Consultation with the Criminal Divisions Asset Forfeiture
and Money
Laundering Section (AFMLS) will provide a means to ensure the
orderly development
of the case law and to assist prosecutors in applying these
statutes in a
consistent manner. In the following instances, United States
Attorneys' Offices
must consult with AFMLS prior to the filing of an indictment or a
civil or
criminal complaint:
- Forfeiture of Businesses.
In any case where forfeiture
of a business
is sought under the theory that the business facilitated the money
laundering
offenses, no forfeiture action, either criminal or civil, may be
filed without
prior consultation with AFMLS, Criminal Division.
Cases Filed Under § 1956(b). Section 1956(b)
provides for the
imposition of a civil penalty (of not greater than $10,000 or the
value of the
property, funds, or monetary instruments involved in the
transaction) against
anyone who violates the criminal provisions of § 1956(a)(1) and
(a)(2). In
any case where a civil action under § 1956(b) is going to be
brought against
a business entity, no complaint may be filed without prior
consultation with
AFMLS, Criminal Division.
Cases Involving Financial Crimes. In any case in which
the conduct
to be charged as "specified unlawful activity" under §§
1956 and 1957
consists primarily of one or more financial or fraud offenses, and
in which the
financial and money laundering offenses are so closely connected
with each other
that there is no clear delineation between the underlying financial
crime and the
money laundering offense, no indictment or complaint may be filed
without prior
consultation with AFMLS, Criminal Division. (This issue is often
referred to
as the "merger" issue.)
Explanation: Sections 1956 and 1957 both require that the
property involved
in the money laundering transaction be the proceeds of
specified unlawful
activity at the time that the transaction occurs. The statute does
not define
when property becomes "proceeds," but the context implies that the
property will
have been derived from an already completed offense, or a completed
phase of an
ongoing offense, before it is laundered. Therefore, as a general
rule, neither
§ 1956 nor § 1957 should be used where the same financial
transaction
represents both the money laundering offense and a part of the
specified unlawful
activity generating the proceeds being laundered.
Prosecutions in Receipt and Deposit Cases: In any case
when the
conduct to be charged as money laundering under § 1956 or §
1957, or
where the basis for a forfeiture action under § 981 consists of
the deposit
of proceeds of specified unlawful activity into a domestic
financial institution
account that is clearly identifiable as belonging to the person(s)
who committed
the specified unlawful activity, no indictment or complaint may be
filed without
prior consultation with the Asset Forfeiture and Money Laundering
Section.
Explanation: One of the major concerns expressed about the use
of the money
laundering statutes involves a class of money laundering cases
often referred to
as "receipt and deposit" cases. "Receipt and deposit" cases are
those kinds of
cases where a person obtains proceeds from specified unlawful
activity, which
that person committed, and then deposits the proceeds into a bank
account that
is clearly identifiable as belonging to that person. In that type
of
transaction, there is generally no concealment involved and the
transaction is
conducted so that the person can use or enjoy the proceeds of the
specified
unlawful activity.
The concern has been expressed that "receipt and deposit"
cases should
not be sentenced as severely as money laundering cases involving
more active
forms of concealment or promotion because, arguably, the money
laundering
activity in "receipt and deposit" cases creates little or no
additional harm to
society above that which was caused by the commission of the
underlying offense
and, in some cases, merely constitutes the completion of the
underlying offense.
Such concerns have been responsible, in part, for attempts by the
Sentencing
Commission to amend the sentencing guidelines in a manner that
would reduce the
offense levels for money laundering offenses.
While §§ 1956 and 1957 apply to "receipt and
deposit"
transactions, for reasons of policy, "receipt and deposit"
transactions should
not be charged unless there are extenuating circumstances.
However, a "receipt
and deposit" transaction may be charged when the transaction
involves other
indicia of money laundering such as an effort to conceal or
disguise the illegal
proceeds, when a financial transaction is conducted to promote
further
unlawful activity, or when the transaction is designed to avoid a
transaction
reporting requirement.
Section 1957, as originally enacted, granted no exemptions
based upon
the kind of trade or business engaged in by a potential defendant
or the purpose
for which a particular "monetary transaction" was undertaken.
