By definition, money laundering is considered as the concealment of the origins of illegally obtained money, typically by means of transfers involving foreign banks or legitimate businesses. Money obtained from certain crimes, such as extortion, insider trading, drug, trafficking, and illegal gambling is “dirty” and needs to be “cleaned” to appear to have been derived from legal activities so that banks and other financial institutions will deal with it without suspicion.
Money Laundering is categorized as a white-collar crime, being that it is a financially motivated, nonviolent crime generally committed by businesses and government professionals.
There are several common types of money laundering, including casino schemes, cash business schemes, and foreign investment/offshore account schemes. Further, electronic money provides an easy method of transferring value without revealing identity as untracked banknotes, especially wire transfers involving anonymity-protecting numbered bank accounts. A complete money laundering operation will often involve several of these schemes as the money is moved around to avoid detection.
According to one law review article, money laundering typically is effectuated through a three-step process: (1) the criminally derived money is “placed” into a legitimate enterprise; (2) the funds are “layered” through various transactions to obscure the original source; and (3) the newly laundered funds are integrated into the legitimate financial world “in the form of banknotes, loans, letters of credit,” or other recognizable financial instruments. 39 Am. Crim. L. Rev. 839, 840 (Spring, 2002).
Tennessee’s Money Laundering Act of 1996, Tenn. Code Ann. § 39-14-901 et seq., contains no explanation of the legislature’s purpose in passing the Act. However, the legislative history attendant to the bill’s passage indicates that it was modeled after the federal Money Laundering Control Act of 1986. See 18 U.S.C. §§ 1956, 1957. That Act “targets ‘the lifeblood of organized crime’: the conversion of funds derived from illegal activities into a ‘clean’ or usable form.” Money Laundering, 39 Am.Crim. L.Rev. 839, 840 (Spring, 2002) (citation omitted).
Under, Tenn. Code Ann. § 39-14-903 (a)(1): It is an offense to knowingly use, conspire to use or attempt to use proceeds derived directly or indirectly from a specified unlawful activity to conduct or attempt to conduct a financial transaction or make other disposition with the intent to conceal or disguise the nature, location, source, ownership or control of the criminally derived proceeds. In Tennessee, money laundering is generally a Class B felony punishable by 8 to 30 years in prison and a maximum fine of $25,000. However, if a business knowingly uses property or funds with intent to (1) obtain, display, conceal sell, purchase, or transport criminal proceeds, or (2) commit or facilitate any violation, it’s a Class E felony punishable by a fine of $5,000 and forfeiture of the assets.
More specifically, under Tennessee Practice Pattern Jury Instructions—Crim. 11.36, any person who commits the offense of money laundering is guilty of a crime.
In order to find the defendant guilty of this offense, the state must have proven beyond a reasonable doubt the existence of the following essential elements:
- that the defendant knowingly [used proceeds][conspired to use proceeds][attempted to use proceeds]to [conduct][attempt to conduct] a financial transaction or make any other disposition with the intent to conceal or disguise the nature, location, source, ownership or control of the criminally derived proceeds;
- that the proceeds were derived directly or indirectly from [(insert specified unlawful activity)];
- that the defendant knew that the property or proceeds were derived from some form of criminal activity.
Hence, if a defendant is aware that certain monies or funds are the results of a specific unlawful activity and then subsequently conducts a financial transaction with the intent to conceal those funds or transfers funds from the United States to a foreign territory outside the U.S. or vice versa, he or she could be appropriately charged with this serious offense. Moreover, prosecutions arise when the defendant acted with one of the requisite criminal intents: promoting, concealing, or avoiding reporting requirements.
The concealment prong of the Tennessee money laundering statute, Tenn. Code Ann. § 39-14-903 (a)(1), is of crucial importance, as there can be no conviction without sufficient proof that the defendant possessed intent to “conceal or disguise” criminally derived proceeds through some financial transaction. In construing this aspect of the federal act, however, federal courts have recognized that an accused who simply uses the proceeds of illegal activity to purchase items, is not guilty of money laundering. State v. Jackson, 124 S.W.3d 139 (Tenn. Crim. App. 2003), provides further insight into such application of the concealment prong under Tenn. Code Ann. § 39-14-903.
In State v. Jackson, the appellate court held that the defendant’s conduct in forging a signature on a stolen check, in attempt to buy merchandise from a store and with alleged intent to convert the merchandise into cash, did not establish intent to conceal or disguise the nature, location, source, ownership, or control of criminally derived proceeds, as an element of money laundering. Further, the court found that the defendant was not attempting to conceal anything other than his own identity, and the defendant was not attempting to launder the check and instead was trying to negotiate it. Therefore, the court reversed and dismissed the charges against the defendant.
Additionally, the Jackson court referred to United States v. Olaniyi–Oke, 199 F.3d 767 (5th Cir.1999), where the court reversed a conviction under the concealment prong of the federal money laundering statute, 18 U.S.C. § 1956(a)(1)(B)(i). In this case, the defendant had used a fraudulently-obtained credit card to purchase two computers. The government argued that the defendant used the rightful credit card owner’s name and card to buy computers, making “obvious” his intent to conceal. The court disagreed, stating that “the government’s argument would convert every purchase of goods with illegally obtained credit into money laundering.”
Hence, the statute is intended to punish “conduct that is really distinct from the underlying specified unlawful activity[,] ... [not to] provide overzealous prosecutors with a means of imposing additional criminal liability any time a defendant makes benign expenditures with funds derived from unlawful acts.” Therefore, the prosecution must establish intent to conceal or disguise criminally derived proceeds through some financial transaction, rather than subsequent use of criminal proceeds to purchase items, in a money laundering case.