Use the Lexology Navigator tool to compare the answers in this article with those from other jurisdictions.
How are ‘money laundering’, ‘terrorism financing’ and ‘fraud’ legally defined in your jurisdiction?
Federal law generally prohibits three types of money laundering:
- Conducting (or attempting) financial transactions with knowledge that the transaction involves the proceeds of “specified unlawful activity” with either:
- the intent to promote that activity or to violate certain tax laws; or
- knowledge that the transaction is designed either to conceal or disguise the location, source, ownership or control of the proceeds of “specified unlawful activity”, or to avoid a transaction reporting requirement under federal or state law (see 18 USC Section 1956(a)(1)).
- Moving funds across the US border with either:
- the intent to promote “specified unlawful activity”; or
- knowledge that the funds represent the proceeds of some form of unlawful activity and that the movement is designed to conceal or disguise the nature, location, source, ownership or control of the proceeds of “specified unlawful activity” or avoid a transaction reporting requirement under federal or state law (see 18 USC Section 1956(a)(2)).
- Conducting (or attempting) monetary transactions with knowledge that the transaction involves “criminal derived property” with a value greater than $10,000, if the property is derived from “specified unlawful activity” (see 18 USC Section 1957).
Conspiring to commit any of the above offences is also separately defined as money laundering (see 18 USC Section 1956(h)).
Most terrorism financing prosecutions in the United States are brought under 18 USC Section 2339B, which was enacted in 1996 and prohibits knowingly providing “material support or resources” to a foreign terrorist organisation. The term “material support or resources” – which was amended by the USA PATRIOT Act – includes cash or securities, financial services, lodging, training, expert advice or assistance, safehouses, false documentation or identification, equipment, weapons and virtually any other type of asset. Individuals and entities are identified and included on the list of designated foreign terrorist organisations by the secretary of state, in consultation with the attorney general and the secretary of the treasury.
Principal and secondary offences
What are the principal and secondary offences in relation to money laundering, terrorism financing and fraud?
US anti-money laundering and combating the financing of terrorism (AML/CFT) laws do not use the terms ‘primary’ and ‘secondary’ to describe various offences. However, the laws do distinguish between money laundering and terrorism financing on the one hand, and the failure to implement required programmes to prevent money laundering and terrorism financing on the other hand. Although any individual may be prosecuted for money laundering or terrorism financing, only ‘financial institutions’ (as defined in the Bank Secrecy Act) must implement programmes to prevent money laundering and terrorism financing. When a financial institution that is required to implement such a programme fails to do so, it is liable for a violation of the Bank Secrecy Act. Whether such a financial institution has also engaged in money laundering and terrorism financing depends on whether the financial institution engaged in the financial transaction at issue, and its role in the transaction or with the clients conducting it.
How are predicate offences defined?
Predicate offences to money laundering are referred to as “specified unlawful activity” and are defined broadly at 18 USC Section 1956(c)(7). That statute defines ‘specified unlawful activity’ as including a wide range of white collar and other crimes including racketeering activity, acts constituting a criminal enterprise, environmental crimes and a broad list of more than 170 separate US crimes ranging from fraud to sanctions violations. The statute also includes tax evasion, terrorism financing and a limited number of offences against foreign nations as predicate offences to money laundering.
To be subject to criminal liability under the federal money laundering statutes, a participant in the activity must know that the property involved in the transaction represents the proceeds of “some form of unlawful activity”; it is not necessary to prove that a defendant knew the property represented the proceeds of a particular “specified unlawful activity”. Under US law, evidence of intent can be circumstantial evidence or proof that the actors under investigation consciously avoided learning the true nature of the proceeds at issue.
De minimis rules
What de minimis rules apply to money laundering, terrorism financing and fraud offences?
The general offence of money laundering has no de minimis amount and applies no matter how small the transaction (see 18 USC Section 1956). The money laundering offence set out in 18 USC Section 1957 requires a transaction in an amount greater than $10,000 sent by, through or to a financial institution. The prohibition against terrorism financing has no de minimis rule.
Click here to view full article.