Money laundering charges carry severe penalties—often harsher than the underlying crimes that generated the illegal funds. Understanding how money laundering laws work and what defenses apply is essential for anyone facing these serious allegations.
What Is Money Laundering?
Money laundering is the process of making illegally-obtained money appear legitimate by moving it through financial transactions that disguise its criminal origins. The goal is to "clean" dirty money so it can be used without raising suspicion.
Money laundering is a separate crime from the underlying offense that generated the funds—and often carries harsher penalties.
The Three Stages of Money Laundering
Classic money laundering involves three stages:
Placement: Getting illegal cash into the financial system—depositing cash in banks, purchasing assets, or converting to other monetary instruments.
Layering: Moving money through multiple transactions to obscure its trail—wire transfers, shell companies, foreign accounts, complex business transactions.
Integration: Reintroducing cleaned money into the legitimate economy as apparently legal income—investments, real estate, business revenue.
Federal Money Laundering Laws
Federal law criminalizes money laundering under 18 U.S.C. § 1956 and § 1957:
Section 1956 prohibits conducting financial transactions with proceeds of "specified unlawful activity" with intent to promote the underlying crime or knowing the transaction is designed to conceal the money's origins.
Section 1957 prohibits monetary transactions exceeding $10,000 involving criminally-derived property.
Penalties include up to 20 years in prison and fines up to $500,000 or twice the amount laundered.
Specified Unlawful Activity
Money laundering charges require that funds derive from "specified unlawful activity"—a list of over 200 federal and state crimes including drug trafficking, fraud, bribery, extortion, theft, gambling, tax evasion, terrorism, and organized crime offenses.
Prosecutors must connect the funds to one of these underlying crimes.
Common Money Laundering Methods
Methods prosecutors allege include: structuring deposits to avoid reporting requirements (smurfing), using shell companies with no real business purpose, real estate transactions with inflated or deflated prices, trade-based laundering using import/export pricing manipulation, cryptocurrency transactions, casino gambling (cashing in chips), and using legitimate businesses to commingle illegal funds.
Defenses to Money Laundering Charges
Common defenses include:
Lack of knowledge: You didn't know the funds were criminally derived. Unknowing involvement in someone else's scheme is a defense.
No specified unlawful activity: The underlying crime doesn't qualify as "specified unlawful activity."
Legitimate source: The funds came from legal sources, not criminal activity.
No intent to conceal: Transactions weren't designed to disguise the money's origins.
Mere receipt isn't laundering: Simply receiving dirty money, without participating in concealment, may not be laundering.
Relationship to Underlying Crimes
Money laundering is often charged alongside the underlying offense—drug trafficking plus laundering, fraud plus laundering. This dramatically increases potential penalties. You can also be convicted of money laundering even if acquitted of the underlying crime, if prosecutors prove funds derived from some illegal activity.
Financial Institution Reporting
Banks must report suspicious transactions, creating evidence for laundering investigations. Currency Transaction Reports (CTRs) document transactions over $10,000. Suspicious Activity Reports (SARs) flag unusual patterns. Structuring transactions to avoid these reports is itself a crime.
International Dimensions
Money laundering often involves international transfers, implicating additional laws. Moving funds offshore, using foreign banks, or transferring through multiple countries creates jurisdictional complexity and additional charges.
Asset Forfeiture
Money laundering charges often include civil asset forfeiture—seizure of property allegedly connected to laundering. Even if criminal charges fail, the government may seek to keep seized assets through civil proceedings with lower proof standards.
Getting Legal Help
Money laundering charges require immediate, experienced defense counsel. These cases involve complex financial evidence, multiple overlapping charges, and severe penalties. Early legal intervention can challenge evidence, protect assets from forfeiture, and develop effective defense strategies.