Strangers in a Strange Land

In 2001, as part of the Patriot Act, Congress amended the money laundering statute in several aspects, including the insertion of a venue provision. Now a money laundering offense may be brought in “(A) any district in which the financial or monetary transaction is conducted; or (B) any district where a prosecution for the underlying specified unlawful activity could be brought, if the defendant participated in the transfer of the proceeds of the specified unlawful activity from that district to the district where the financial or monetary transaction is conducted.” 18 U.S.C. 1956(i)(1) (emphasis added). Another amendment specifies that prosecution for attempted money laundering or conspiracy to commit money laundering may be brought in any district where venue would lie for the completed offense or any district where an act in furtherance of the conspiracy took place.

Whitfield v. United States

The Court added another wrinkle to this area recently when it held that a conviction for conspiracy to commit money laundering does not require proof of an overt act in furtherance of the conspiracy. Whitfield v. United States (Jan. 11, 2005). The Court was interpreting another 2001 amendment which provides that “[a]ny person who conspires to commit any offense defined in [' 1956] or section 1957 shall be subject to the same penalties as those prescribed for the offense the commission of which was the object of the conspiracy.” 18 U.S.C. ' 1956(h). The Court reasoned that because the text of ' 1956(h) does not expressly make the commission of an overt act an element of the conspiracy offense, the government need not prove an overt act to obtain a conviction.

Significant Changes

These changes are significant. Proper venue may seem like a trivial matter in a criminal case because the government can always re-indict the defendant in the proper venue, but when venue does not lie, it gives the defendant some leverage and a bargaining chip. Getting an indictment dismissed for improper venue forces the U.S. Attorney to convince a sister district to re-indict the defendant or move to be cross-certified to prosecute a case in another district. Any provision that expands the government's venue options eases the government's burden and removes a potential bargaining chip from the defense. Moreover, the constitutional guarantee of a trial “by an impartial jury of the State and district wherein the crime shall have been committed” is threatened whenever venue requirements are relaxed.

A brief example illustrates the point. Alex, a New York accountant, is approached by two individuals from Montgomery, AL, who ask him to launder money they obtained through a securities scam in Montgomery. Alex goes down to Montgomery and picks up a number of checks (or a suitcase of money) and returns to New York. He is subsequently indicted in the Middle District of Alabama for money laundering. Neither Alex nor his lawyer know anyone in Alabama. Is there any question that the government's choice of venue will affect Alex's ability to mount a defense?

The above example may seem uncontroversial. After all, Alex did physically go to Alabama and bring money back to New York; venue would be proper even under Cabrales, as Alex acquired the funds in one district and transported them to another. However, assume for a moment that Alex did not physically go to Alabama but simply provided an account number for a wire transfer or accepted delivery in New York of a package from Alabama. Under the new provision, venue arguably would be proper in Alabama because “the defendant participated in the transfer of the proceeds of the specified unlawful activity” from that district where it occurred to the 'laundering' district. No courts have yet decided what constitutes participation in the transfer of proceeds, but the government will undoubtedly say that any act that furthers the laundering of proceeds from another district constitutes participation. Consequently, Alex may again face a criminal trial in a district where he never set foot.

The Whitfield decision also increases the exposure of potential money laundering defendants to standing trial in districts where they are strangers. Let's say Alex agrees by phone or e-mail to launder Alabama money in New York, but the agreement is never carried out. Alex receives no money at all and never does anything more. Yet he is indicted in the Middle District of Alabama for conspiracy to launder money. The government will argue that venue is proper under ' 1956(i)(1), the conspiracy venue provision, and that it does not need to prove any overt act by Alex to obtain a conviction on the conspiracy to launder money charge. Furthermore, under ' 1956(h), Alex, charged with conspiracy to commit money laundering, is subject to the same penalties as those charged with the actual offense. Together, these developments in the law greatly increase the government's power to pressure an individual charged with money laundering because conspiracy is now easier to prove, and the individual is forced to defend away from home.

Although the above example may seem simplistic, in the white-collar realm it is realistic. Many white-collar defendants are charged solely with money laundering because they had little or no involvement with the underlying criminal activity; for example, a real estate broker who purchases and sells homes using drug proceeds without having any involvement in the underlying drug dealing. A key question in the case may be whether the money laundering defendant knew the proceeds being laundered were the product of unlawful activity — a category that includes business crimes like mail or wire fraud, embezzlement of pensions funds, and so forth. Finally, if the money laundering defendant is intricately tied up with the underlying activity (eg, securities fraud), the ease of communication today makes far-flung laundering conspiracies a likelihood, and there's no telling where the wrongdoer might face trial.

Conclusion

Whatever the permutations, it's now much easier for the government to obtain convictions for money laundering or conspiracy to launder money in a venue of its choosing. White-collar defendants can increasingly expect to be defending against such charges in unfamiliar and potentially hostile surroundings.

Recent pronouncements by both the Supreme Court and Congress have significantly expanded the reach and power of the federal money laundering statute. Although traditionally associated with drug dealing, the statute can reach and has reached any illegal activity that generates large sums of cash (eg, insider trading, fraud, embezzlement). These changes in the law afford the government greater flexibility in where it can bring money laundering cases, and make it easier for the government to obtain a conviction for conspiracy to commit money laundering. Rule 18 of the Federal Rules of Criminal Procedure states that “[u]nless a statute of these rules permit otherwise, the government must prosecute an offense in a district where the offense was committed.”

