I. Introduction
At the end of last year, the United States Supreme Court granted a petition for writ of certiorari for the appeal of convicted felon Humberto Fidel Regalado Cuellar. [1] The Court's ultimate decision in the case of United States v. Cuellar will be of immense importance, and can have far reaching effects. The Cuellar case will allow the United States Supreme Court to give lower courts guidance in the proper interpretation of current statutes criminalizing money laundering. Currently, a plethora of crimes are in the penumbra of money laundering charges. Such aggressive interpretation and application of money laundering charges is troubling in light of its original purpose. Clearly, much has changed since the passage of the 1970 Bank Secrecy Act "BSA". [2] Furthermore, the meaning of money laundering has expanded to "cover almost any financial crime", and marks a far departure from its original conceptualization. [3] Should the Court affirm Cuellar's conviction and potentially allow prosecutors "unfettered discretion to go after anyone who touches dirty cash?" [4] On the contrast, should the Court return money laundering charges to the intent of the 1986 Congress that moved to criminalize the act of money laundering?
II. Background History
In 1970, Congress enacted the Bank Secrecy Act. [5] The Bank Secrecy Act was the result of substantial evidence from law enforcement agencies that bank procedures which prevented the disclosure of confidential account information were encumbering the investigation of organized crime, and similar criminal activities. [6]As a result, the 1970 Bank Secrecy Act was created to prompt, "financial institutions to help the government catch money launders." [7] For example, the BSA allows the United States Secretary of the Treasury to compel any financial institution to file reports on suspicious financial transactions, in an effort to help the government track criminal activity. [8]
The BSA was originally narrowly tailored to regulate activities by banks and some other financial institutions that offered services similar to banks. For example, banks and other financial institutions were required to report the transport of currency across U.S. borders, report suspicious transactions relevant to possible violations of the law, keep people records related to certain monetary instrument purchases and fund transfers. [9]
It became readily apparent that the BSA, as originally enacted, was not sufficient to prevent all types of money laundering, as it was primarily aimed at banks and other financial institutions. In 1986, Congress criminalized the act of money laundering itself, and attached fines and long prison terms as potential punishment for violation of the law. [10] The criminalization of money laundering was in part the result of the President's Commission on Organized Crime report released in 1984 that recommended a legislative solution to loopholes of the BSA. [11] The two statutes criminalizing money laundering were not without problems. Congress eventually realized that bulk cash smuggling across a U.S. border was not covered by the statutes, and Congress created a new law which prohibited bulk cash smuggling. [12]
III. Analysis
Although the statutes criminalizing money laundering were created to target organized crime groups who were washing their ill gotten monetary gains through legitimate businesses, some prosecutors now tack money laundering charges on to a myriad of crimes far beyond the spectrum originally intended. [13] On the one hand, it can be argued that money laundering all relates to the washing of the proceeds of illegal activities through legitimate enterprises. On the other hand, a prosecutor can charge a person with money laundering no matter how tenuous the connection between the criminal act that produced the gain and the actions of the person charged with the crime. Furthermore, prosecutors wield much discretion as to the tacking of money laundering charges to various other crimes.
On July 14, 2001, defendant Humberto Fidel Regalado Cuellar was stopped about 114 miles from the Mexican border for driving too slowly. [14] A narcotics dog was alerted to $83,000 which was wrapped in duct tape and hidden under a floorboard, which was covered with animal hair, often used to distract drug-sniffing dogs. [15] Furthermore, Cuellar pulled out a wad of cash that "smelled like marijuana", and showed it to Deputy Kevin Herbert from the Schleicher County Sheriff's office and State Trooper Danny Nunez. Officer Nunez also "noticed that mud appeared to be splashed purposefully on the car with an acoustic gun, which is done by criminals to cover up tool marks, fresh paint and other work done on a vehicle." [16] Subsequently, Cuellar was convicted of international money laundering in violation of 18 U.S.C. section 1956(a)(2). [17]
18 U.S.C. criminalized two types of money laundering. Subsection (a)(1) prohibits a person from knowingly engaging in a financial transaction involving illicit criminal proceeds knowing that the transaction is designed to conceal or disguise the nature, location, source, ownership or control of illicit proceeds. [18] Subsection (a)(2) prohibits a person from transporting, or attempting to transport, illicit funds, from a place inside the United States to a place outside the United States, knowing that such transportation is designed to conceal or disguise the nature, location, source, ownership or control of those proceeds. [19] Mr. Cuellar was charged and convicted under subsection (a)(2) of 18 U.S.C. 1956.
