Supreme Court Narrows Money Laundering Law

In a ruling favorable to defendants, the Supreme Court today narrowed the application of the crime of money laundering in an opinion by Justice Clarence Thomas.

''The rulings significantly raise the bar for prosecutors to prove money laundering,'' said Jeffrey Green, who represents the National Association of Criminal Defense Lawyers.

Green said the decisions also will significantly affect the white-collar world, where money laundering charges are frequently tacked onto alleged violations of the Foreign Corrupt Practices Act, the law designed to prosecute American companies that bribe foreign officials.

From an e-mail I received from the Sentencing Resource Counsel:[More...]

In Cuellar v. United States, no. 06-1456, the Supreme Court (Justice Thomas writing) held that the portion of the money laundering statute that prohibits the international transportation of proceeds of unlawful activity (18 USC section 1956(a)(2)(B)(i)), requires proof that the funds were not only concealed and transported, but also that those actions were taken, at least in part, for the purpose of concealing or disguising their nature, location, source, ownership or control.

In Justice Thomas's words, "Merely hiding funds during transportation is not sufficient to violate the statute, even if substantial efforts have been expended to conceal the money." Because the evidence demonstrated that Mr. Cuellar had concealed and transported money in the floorboard of his vehicle for the purpose of paying the leaders of a drug operation (and not merely to get it out of the country), his conviction was reversed.

In a second cse, United States v. Santos,
no. 06-1005, a divided Court affirmed the judgment of the Seventh Circuit, which had upheld the grant of a 2255 motion on the ground that the word
"proceeds" as used in 18 USC sections 1956(a)(1)(A)(i) and (h) applies only
to criminal "profits" and not merely to criminal "receipts."

According to Justice Scalia (joined by Justices Souter, Thomas and Ginsburg), because both "profits" and "receipts" are ordinary definitions of the term "proceeds," and because neither definition would render the statute incoherent, redundant or utterly absurd, the rule of lenity dictates that the Court choose the definition that is "always more defendant-friendly."

Justice Stevens concurred in the judgment because no legislative history exists to define "proceeds" in the context of the underlying offense (running an illegal lottery), although he would leave the door open to allowing "proceeds" to include criminal receipts for certain underlying offenses specifically discussed in the legislative history.

Scotusblog has more on Santos.

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  • Display: Sort:
    The laymens terms.... (5.00 / 1) (#2)
    by kdog on Mon Jun 02, 2008 at 05:22:58 PM EST
    description sounds like good news to me...possessing a large sum of money alone is not a crime.

    You'd think that would go without saying...but its a jungle in that criminal code.

    The Santos case makes (none / 0) (#1)
    by scribe on Mon Jun 02, 2008 at 05:15:53 PM EST
    for an interesting discussion about exactly what it was that the Supreme Court decided.  Scalia tried to grab at defining what the opinion of the Court consisted of, and at controlling the meaning, and Stevens slapped him back, calling part of Scalia's opinion "dicta" and "speculating".

    This will make for some long memoranda defining exactly what can, and cannot, constitute "proceeds" for purposes of this statute.

    Very interesting (none / 0) (#3)
    by Steve M on Mon Jun 02, 2008 at 05:31:14 PM EST
    I suspect, though, that this decision will do nothing to lighten the oppressive burden of anti-money laundering regulations.  Many of my clients in the financial sector seem to spend half their day doing nothing but complying with various AML obligations.

    Interesting That The Right-Wing Justices (none / 0) (#4)
    by BDB on Mon Jun 02, 2008 at 05:36:38 PM EST
    suddenly decide to construe the AML statutes in more defendant friendly ways just as we're in the midst of a huge meltdown on Wall Street.  The restriction on "profits" as opposed to "reciepts" is particularly interesting.  

    I can't help but think... (none / 0) (#5)
    by MileHi Hawkeye on Mon Jun 02, 2008 at 07:06:31 PM EST
    ...that if the government wants to make your life a living heck, they're going to do it one way or another.

    Hopefully, this a small step towards making it a little harder for them to do so.  

    Not a crime? (none / 0) (#6)
    by jccamp on Mon Jun 02, 2008 at 10:06:12 PM EST
    "...possessing a large sum of money alone is not a crime."

    Actually, this is what the trial court found: "the evidence demonstrated that Mr. Cuellar had concealed and transported money in the floorboard of his vehicle for the purpose of paying the leaders of a drug operation"

    That's slightly more than the mere possession of cash.

    The conviction was reversed because the def was taking the money across an international border to pay the drug boss, not intended to cross the border to hide the source, nature etc of the cash, which is an element in the statute. The prosecutors probably got lazy. They may very well have possessed the requisite proof under the new standards. I'm presuming the USAO could have produced testimony that the money could have been sent via Western Union or such, if the sole intent was to take it across a border to pay the boss.

    What effect this decision may have on corporate cases is an entirely different issue. Not my field...

    "This will make for some long memoranda defining exactly what can, and cannot, constitute "proceeds" for purposes of this statute. "

    That sounds right. Santos appears to be very narrow in its application, since the Court did not really explain in which criminal enterprises "proceeds" will continue to equate with "receipts" or "revenue", and in which it is synonymous with "profits."  Apparently, the crimes specifically cited in the USC may be untouched. A key rationale in Santos (according to Stevens) seems to be that the money laundering charge bore heavier penalties that the underlying crime, which is counter-intuitive and clearly not intended by the legislative branch. That logic does not hold in the cited crimes.