Limiting the Extraterritorial Reach of U.S. Criminal Law

In reaching its conclusion, the Eleventh Circuit analyzed several cases where ” 841 and 846 were applied extraterritorially, but found all of them to have a greater nexus to the United States than the Lopez-Vanegas defendants' five Miami meetings. The court noted that the cited statutes could apply extraterritorially only if the defendants either possessed, conspired to possess, or intended to distribute the controlled substances in the United States. In addition, the court compared Congress's specific language in 21 U.S.C. ' 959, which provides violations for acts outside the United States, with the lack of similar provisions in ” 841 and 846. Accordingly, the court concluded that the Miami meetings did not provide a sufficient U.S. nexus amounting to a violation of ” 841 and 846.

Why Is Lopez-Vanegas Surprising?

The case is surprising for a couple of reasons. First, the DOJ in recent years has aimed to increase dramatically the extraterritorial reach of U.S. laws, and the courts have seemingly acquiesced. In 2005, for example, the Supreme Court upheld a wire fraud conviction against Carl and David Pasquantino for scheming in the United States to evade Canadian tax laws. The only violation of U.S. law ' and indeed the only nexus to the United States ' was the use of a telephone in the United States to discuss the transportation of liquor to Canada. Though the Court denied giving extraterritorial effect to the wire fraud statute, it also noted that the mail and wire fraud statute is “not a statute in which Congress had only 'domestic concerns in mind.'” Pasquantino v. United States, 544 U.S. 349, 371 (2005). Thus, the Court gave considerable weight to the fact that the scheme was planned in the United States and therefore violated domestic law. It upheld the Pasquantinos' conviction, even though the object of the scheme was to “defraud a foreign sovereign of tax revenue,” giving considerable weight to the fact that the Pasquantinos used “U.S. interstate wires to execute a scheme.”

Lopez-Vanegas is also surprising in light of its facts. Surely, most former prosecutors or law enforcement officers can recall numerous instances where a defendant was charged and convicted or pled guilty to a crime where much less contact with the United States than five meetings was involved. Further, courts across the country have found that the Controlled Substances Act was enacted to combat drug distribution and is consequently entitled to expansive application. Nevertheless, Lopez-Vanegas illustrates that there remain limits to the extraterritorial reach of U.S. criminal laws ' and to conspiracies thereunder ' when the statutes do not explicitly call for extraterritorial application.

How, then, can the DOJ continue to prosecute conspiracies against non-U.S. citizens acting abroad where the underlying offense specifies territorial limits, as in the case of a conspiracy to commit money laundering charge?

Extraterritorial Application of Money Laundering Statutes

Unlike ” 841 and 846, the money laundering statutes (18 U.S.C. ” 1956-57) expressly define their territorial application and limit their extraterritorial reach to U.S. citizens. Specifically, ' 1956(f) limits the statute's application to conduct either by a U.S. citizen or a non-U.S. citizen that occurs at least in part in the United States. Further, ' 1956(a)(2) limits the statute's application to the transfer of illicit proceeds in or out of the country. In other words, money laundering by a non-U.S. citizen that occurs outside the United States is wholly beyond the reach of ' 1956. Similarly, ' 1957 limits itself to offenses by a non-U.S. citizen that take place in the United States or offenses by a U.S. citizen. These limitations reflect congressional concern about preventing international jurisdictional conflicts and imposing a duty on foreign citizens to become aware of U.S. laws.

The extraterritorial application of the money laundering laws becomes less precise ' and the potential impact of Lopez-Vanegas rises considerably ' where a non-U.S. citizen operating abroad has been charged under ' 1956(h) for participating in an extraterritorial money laundering conspiracy. It is well-settled that conspiracies can be proven circumstantially, and the government can prosecute every member of a conspiracy that takes place in U.S. territory, even those conspirators who never entered the country. Common-law conspiracy principles are strengthened in drug trafficking cases, where congressional intent indicates that courts should take expansive readings of the money laundering statutes. Therefore, it would appear that a money-laundering conspiracy charge, unlike its underlying offenses, can reach a non-U.S. citizen laundering money abroad as long as the conspiracy itself takes place in the United States.

Lopez-Vanegas's Effect on Money-Laundering Conspiracy

The DOJ routinely charges ' 1956(h) violations against foreign defendants for money laundering violations occurring abroad. A typical scenario involves a specified unlawful activity (SUA) occurring in the United States and the proceeds laundered to other countries. The DOJ charges all individuals and entities involved in laundering the proceeds, including non-U.S. citizens who conspired abroad to launder the money abroad. In so doing, prosecutors often confuse the U.S.-based conspiracy and its participants with a separate extraterritorial operation involving non-U.S. citizens conspiring to launder money abroad, often after the funds have already reached foreign shores. These non-U.S. citizens are often included in the indictment and extradited from their countries to face the money-laundering charge. Consequently, many foreign nationals have stood trial and been convicted for conspiring to violate a statute that expressly excluded them from the substantive offense.

