWLEDGE :
- INTENT: When the defendant did so, he/she intended to promote, manage, establish, carry on or facilitate criminal activity5;
- KNOWLEDGE: the defendant knew that the monetary instrument[s] represented the proceeds of criminal activity or was/were derived directly or indirectly from the proceeds of criminal activity;
Example: Birch and Bob owned and operated a home elevation and shoring company. They maintained a business bank account in the name of the company. Unbeknownst to Bob, Birch approved two checks payable to a contractor in dollar amounts below $10,000 in ordered to avoid the financial institution from issuing a currency transaction report. Although Bob signed the checks, he cannot be convicted of money laundering because he neither intended to promote the criminal activity nor had knowledge of the activity.
- The following element applies only when the defendant is an attorney: The attorney defendant accepted a fee for representing a client in a criminal investigation or proceeding and accepted the monetary instrument with the intent to disguise or aid in disguising the source of the funds or the nature of the criminal activity.
- Bob and Kirk purchased fraudulent income tax refund checks and then presented those fraudulent checks for payment at financial institutions in Virginia, Florida and elsewhere. In all, they fraudulently deposited more than $17.5 million as a result of the scheme.
- Miguel and Oscar would direct portions of bulk cash generated from the sale of illegal narcotics to friends and relatives, for purchasing, breeding and training racing horses in the United States. Testimony also revealed a shell game by Miguel and Oscar involving straw purchasers and transactions worth millions of dollars in New Mexico, Oklahoma, California and Texas to disguise the source drug money and make the proceeds from the sale of horses or their race winnings appear legitimate. Furthermore, they implemented a scheme to structure cash deposits in amounts under $10,000 in order to circumvent mandatory bank reporting requirements.
- Simon met with Bob to discuss putting aside proceeds from Bob’s drug trafficking activities for his family’s use while he was in prison for drug trafficking. Simon’s scheme was that Bob was going to hire Simon’s law firm to handle an appeal of his drug trafficking conviction. Simon would then use his attorney trust fund to write a check every month to Bob’s designee. Because it was a legal transaction, he would not have to report it. It was agreed that the checks would be written for $7,500, unless a different amount was specified later. Bob gave $110,000 in cash to Simon. Simon accepted the cash and during the time Simon was counting the cash, they repeatedly discussed Bob’s participation in the drug trade and that the money being counted was from his drug trafficking activities.
- Jessica robbed a grocery store and used the cash to purchase a Gucci bag. She took the cash straight to a Gucci store at the mall and finally was a proud owner of a Gucci bag. Jessica did not launder the money under penal code section 186.10 pc because she did not conduct any transaction through a bank. Therefore she cannot be convicted of the offense.
Who Can Be Charged With Money Laundering Under Penal Code Section 186.10 pc?
Anyone who conducts a transaction that meets the minimum amounts as specified above either with specific intent to promote criminal activity or with the knowledge that the transaction represented criminal activity can be charged with the offense.
How Can You Fight A Charge Of Money Laundering?
There are several defenses that your attorney can assert on your behalf to fight a charge of money laundering. Here are the most common ones:
Lack of Intent/Lack of Knowledge
Since the prosecution cannot prove a case of money laundering absent showing that defendant either intent to promote criminal activity or defendant had knowledge that the transaction represented criminal activity, if the defendant can show that he/she lacked either intent or knowledge it is a viable defense to being convicted of money laundering.
Insufficient Money For Criminal Activity
As stated above, the minimum amount of proceeds a defendant has to launder to be convicted is over $5,000 – whether it involves a single transaction or multiple transactions (in the latter case, the prosecutor has to show that the defendant laundered an amount over $5,000 within a 7-day period even if the individual transactions are all below the amount). Therefore, if the defendant can show that the amount(s) is $5,000 or below, he/she cannot be convicted.
What are the penalties, punishment and sentencing guidelines for money laundering?
The punishment for money laundering depends on the number of separate offenses, the value amount of the financial transactions, and the defendant’s prior conviction record. In general, a conviction for one offense of money laundering may result in a sentence of imprisonment in county jail or state prison for up to one year. However, this sentence can be increased to correlate with the value amount of the transaction; state law specifies several types of increased terms for transactions valued up to $2,500,000.
Money laundering is punished by imprisonment in a county jail for not more than one year or pursuant to subdivision (h) of Section 1170, by a fine of not more than two hundred fifty thousand dollars ($250,000) or twice the value of the property transacted, whichever is greater, or by both that imprisonment and fine. However, for a second or subsequent conviction for a violation of this section, the maximum fine that may be imposed is five hundred thousand dollars ($500,000) or five times the value of the property transacted, whichever is greater.
If the value of the transaction or transactions exceeds fifty thousand dollars ($50,000) but is less than one hundred fifty thousand dollars ($150,000), the court, in addition to and consecutive to the felony punishment otherwise imposed pursuant to this section, shall impose an additional term of imprisonment of one year.
If the value of the transaction or transactions exceeds one hundred fifty thousand dollars ($150,000) but is less than one million dollars ($1,000,000), the court, in addition to and consecutive to the felony punishment otherwise imposed pursuant to this section, shall impose an additional term of imprisonment of two years.
If the value of the transaction or transactions exceeds one million dollars ($1,000,000), but is less than two million five hundred thousand dollars ($2,500,000), the court, in addition to and
consecutive to the felony punishment otherwise imposed pursuant to this section, shall impose an additional term of imprisonment of three years.
If the value of the transaction or transactions exceeds two million five hundred thousand dollars ($2,500,000), the court, in addition to and consecutive to the felony punishment otherwise prescribed by this section, shall impose an additional term of imprisonment of four years.
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- Elements. Pen. Code, § 186.10; People v. Mays (2007) 148 Cal.App.4th 13, 29 [55 Cal.Rptr.3d 356].
- “Conducting” includes, but is not limited to, initiating, participating in, or concluding a transaction.
- A “transaction” includes the deposit/ withdrawal/ transfer/ bailment/loan/pledge/payment/ of currency/a monetary instrument/the electronic, wire, magnetic, or manual transfer of funds between accounts by, through, or to, a financial institution
- “Financial institution” means any national bank or banking institution located or doing business in the state of California.
- “Criminal activity” means a criminal offense punishable under the laws of the state of California by death or imprisonment in the state prison or a criminal offense committed in another jurisdiction, which, under the laws of that jurisdiction is punishable by death or imprisonment for a term exceeding one year.