United States v. Cabrales

In United States v. Cabrales , 524 U.S. 1, 2-3 (1998), the Supreme Court held that Missouri was an improper venue for a money laundering charge because the money laundering activity charged against the defendant began, continued and was completed wholly in Florida. The underlying funds were generated from drug activity in Missouri, but all the money laundering activity was completed in Florida. The Court rejected the government's contention that the money laundering in question was a continuing offense because Cabrales was not charged with conspiracy, nor was it alleged that he acquired the funds in one district and transported them into another.

In 2001, as part of the Patriot Act, Congress amended the money laundering statute in several aspects, including the insertion of a venue provision. Now a money laundering offense may be brought in “(A) any district in which the financial or monetary transaction is conducted; or (B) any district where a prosecution for the underlying specified unlawful activity could be brought, if the defendant participated in the transfer of the proceeds of the specified unlawful activity from that district to the district where the financial or monetary transaction is conducted.” 18 U.S.C. 1956(i)(1) (emphasis added). Another amendment specifies that prosecution for attempted money laundering or conspiracy to commit money laundering may be brought in any district where venue would lie for the completed offense or any district where an act in furtherance of the conspiracy took place.

Whitfield v. United States

The Court added another wrinkle to this area recently when it held that a conviction for conspiracy to commit money laundering does not require proof of an overt act in furtherance of the conspiracy. Whitfield v. United States (Jan. 11, 2005). The Court was interpreting another 2001 amendment which provides that “[a]ny person who conspires to commit any offense defined in [' 1956] or section 1957 shall be subject to the same penalties as those prescribed for the offense the commission of which was the object of the conspiracy.” 18 U.S.C. ' 1956(h). The Court reasoned that because the text of ' 1956(h) does not expressly make the commission of an overt act an element of the conspiracy offense, the government need not prove an overt act to obtain a conviction.

Significant Changes

These changes are significant. Proper venue may seem like a trivial matter in a criminal case because the government can always re-indict the defendant in the proper venue, but when venue does not lie, it gives the defendant some leverage and a bargaining chip. Getting an indictment dismissed for improper venue forces the U.S. Attorney to convince a sister district to re-indict the defendant or move to be cross-certified to prosecute a case in another district. Any provision that expands the government's venue options eases the government's burden and removes a potential bargaining chip from the defense. Moreover, the constitutional guarantee of a trial “by an impartial jury of the State and district wherein the crime shall have been committed” is threatened whenever venue requirements are relaxed.

A brief example illustrates the point. Alex, a New York accountant, is approached by two individuals from Montgomery, AL, who ask him to launder money they obtained through a securities scam in Montgomery. Alex goes down to Montgomery and picks up a number of checks (or a suitcase of money) and returns to New York. He is subsequently indicted in the Middle District of Alabama for money laundering. Neither Alex nor his lawyer know anyone in Alabama. Is there any question that the government's choice of venue will affect Alex's ability to mount a defense?

The above example may seem uncontroversial. After all, Alex did physically go to Alabama and bring money back to New York; venue would be proper even under Cabrales, as Alex acquired the funds in one district and transported them to another. However, assume for a moment that Alex did not physically go to Alabama but simply provided an account number for a wire transfer or accepted delivery in New York of a package from Alabama. Under the new provision, venue arguably would be proper in Alabama because “the defendant participated in the transfer of the proceeds of the specified unlawful activity” from that district where it occurred to the 'laundering' district. No courts have yet decided what constitutes participation in the transfer of proceeds, but the government will undoubtedly say that any act that furthers the laundering of proceeds from another district constitutes participation. Consequently, Alex may again face a criminal trial in a district where he never set foot.

The Whitfield decision also increases the exposure of potential money laundering defendants to standing trial in districts where they are strangers. Let's say Alex agrees by phone or e-mail to launder Alabama money in New York, but the agreement is never carried out. Alex receives no money at all and never does anything more. Yet he is indicted in the Middle District of Alabama for conspiracy to launder money. The government will argue that venue is proper under ' 1956(i)(1), the conspiracy venue provision, and that it does not need to prove any overt act by Alex to obtain a conviction on the conspiracy to launder money charge. Furthermore, under ' 1956(h), Alex, charged with conspiracy to commit money laundering, is subject to the same penalties as those charged with the actual offense. Together, these developments in the law greatly increase the government's power to pressure an individual charged with money laundering because conspiracy is now easier to prove, and the individual is forced to defend away from home.

Although the above example may seem simplistic, in the white-collar realm it is realistic. Many white-collar defendants are charged solely with money laundering because they had little or no involvement with the underlying criminal activity; for example, a real estate broker who purchases and sells homes using drug proceeds without having any involvement in the underlying drug dealing. A key question in the case may be whether the money laundering defendant knew the proceeds being laundered were the product of unlawful activity — a category that includes business crimes like mail or wire fraud, embezzlement of pensions funds, and so forth. Finally, if the money laundering defendant is intricately tied up with the underlying activity (eg, securities fraud), the ease of communication today makes far-flung laundering conspiracies a likelihood, and there's no telling where the wrongdoer might face trial.

Conclusion

Whatever the permutations, it's now much easier for the government to obtain convictions for money laundering or conspiracy to launder money in a venue of its choosing. White-collar defendants can increasingly expect to be defending against such charges in unfamiliar and potentially hostile surroundings.