Money Laundering, 3rd Edition

xv

The year 2011—October 27, in particular—marks the 25th

anniversary of the passage of the Money Laundering Control

Act of 1986, Public Law 99-570. There have been a lot of

changes in those 25 years, including amendments to the law,

the addition of new underlying crimes, court decisions inter-

preting the statute in ways favorable to the government or

limiting the scope of the act, but most in law enforcement

would say that the law has become an important tool in com-

bating criminal activity.

One of the most signicant changes over the years has

been the steady extension of the reach of the statute. Very

few people, even those familiar with the history of the statute,

remember that the Money Laundering Control Act was not

enacted as a stand-alone law, but rather was a part (Subtitle H)

of The Anti-Drug Abuse Act of 1986. This placement illus-

trates a common view of the money laundering problem at

the time. True, the law prohibited the laundering of money

derived from a number of so-called Specied Unlawful

Activities (SUAs), but in the early days of its implementation,

investigators focused on the vast prots of the illegal drug

trade. My rst money laundering case (the rst brought in our

judicial district) targeted a multistate cocaine trafcking orga-

nization that laundered prots through a car dealership front.

The majority of the cases led in the early years also had drug

sales as the underlying SUA, but this trend didn’t last.

Cases involving drug money are still important today, but

headlines in recent years have announced money laundering

indictments in multibillion-dollar fraud schemes, environmen-

tal crimes, and for many of the SUAs added since 1986. At

this writing, at least 260 crimes are listed as SUAs, and more

will probably be added this year. In fact, the Asset Forfeiture

and Money Laundering Section (AFMLS) of the Justice

Department is examining ways to expand the statute’s reach

to any crime that is a “domestic felony” under federal law, as

well as to foreign crimes that have an equivalent in American

law. If these changes are enacted, the concept of the SUA will

cease to exist, replaced by a prohibition of the laundering of

the proceeds of pretty much any federal crime. Measures to

that effect are already on the books in many states, which

essentially reach any criminal act under state law.

That major change and even the gradual expansion of the

statute over time create new opportunities and challenges

for law enforcement. Some federal agencies, notably the

FBI, DEA, IRS, and Customs Service, got a lot of practice

investigating money laundering during the law’s rst 25

years, developing effective methods and techniques in use

today. The Bureau of Justice Statistics reported in 2003 that

between 1994 and 2001, 18,500 persons faced a money-laun-

dering-related charge in federal court. Most of those cases

were brought by agencies of the Departments of Justice and

the Treasury, but as the list of SUAs got longer, other agen-

cies were given a stake in the money laundering game—one

that, as time went by, everyone played for higher and higher

stakes. The money, as a Texas hold ’em player might say, is

getting very serious. Multimillion-dollar money launder-

ing cases are no longer uncommon, and some of the recent

frauds—Bernie Madoff’s being the most widely publicized—

involve billions, even tens of billions, of dollars. By expand-

ing the scope of the money laundering law and by broadening

the reach of federal forfeiture statutes, Congress brings more

law enforcement agencies into a crowded eld, but one that is

much more hazardous for the criminal.

With this opportunity come those challenges mentioned

earlier. Investigators whose jurisdictions included postal or

environmental or food and drug crimes now have the chance

to pursue violators who are laundering their illegal prots

—and to go after those prots as well. The many investigators

who pursue fraudsters may also have a fresh line of attack

and new charges to pursue. This is obviously exactly what

Congress intended by expanding the scope of the money laun-

dering law, but practical obstacles remain, especially for those

who are new to the money laundering arena and may be unfa-

miliar with the rules of the game or the players’ techniques.

For those who are hoping to develop their knowledge of this

crime and the means needed to investigate it, you’ve come

to the right place; this book was written for you. As the title

states, this book is a guide for criminal investigators, and

the concepts and techniques outlined herein apply equally to

detectives investigating drug violations as part of a federal task

force, special agents tracking illegal polluters or perpetrators

of fraud, or those tracking the terrorist nancing threat.

These changes weren’t the only important developments

on the money laundering front over the past quarter of a cen-

tury. During that time, Congress provided law enforcement

with additional tools, such as regulations under the Bank

Secrecy Act (BSA) that made money laundering easier to

detect, investigate, and prosecute. In April 1990, the Treasury

Department’s Financial Crimes Enforcement Network

(FinCEN) went operational and has since become the nation’s

primary nancial intelligence resource; its role has expanded

to include participation in international intelligence coor-

dination and administration of the BSA’s provisions. Since

1986, not just FinCEN, but also law enforcement generally

got better at processing nancial information, and the exten-

sion of the BSA to nonbank nancial institutions and other

businesses meant that more entities report the types of trans-

actions commonly seen in money laundering schemes. This

intelligence has proven invaluable to investigators, and an

entire chapter of this latest edition is devoted to exploring the

ways and means by which it can be exploited.

Preface