Bank Fraud · Proceeds and Transfers

When Does a Later Transfer Become a Laundering Count?

A transfer after an alleged bank-fraud draw is not automatically money laundering. The government must prove the elements of the particular laundering statute, including the required source, knowledge, transaction, and purpose or threshold.

By Heath Hyde · East Texas and statewide

Mr. Heath Enix ‘Heath’ Hyde
Eligible to Practice in Texas
Attorney at Law
Bar Card Number: 00796807
TX License Date: 11/01/1996

Primary Practice Location: Sulphur Springs, TX and Dallas, TX
214 Connally St Ste A
Sulphur Spgs, TX 75482-2612

Request a consultationCall 903-439-0000

A laundering count needs its own proof, even when prosecutors allege that the money came from bank fraud. For § 1956, that includes a qualifying financial transaction involving proceeds and the intent or knowledge required by the charged clause. Section 1957 takes a different approach: a qualifying monetary transaction must involve more than $10,000 in criminally derived property. It does not require an intent to promote or conceal the underlying crime.

For each laundering count, put the loan draw beside the payment prosecutors have charged. There should be a date for the receipt, a date for the payment and an explanation of which property connects them. Then read the cited subsection. A payment made after a draw may fit the chronology without satisfying the other elements.

Separate the underlying offense from the later transaction

Proof of bank fraud does not relieve prosecutors of proving the laundering count. The bank’s role in the alleged fraud is one inquiry. What happened to the property afterward is another. For that later transaction, the government still needs proof of source and knowledge, along with the requirements of the laundering provision it charged.

Under § 1956(a)(1), prosecutors must prove a financial transaction involving actual proceeds of specified unlawful activity, along with the required knowledge of criminal source. The particular clause adds further requirements. A promotion theory concerns intent to further specified unlawful activity. Concealment concerns knowledge of a design to hide the proceeds’ nature, location, source, ownership or control. Reporting avoidance concerns knowledge of a design to avoid a state or federal transaction-reporting requirement. Read the precise clause and the law in effect on the alleged date.

Section 1957 does not require those promotional or concealment purposes. It requires a knowing monetary transaction involving more than $10,000 of criminally derived property from specified unlawful activity. The statutory definition covers qualifying deposits, withdrawals, transfers or exchanges through, by or to a covered financial institution, with the required connection to interstate or foreign commerce. Source, value, knowledge and the type of transaction still need proof.

Trace funds without assuming every transfer is new harm

An equipment order placed before the loan may help explain a subsidiary’s later payment. Check the order against the invoice and business plan. The description “business expense” cannot prove intent. Nor can a route through nominee accounts, without the evidence needed to establish the charged mental state.

Begin the account history before the disputed draw. Include the opening balance and lawful receipts, then follow the withdrawals to their recipients. Keep the supporting records with the entries.

Keep a separate figure for the money involved in the charged laundering transaction. It may not be the same as the victim’s loss. Money passing through several accounts is still the same money; the entries do not necessarily represent new losses at every stop. Use the statements, loan ledger, wire details and invoices to reconstruct the movement. The applicable statute and sentencing guidelines then govern the separate calculations.

Apply the correct law to the offense date

The law applicable to the alleged dates must be checked, particularly where the question is when the underlying offense produced proceeds. A later payment might support an allegation about the original scheme, constitute a separate monetary transaction or reflect an ordinary use of funds. The records and the governing law determine which interpretation is supportable.

Before explaining a transaction or moving disputed funds, have counsel review the charging papers and account records. Keep those originals. The review must also address any separate sentencing issues.

Related guide: Federal Bank Fraud Defense in Texas.