US money laundering law’s 230 ‘Specified Unlawful Activities’ target FCPA, diverse frauds and all ga

(This is Part III of a five-part series on the architecture, operation and application of the United States money laundering law, which is the world’s most powerful and oldest. Enacted in 1986, it has the official name, “Laundering of Monetary Instruments” and is codified at Title 18, US Code Section 1956. Carrying a maximum 20-year prison term upon conviction and a $500,000 fine, it has several unique characteristics, like its “extraterritorial reach,” dual criminal and civil provisions, three operative prongs, including an “undercover sting” provision, and, as are explained here, its 230 or so “Specified Unlawful Activities.”)
Unlike the money laundering laws of every other country, the principal United States money laundering law requires the commission of a specified underlying crime that produces, or is linked to, dirty money before a prosecution for money laundering may be commenced.

The United States money laundering law has about 230 of these underlying crimes, which it calls “Specified Unlawful Activities.” The SUAs, as they are commonly known, cover the gamut of criminal activity that is designed to make a profit for the perpetrator or give him an economic advantage. With the exception of crimes of pure passion, virtually all other crimes fit into this mold. Even crimes of passion, such as a murder coupled with a newly-acquired life insurance policy, can have a financial angle.

Rather than making the US money laundering apply to all criminal activity that produces a profit or economic advantage, the US Congress in 1986 chose to specify a long list of crimes that serve as a mandatory underpinning of all money laundering prosecutions.

No SUA, no money laundering prosecution

Simply stated, unless a person conducted transactions with, or moved across national borders, “the proceeds of specified unlawful activity” he or she may not be prosecuted for money laundering under the US law.

The SUAs directly or indirectly cover all offenses that may be called financial crimes. But, just in case a particular criminal activity has escaped being named as an SUA, the listing Congress prescribed includes catch-alls, like wire fraud and mail fraud, which cover a lot of ground. (See, Title 18, US Code Section 1956(c)(7)).

The SUAs also include crimes committed under the Bank Secrecy Act, such as the filing of false and fraudulent reporting forms that financial institutions, businesses and individuals are required to submit to the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN).

United States not shy about stating global reach of its laws

The United States is not shy about extending the reach of its laws across its borders. The money laundering law says it has “extraterritorial jurisdiction… if the conduct is by a United States citizen or, in the case of a non-United States citizen, the conduct occurs in part in the United States” and at least $10,000 is involved.

Recognizing that many financial crimes operate in multiple countries or are perpetrated from outside the United States, the SUAs have a strong international flavor and heavily focused on corruptionin two major ways. They include Foreign Corrupt Practices Act violations under Title 15, USC Sec. 78ff. Thus, a person charged with an FCPA crime may also be charged with money laundering under Section 1956, which carries a 20-year prison term.

Beyond that, however, the specified unlawful activities have another unique element. Some professionals who advise clients on FCPA matters and law enforcement professionals may be surprised to learn that the SUAs include certain foreign crimes.

The foreign SUAs include bribery of a public official, theft or embezzlement of public funds by a public official, and extortion, which is a classical way by which corrupt public officials shake down companies and persons seeking to do business with a government ministry or agency.

SUAs allows US to prosecute foreign corruption if money comes to US

The inclusion of foreign SUAs means that the US money laundering law prohibits the laundering of the proceeds of certain foreign crimes that may have been committed exclusively overseas. In other words, if a foreign corrupt public official extorts or is bribed by a US or other company, the official and the company that paid the bribe may be prosecuted for money laundering under the US law if they conduct transactions in the US with the proceeds or move the money to or from the US to promote the corruption, to conceal or disguise the proceeds, or to violate a US reporting requirement.

The classic case involving application of the US money laundering law in a foreign corruption case involved Pavlo Lazarenko, the former prime minister of Ukraine. He was indicted in 2000 on federal money laundering and other charges in San Francisco and accused of laundering $100 million in foreign extortion proceeds through US financial institutions.

The landmark case was investigated by the FBI and IRS Criminal Investigation and prosecuted by then-Assistant US Attorney Martha Boersch, who obtained a conviction after a lengthy trial. It was the first time the proceeds of foreign corruption, here the SUA of foreign extortion, served as the basis for US money laundering prosecution.

The foreign SUAs include non corruption-related crimes, such as fraud against a foreign bank and offenses that a multilateral treaty obligates the US to extradite or prosecute if the offender is in the United States.

It is not uncommon now for FCPA prosecutions to include counsel for money laundering under Section 1956. One high-profile recent example is the now-infamous “Africa sting,” in which the Justice Department brought FCPA charges against 22 executives of military supply companies for allegedly bribing an undercover FBI agent posing as an official of the African nation of Gabon.  16 of the defendants were also charged with money laundering in that case.

After multiple trials ended in hung juries and acquittals of several defendants, the Africa sting eventually collapsed when the Justice Department chose to dismiss charges and walk away from the case earlier this year. However, the Justice Department was able to make money laundering charges stick in another recent FCPA enforcement action, in a case against former officials of state-owned Haitian telephone utility Haiti Teleco.

The officials, Patrick Joseph and Jean Duperval, accepted bribes from Florida telecommunications companies in exchange for favorable contracts in Haiti. Since the FCPA does not cover bribe-takers, only the payers of bribes, prosecutors instead successfully pursued money laundering charges against the pair. Duperval was sentenced to nine years in federal prison on 19 counts of money laundering and two conspiracy counts in May 2012. Joseph was sentenced to one year on one count of conspiracy to commit money laundering earlier this month.

From time to time, Congress expands the list of SUAs. When it may decide that a list of specific crimes serves little purpose, as some experts suggest, and should be replaced by language that covers the proceeds of any criminal activity is unknown.

For the moment, the long list of specified unlawful activities serves as a guidepost to money laundering prosecution, and also as a graphic illustration of the connection of virtually all crimes to money.

(A panel at the ACFCS International Financial Crime Conference and Exhibition 2012, September 13 – 15 at the Sheraton Hotel in New York will bring in four top experts to dissect all aspects of the US money laundering laws. In addition, ACFCS will be hosting a pre-conference workshop on September 12 to provide in-depth, actionable guidance on AML and BSA compliance from pioneers and thought leaders in the money laundering field, including Charles Intriago, Michael McDonald and Jim Richards. For more information and to register now, please visit www.financialcrimeconference.com)