The government is required to prove five elements to demonstrate a person is guilty of violating 18 U.S.C. section 1956(a)(2)(B)(i), which outlaws international money laundering. The elements outlined in the statute are: (1) the transportation or attempted transportation of funds was across U.S. borders; (2) the funds in question must be the proceeds of specified unlawful activity; (3) the accused must know that the funds represent such proceeds; (4) the transportation of the funds must have been designed (in whole or in part) to conceal or disguise the nature, location, source, ownership or control of the proceeds; and (5) the accused must know that such concealment was part of the transportation plan or design. [20]
In Mr. Cuellar's case the most contentious elements are the fourth and fifth. Cuellar admitted he was on his way to Mexico, and the district court determined the evidence was "sufficient to allow a reasonable jury to infer" the money Cuellar possessed were proceeds from drug trafficking and Cuellar knew that it was. [21] Mr. Cuellar argued that the evidence showing that money was hidden in his car and being transported to Mexico was not enough to sustain a conviction under the international money laundering statute. Circuit Judge W. Eugene Davis, writing for the majority of the United States Court of Appeals for the Fifth Circuit, concluded that the government presented sufficient evidence at Cuellar's trial to support his conviction. Circuit Judge Jerry E. Smith and Circuit Judge James L. Dennis were in dissent.
IV. Possible Resolution
A cognizable definition of the scope of money laundering charges is desperately needed. The Court of Appeals for the Fifth Circuit adopted a very broad interpretation of the international money laundering statute. As Circuit Judge Jerry E. Smith stated there is "a difference between concealing something to transport it, and transporting something to conceal it." [22] If money laundering is to refer to an attempt to wash dirty money through legitimate businesses, then the Court of Appeals decision should be overturned. However, if money laundering is to be construed as any transfer of illicit proceeds, then the Cuellar decision should be affirmed.
The plain language of the international money laundering statute appears to support Cuellar's contention that the government did not provide sufficient evidence to prove its case. No drugs were found in the car, and the government did not provide any information about how the money would be used once Cuellar transported it to Mexico. Furthermore, the statue outlawing bulk cash smuggling is more applicable to Cuellar's case. The bulk cash smuggling statute was "enacted in 2001 because Congress realized that section 1956 did not prohibit the carrying of bulk cash across a U.S. border." [23] Additionally, the statute was passed with a finding that "the arrest and prosecution of bulk cash smugglers are important part of law enforcement's effort to stop the laundering of criminal proceeds." [24]
Money laundering charges should not be loosely interchanged with the bulk cash smuggling statute. In Mr. Cuellar's case the government decided to pursue a conviction under money laundering, instead of the bulk cash smuggling statute. The government's decision is perplexing and also deeply concerning. While the statues may seem to have the same end as a goal, the potential penalties under each statute differ greatly. While the bulk cash smuggling statute carries a maximum five year prison term, the charge of money laundering carries a maximum prison term of twenty years. With the immense disparity between the sentencing guidelines attached to each charge, it is imperative that people are charged with the right crime.
V. Conclusion
As demonstrated by Cuellar's case the government and prosecutors wield tremendous power in deciding which charge is filed against a person. One the one hand, prosecutors can pursue lengthy prison sentences and charge money laundering against offenders who do not meet the legislative intent of the charge. On the other hand, prosecutors can charge money laundering only when the evidence clearly establishes every element of the crime as plainly written in the statute. Hopefully, the Supreme Court will establish a clear guide for prosecutors to know when to charge a suspect with money laundering. Additionally, Congress has the option to clarify the intent of the money laundering statutes by eliminating ambiguity in the contemporary statute.
[1] United States v. Cuellar, 478 F.3d 282 (5th Cir. 2007).
[2] Congress enacted the Bank Secrecy Act of 1970, which required any financial institution receiving one or more cash transactions in excess of $5000 (the limit is now 10,000) to file a Currency Transaction Report with the federal government. See Bank Secrecy Act, 31 U.S.C. § 5311-5312, 5316-5324 (2004).
[3] The Government's Dirty Laundry, Forbes, Apr. 7, 2008, at 28.
[4] See Money Laundering Control Act of 1986, Pub. L. No. 99-570, 100 Stat. 3207-18 (codified as amended at 18 U.S.C. Sections 1956-1957 (1994); 31 U.S.C. Sections 5324-5326 (1994)).
[5] See Bank Secrecy Act, 31 U.S.C. § 5311-5314, 5316-5324.
[6] See Secretary of the Treasury, A Report to Congress in Accordance with Section 357 of the United and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 at 5 (Apr. 26, 2002) [hereinafter the "Section 357 Report"]
[7] The Government's Dirty Laundry, supra note 3.
[8] Section 357 Report, supra note 6, at 3.
[9] See Bank Secrecy Act, 31 U.S.C. § 5311-5314, 5316-5324.
[10] Section 357 Report, supra note 6, at 6,7.
[11] See President's Commission on Organized Crime, Interim Report to the President and Attorney General, The Cash Connection: Organized Crime, Financial Institutions, and Money Laundering 7 (1984).
[12] See Pub. L. No. 107-56 Section 371(c), 115 Stat. 337 (2001).
[13] The Government's Dirty Laundry, supra note 3.
[14] United States v. Cuellar, 478 F.3d 282 (5th Cir. 2007).
[15] Id. at 285.
[16] Id.
[17] Id. at 287.
[18] Id.
[19] Id.
[20] Id.
[21] Id.
[22] Id.
[23] See, Pub. L. No. 107-56 Section 371(c), 115 Stat. 337 (2001).
[24] Cuellar, 478 F.3d 282.