Thus, the statute,
on its face, would have allowed the prosecution of a defense
attorney who
knowingly received and deposited more than $10,000 in criminally
derived funds
as legal fees for representation of a client in a criminal case.
At that time,
several Congressmen expressed concern that such an application of
the statute
might infringe upon the Sixth Amendment right to counsel in a
criminal case and
contemplated adding language to the proposed statute exempting such
"attorney
fee" transactions. Although no prosecution of a defense attorney
had been
brought or submitted for consideration, Congress reversed course in
1988 and
enacted an express, but extremely limited,
exemption under
§ 1957 for "attorney fee" transactions. It did this by
enacting § 6182
of the 1988 Act which added the following language at the end of
the definition
of "monetary transaction" in subsection 1957(f)(1): but such term
does not
include any transaction necessary to preserve a person's
right to
representation as guaranteed by the Sixth Amendment of the
Constitution. Pub.
L. 100-690, 102 Stat. 4354 (emphasis added).
There is no legislative history to clarify this provision
and its scope
is open to differing interpretations. The statutory exemption
would allow
criminal prosecution of defense attorneys who knowingly "receive
and deposit"
tainted funds either as part of a sham or fraudulent transaction,
or as legal
fees for representation of a client in any non-criminal matter.
See, e.g.,
Hullom v. Burrows, 266 F.2d 547, 548 (6th Cir.), cert.
denied, 361
U.S. 919 (1959) (Sixth Amendment right to counsel does not apply in
civil
litigation). It would also permit prosecution of a defense
attorney who
"receives and deposits" tainted funds from a third-party payor as
legal fees for
representation of a client in a criminal case. Such third-party
payments can
hardly be said to be necessary to preserve the client's right to
counsel in a
criminal case because, in the absence of such payments, the client
would still
be free to retain private counsel with his own funds or to be
represented by a
public defender or court-appointed counsel if he could not afford
to retain
private counsel.
Further, in cases involving the civil forfeiture of
attorney fees, the
Supreme Court has ruled that there is no Sixth Amendment right to
use criminally
derived property to retain counsel of choice in a criminal case.
See
Caplin & Drysdale v. United States, 109 S. Ct. 2646 (1989);
United
States v. Monsanto, 109 S. Ct. 2657 (1989).
In any event, any prosecution of an attorney under §
1957 for the
receipt and deposit of funds allegedly derived from a specified
unlawful activity
(when the fee appears to be bona fide) is a highly sensitive area
and must be
approached with great care. Attorneys in such situations, unlike
all others who
may deal with criminal defendants, may be required to investigate
and pursue
matters which will provide them with knowledge of the illicit
source of the
property they receive. Indeed, the failure to investigate such
matters may be
a breach of ethical standards or may result in a lack of effective
assistance to
the client.
Because the Department firmly believes that attorneys
representing
clients in criminal matters must not be hampered in their ability
to effectively
and ethically represent their clients within the bounds of the law,
the
Department, as a matter of policy, will not prosecute attorneys
under § 1957
based upon the receipt of property constituting bona fide fees for
the legitimate
representation in a criminal matter, except if (1) there is proof
beyond a
reasonable doubt that the attorney had actual knowledge of the
illegal origin of
the specific property received (prosecution is not permitted if the
only proof
of knowledge is evidence of willful blindness); and (2) such
evidence does not
consist of (a) confidential communications made by the client
preliminary to and
with regard to undertaking representation in the criminal matter;
or (b)
confidential communications made during the course of
representation in the
criminal matter; or (c) other information obtained by the attorney
during the
course of the representation and in furtherance of the obligation
to effectively
represent the client.
What constitutes "representation in a criminal matter"
depends on the
facts and circumstances of the particular case. In deciding if
representation
in different but related proceedings constitutes "representation in
a single
matter," consideration will be given to whether the proceedings
relate to
investigations or cases arising out of the same facts or
transactions, for
example, a civil RICO case which arises out of a criminal RICO
prosecution.
This prosecution standard applies only to fees received
for legal
"representation in a criminal matter." Attorneys who receive
criminally derived
property in exchange for carrying out or engaging in other
commercial
transactions unrelated to the representation of a client in a
criminal matter or
for representing a client in a civil matter should be treated the
same as any
other person.