Unlike in Lopez-Vanegas, the money-laundering statutes are not silent, and foreign defendants who have not entered the United States cannot be charged with money laundering if their conduct did not occur here. Further, congressional concerns about international jurisdictional conflicts and charging foreign nationals with knowledge of U.S. law militate strongly against extraterritorial reach of conspiracy charges. The Eleventh Circuit's reasoning from ' 959 works here too: Had Congress intended the money-laundering conspiracy laws to reach these foreign defendants, it could have said so in the statute.

Lopez-Vanegas sets a much-needed standard for the U.S. nexus required to convict a foreigner of conspiring to violate U.S. law. Even if the conspiracy was planned here, it does not follow that the defendants intended to violate U.S. law. Thus, where foreign nationals conspire abroad to launder illegal proceeds abroad, they should not be indictable in the United States.

Conclusion

The Lopez-Vanegas decision challenges a long-accepted DOJ norm of charging foreign nationals with money laundering for acts occurring abroad. Given the Eleventh Circuit's historically conservative, pro-DOJ disposition, it is likely that the Lopez-Vanegas limitations will spread to other circuits. Until then, the DOJ will assuredly continue to push the extraterritorial reach of U.S. laws to its limit, but it should acquiesce in the Eleventh Circuit's decision and avoid charging persons who “committed no crime against the United States” under the reasoning of Lopez-Vanegas.

William V. Roppolo is a Partner in the Miami office of Baker & McKenzie, LLP. He practices civil and criminal litigation with an emphasis on defending financial crimes. He is a former legal counsel with the Department of Homeland Security (formerly the Customs Service), where he focused on tracing proceeds of international criminal activity. Joseph J. Mamounas is also at the Miami office, where he practices both civil and criminal litigation.

The Eleventh Circuit recently vacated two defendants' money-laundering sentences because it found that they had “committed no crime against the United States.” United States v. Lopez-Vanegas , 493 F.3d 1305, 1306 (11th Cir. 2007). This decision was shocking because the defendants and their co-conspirators met in Miami numerous times to plan their conspiracy. At first blush, the court's decision seems to pose a significant obstacle to the increasingly broad extraterritorial application of U.S. criminal laws by the Department of Justice (DOJ). But when applied to conspiracies based on U.S. money laundering laws, does Lopez-Vanegas go far enough to prevent the DOJ from charging foreign nationals for conduct outside the U.S.?

The Lopez-Vanegas Case

Ivan Lopez-Vanegas and his co-defendant were allegedly part of a conspiracy to transport cocaine from Venezuela to Paris through Saudi Arabia using the private plane of a Saudi Arabian prince. The pair were convicted of conspiracy to possess with intent to distribute five kilograms or more of cocaine in violation of 21 U.S.C. ” 841 and 846. The drugs were distributed throughout Europe, but the scheme was planned and coordinated in Miami. Although neither statute expressly requires that the cocaine underlying the conspiracy have any connection with the United States, the Eleventh Circuit found that a conspiracy conviction could not be based on possession of cocaine entirely outside of the country. Such statutes, being silent about their territorial reach, must be presumed to apply only domestically unless Congress intended extraterritoriality and the laws' nature permits it.

In reaching its conclusion, the Eleventh Circuit analyzed several cases where ” 841 and 846 were applied extraterritorially, but found all of them to have a greater nexus to the United States than the Lopez-Vanegas defendants' five Miami meetings. The court noted that the cited statutes could apply extraterritorially only if the defendants either possessed, conspired to possess, or intended to distribute the controlled substances in the United States. In addition, the court compared Congress's specific language in 21 U.S.C. ' 959, which provides violations for acts outside the United States, with the lack of similar provisions in ” 841 and 846. Accordingly, the court concluded that the Miami meetings did not provide a sufficient U.S. nexus amounting to a violation of ” 841 and 846.

Why Is Lopez-Vanegas Surprising?

The case is surprising for a couple of reasons. First, the DOJ in recent years has aimed to increase dramatically the extraterritorial reach of U.S. laws, and the courts have seemingly acquiesced. In 2005, for example, the Supreme Court upheld a wire fraud conviction against Carl and David Pasquantino for scheming in the United States to evade Canadian tax laws. The only violation of U.S. law ' and indeed the only nexus to the United States ' was the use of a telephone in the United States to discuss the transportation of liquor to Canada. Though the Court denied giving extraterritorial effect to the wire fraud statute, it also noted that the mail and wire fraud statute is “not a statute in which Congress had only 'domestic concerns in mind.'” P asquantino v. United States , 544 U.S. 349, 371 (2005). Thus, the Court gave considerable weight to the fact that the scheme was planned in the United States and therefore violated domestic law. It upheld the Pasquantinos' conviction, even though the object of the scheme was to “defraud a foreign sovereign of tax revenue,” giving considerable weight to the fact that the Pasquantinos used “U.S. interstate wires to execute a scheme.”

