Federal money laundering law is built mainly around the Money Laundering Control Act of 1986. This congressional legislation made money laundering a federal offense, codified in 18 U.S.C. §§ 1956 and 1957.
§1956(a) defines three types of offenses: (1) domestic financial transactions involving proceeds of unlawful activity; (2) transporting, transmitting, or transferring money across U.S. borders with the required unlawful intent; and (3) transactions involving property determined by law enforcement to be criminal proceeds.
WHAT CONSTITUTES MONEY LAUNDERING
The defendant must conduct, or attempt to conduct, a financial transaction knowing that the property involved represents proceeds derived from “specified unlawful activity”, a list of more than 200 criminal offenses is identified in identified in § 1956(c)(7).
- 1956(a)(1) requires a prosecutor to prove, either through direct or circumstantial evidence, that the defendant knew the proceeds in question were derived from a violation of federal, state, or foreign law. This doesn’t require showing that the defendant knew which specific law the proceeds derived from, only that the defendant knew the proceeds were illegally derived in some manner.
WHAT CONSTITUTES A FINANCIAL TRANSACTION
A financial transaction requires proof that the defendant initiated, conducted, or participated in such a transaction.
§1956(c)(3) defines a “transaction” as a purchase, sale, loan, pledge, gift, transfer, delivery, other disposition, and with respect to a financial institution, a deposit, withdrawal, transfer between accounts, loan, exchange of currency, extension of credit, purchase or sale of safe-deposit box, or any other payment, transfer or delivery by, through or to a financial institution.
§1956(c)(4) defines a “financial transaction” as a transaction that affects interstate or foreign commerce in the following ways:
- Involves the movement of funds by wire or by other means;
- Involves the use of a monetary instrument;
- Involves the transfer of title to real property, a vehicle, a vessel or an aircraft; or
- Involves the use of a financial institution which is engaged in activities which affect interstate or foreign commerce.
A defendant must have acted with four intents in conducting a financial transaction. They are:
- Intent to promote specified unlawful activity;
- Intent to promote tax fraud or tax evasions;
- Knowledge that the transaction was designed to conceal or disguise the nature, location, source, ownership or control of proceeds from the specified unlawful activity; and
- Knowledge that the transaction was designed to avoid a transaction reporting requirement under federal or state law.
WHAT DOES § 1957 CRIMINALIZE
Section 1957 criminalizes the knowing engagement in a financial transaction in property derived from specified unlawful activity (more than $10,000) through a U.S. bank, a foreign bank, or some other “financial institution.” The definition of “financial institution” is the same as that spelled out in § 1956. Both these definitions refer to the definition spelled out in 31 U.S.C. § 5312(a)(2) that includes banks, credit unions, brokers or dealers, currency exchanges, money transmitted, casinos, pawn shops, and several other listed businesses and entities.
OTHER LAWS DEALING WITH MONEY LAUNDING
The Bank Secrecy Act of 1970 and its implementing regulations have established reporting and record-keeping duties thar contribute to the enforcement of anti-money laundering efforts. This framework was strengthened by the Anti-Money Laundering Act of 2020 which added the Corporate Transparency Act, requiring reporting of beneficial ownership information for certain entities.. That requirement was suspended by the U.S. Treasury Department in March 2025, but can be reinstated at some point in the future.
Other significant laws in that support the anti-money-laundering effort include:
- 18 U.S.C. § 1960: criminalizes the operation of an unlicensed money transmitting business.
- 31 U.S.C. § 5332: criminalizes bulk cash smuggling.
PENALTIES FOR MONEY LAUNDERING UNDER 18 U.S.C. §§ 1956 and 1957
For 18 U.S.C. § 1956, the maximum penalty is up to 20 years for each violation, plus a fine up to $500,000, or double the amount of property involved, whichever is greater.
For 18 U.S.C. § 1957, the maximum penalty is up to 10 years per violation, plus a fine up to $250,000 for individuals or$500,000 for organizations, or double the amount of property involved, depending on which is greater.
There are also criminal and civil forfeiture penalties involved in money laundering convictions:
- 18 U.S.C. § 982: allows for the forfeiture of any property, real or personal, involved in or traceable to the offense.
- 18 U.S.C. § 981: allows for a civil action against the property involved in the offense or traceable to the offense, under the lesser “preponderance of the evidence” standard.
CONCLUSION
Federal money laundering isn’t prohibited by just one law but by a web of criminal statutes and banking regulations designed to detect, report, and criminalize the disguised movement of illicit funds.
If you or a loved one are the target of a federal investigation or have been charged with a money laundering offense, you should seek the assistance of an experienced criminal defense attorney. The attorneys at the John T. Floyd Law Firm stand ready to provide you with representation.