Proper application of this policy requires examination of
three issues:
- what constitutes bona fide fees;
- what constitutes actual knowledge; and
- what evidence may be relied upon to meet the knowledge
requirement of the
policy.
See the Criminal Resource Manual at
2102
through 2104 , for a discussion of each
of these
issues.
No Department attorney shall, either orally or in writing,
inform an
attorney who is legitimately representing a client in a criminal
matter that the
property the attorney is receiving is or may be criminally derived
solely for the
purpose of meeting the requirements of knowledge imposed by this
prosecution
policy or by the statute.
The Anti-Drug Abuse Act of 1988 (Pub L. 100-690) amended
the money
laundering provisions of 18 U.S.C. § 1956 by adding a provision
which makes
it a crime to conduct or attempt to conduct a financial transaction
involving the
proceeds of criminal activity with the intent to violate § 7201
(attempted
tax evasion) or § 7206 (false tax return) of the Internal
Revenue Code of
1986 (26 U.S.C.). Thus, § 6471 of the Act amends § 1956
(a)(1) as
follows:
Whoever, knowing that the property involved in a
financial
transaction represents the proceeds of some form of unlawful
activity, conducts
or attempts to conduct such a financial transaction which in fact
involves the
proceeds of specified criminal activity--
- (i)with the intent to promote the carrying on of
specified
unlawful activity; or
(ii)with intent to engage in conduct constituting a violation
of § 7201
or § 7206 of the Internal Revenue Code of 1986; . . . .
According to the legislative history of the amendment (134
Cong. Rec.
S17367 (daily ed. November 10, 1988)):
[The provision] is vital to the effective use of
the money
laundering statute and would allow the Internal Revenue Service
with its
expertise in investigating financial transactions to participate in
developing
cases under § 1956. Under this provision any person who
conducts a financial
transaction that in whole or in part involves property derived from
unlawful
activity, intending to engage in conduct that constitutes a
violation of the tax
laws, would be guilty of a money laundering
offense.
This amendment was intended to facilitate and enhance the
prosecution
of money launderers. It was not intended to provide a substitute
for traditional
Title 18 and Title 26 charges related to tax evasion, filing of
false returns,
including the aiding and abetting thereof, or tax fraud conspiracy.
Consequently, appropriate tax-related Title 18 and Title 26 charges
are to be
utilized when the evidence warrants their use.
The use of the specific intent language set forth in 18
U.S.C. §
1956(a)(1)(A)(ii) in a proposed indictment for a violation of 18
U.S.C. §
1956 requires Tax Division authorization: (1) when the indictment
also contains
charges for which Tax Division authorization is required, including
allegations
of tax frauds (e.g., Klein-type) conspiracy; or (2) when the intent
to engage in
conduct constituting a violation of 26 U.S.C. § 7201 or 26
U.S.C. § 7206
is the sole or principal purpose of the financial transaction which
is the
subject of the money laundering count. Such authorization would be
preceded by
IRS Regional Counsel review in accordance with normal review
procedures, except
in Organized Crime Drug Enforcement Task Force cases. (See
USAM 6-4.124 and 6-4.125).
Tax Division authorization is not required for use of such
language in
a money laundering indictment that does not fall in either of the
above two
categories. It is assumed in situations where Tax Division
authorization is not
requested that: (1) the principal purpose of the financial
transaction was to
accomplish some other covered purpose, such as carrying on some
specified
unlawful activity like drug trafficking; (2) the circumstances do
not warrant the
filing of substantive tax or tax fraud conspiracy charges; and (3)
the existence
of a secondary tax evasion or false return motivation for the
transaction is one
that is readily apparent from the nature of the money laundering
transaction
itself.
Section 1956 also directs that the authority to
investigate money
laundering violations is controlled by a Memorandum of
Understanding which has
been entered into by the Departments of Justice and Treasury and
the Postal
Service. See § 1956(e). Prosecutors should be aware of
the
provisions of this memorandum and do nothing to cause its
abrogation. A copy is
contained in the Criminal Resource Manual at
2186.
| March 2001
| USAM Chapter 9-105
|