Lopez-Vanegas is also surprising in light of its facts. Surely, most former prosecutors or law enforcement officers can recall numerous instances where a defendant was charged and convicted or pled guilty to a crime where much less contact with the United States than five meetings was involved. Further, courts across the country have found that the Controlled Substances Act was enacted to combat drug distribution and is consequently entitled to expansive application. Nevertheless, Lopez-Vanegas illustrates that there remain limits to the extraterritorial reach of U.S. criminal laws ' and to conspiracies thereunder ' when the statutes do not explicitly call for extraterritorial application.

How, then, can the DOJ continue to prosecute conspiracies against non-U.S. citizens acting abroad where the underlying offense specifies territorial limits, as in the case of a conspiracy to commit money laundering charge?

Extraterritorial Application of Money Laundering Statutes

Unlike ” 841 and 846, the money laundering statutes (18 U.S.C. ” 1956-57) expressly define their territorial application and limit their extraterritorial reach to U.S. citizens. Specifically, ' 1956(f) limits the statute's application to conduct either by a U.S. citizen or a non-U.S. citizen that occurs at least in part in the United States. Further, ' 1956(a)(2) limits the statute's application to the transfer of illicit proceeds in or out of the country. In other words, money laundering by a non-U.S. citizen that occurs outside the United States is wholly beyond the reach of ' 1956. Similarly, ' 1957 limits itself to offenses by a non-U.S. citizen that take place in the United States or offenses by a U.S. citizen. These limitations reflect congressional concern about preventing international jurisdictional conflicts and imposing a duty on foreign citizens to become aware of U.S. laws.

The extraterritorial application of the money laundering laws becomes less precise ' and the potential impact of Lopez-Vanegas rises considerably ' where a non-U.S. citizen operating abroad has been charged under ' 1956(h) for participating in an extraterritorial money laundering conspiracy. It is well-settled that conspiracies can be proven circumstantially, and the government can prosecute every member of a conspiracy that takes place in U.S. territory, even those conspirators who never entered the country. Common-law conspiracy principles are strengthened in drug trafficking cases, where congressional intent indicates that courts should take expansive readings of the money laundering statutes. Therefore, it would appear that a money-laundering conspiracy charge, unlike its underlying offenses, can reach a non-U.S. citizen laundering money abroad as long as the conspiracy itself takes place in the United States.

Lopez-Vanegas's Effect on Money-Laundering Conspiracy

The DOJ routinely charges ' 1956(h) violations against foreign defendants for money laundering violations occurring abroad. A typical scenario involves a specified unlawful activity (SUA) occurring in the United States and the proceeds laundered to other countries. The DOJ charges all individuals and entities involved in laundering the proceeds, including non-U.S. citizens who conspired abroad to launder the money abroad. In so doing, prosecutors often confuse the U.S.-based conspiracy and its participants with a separate extraterritorial operation involving non-U.S. citizens conspiring to launder money abroad, often after the funds have already reached foreign shores. These non-U.S. citizens are often included in the indictment and extradited from their countries to face the money-laundering charge. Consequently, many foreign nationals have stood trial and been convicted for conspiring to violate a statute that expressly excluded them from the substantive offense.

Unlike in Lopez-Vanegas, the money-laundering statutes are not silent, and foreign defendants who have not entered the United States cannot be charged with money laundering if their conduct did not occur here. Further, congressional concerns about international jurisdictional conflicts and charging foreign nationals with knowledge of U.S. law militate strongly against extraterritorial reach of conspiracy charges. The Eleventh Circuit's reasoning from ' 959 works here too: Had Congress intended the money-laundering conspiracy laws to reach these foreign defendants, it could have said so in the statute.

Lopez-Vanegas sets a much-needed standard for the U.S. nexus required to convict a foreigner of conspiring to violate U.S. law. Even if the conspiracy was planned here, it does not follow that the defendants intended to violate U.S. law. Thus, where foreign nationals conspire abroad to launder illegal proceeds abroad, they should not be indictable in the United States.

Conclusion

The Lopez-Vanegas decision challenges a long-accepted DOJ norm of charging foreign nationals with money laundering for acts occurring abroad. Given the Eleventh Circuit's historically conservative, pro-DOJ disposition, it is likely that the Lopez-Vanegas limitations will spread to other circuits. Until then, the DOJ will assuredly continue to push the extraterritorial reach of U.S. laws to its limit, but it should acquiesce in the Eleventh Circuit's decision and avoid charging persons who “committed no crime against the United States” under the reasoning of Lopez-Vanegas.

William V. Roppolo is a Partner in the Miami office of Baker & McKenzie, LLP. He practices civil and criminal litigation with an emphasis on defending financial crimes. He is a former legal counsel with the Department of Homeland Security (formerly the Customs Service), where he focused on tracing proceeds of international criminal activity. Joseph J. Mamounas is also at the Miami office, where he practices both civil and criminal litigation.