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F.B.I. Shifting its Focus from Ordinary Crime to National Security and Intelligence Gathering
The N.Y. Times is reporting that agents at the Federal Bureau of Investigation (FBI) are more likely to be hunting potential threats to national security than for ordinary criminals in recent years.
This finding comes from data collected detailing the bureau’s activities the last 2 years. The data was part of an internal FBI report that the NY Times successfully obtained under the Freedom of Information Act (FOIA). The report details the FBI’s shift from a law-enforcement agency focused on solving crimes to a domestic intelligence agency whose mission is to detect potential threats before they can reach fruition.
In order to accomplish this transition the FBI instituted a policy to investigate every single national security tip, no matter how dubious the tip may be. Further, if the FBI receives a national security related tip from another agency, like the CIA or OFAC, the FBI will immediately open a more intensive investigation instead of starting with an “assessment.” (A couple of posts about the FBI’s new operations guide regarding assessments and investigations were discussed previously here, and here)
The FBI’s shift away from investigating ordinary crime to prioritizing national security related issues has already had a significant impact. So the critical question that needs to be asked is: What exactly are national security related issues? The U.S. government has expressly stated at one time or another through its various agencies and institutions that crimes related to money laundering, bank secrecy, smuggling, currency transaction reporting, trade sanctions, tax evasion, and narcotics production and trafficking are all national security related issues. As this list demonstrates, the government has unequivocally focused its attention on terrorism finance as one of the major ways of securing national security.
Coupling the government’s focus on terrorism finance with the FBI’s new focus on national security issues probably means more criminal investigations of people in immigrant groups with links to the Middle East, South America, Africa, and East Asia for activities that, in fact, are not at all related to national security. Additionally, this change in federal law enforcement policy coupled with a newly invigorated focus on terrorism finance also means more criminal investigations and scrutiny of traditional white collar activities and financial transactions. Thus, as everyday activities are increasingly linked to national security the general public will be subjected to increased government scrutiny.
Although many traditional protections offered to people that are targets of criminal investigations have eroded since September 11, the FBI is still, at its heart, a law enforcement agency receptive to this country’s legal standards associated with criminal investigations and trials (i.e. reasonable suspicion, probable cause, and beyond a reasonable doubt). However, as the FBI increases its intelligence gathering operations, the need for an effective federal defense attorney becomes even more important. Because the FBI will be subjecting more everyday activities to investigations for “intelligence gathering,” a knowledgeable federal defense attorney will be needed to explain to agents cultural nuances, federal regulatory policies, and foreign policy concerns applicable to a particular client’s situation. This level of knowledge in an attorney is vital to ensuring that the FBI doesn’t misinterpret the findings of an investigation which can ultimately lead to an erroneous indictment or conviction.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
Money Laundering: Understanding 18 U.S.C. 1956 and 1957
Congress enacted the principal money laundering statutes in 1986. 18 U.S.C. 1956 and 1957 criminalize financial and monetary transactions with proceeds of underlying criminal activity. These statutes make money laundering a crime in and of itself. Thus, not only can someone be charged with the underlying offense that initially taints the funds, they can also be charged with money laundering if they use (or attempt to use) the proceeds derived from their criminal activity in ways sanctioned by the money laundering statutes.
Although initially enacted as a means of countering narcotics trafficking activities, the money laundering statutes are now applied to all kinds of kinds of white collar or national security related offenses. For example, these statutes can be invoked when the underlying criminal activity is fraud, sanctions violations, tax evasion, etc. Any time money is derived, earned or otherwise possessed from some specified unlawful activity, it is considered dirty and the person possessing such funds is at risk of also being a money launderer. This is significant because money laundering carries a 20 year maximum sentence, a sentence significantly higher than most white collar or national security related offenses.
Although sections 1956 and 1957 are related, they differ in some very important ways. Under section 1956 a federal prosecutor must prove that: (1) the defendant conducted or attempted to conduct a financial transaction; (2) the defendant knew that the financial transaction involved the proceeds of some type of unlawful activity; (3) the funds were in fact proceeds from unlawful activity; and (4) the defendant intended to “promote” criminal activities, “conceal” the funds, avoid currency transaction reporting laws, or commit tax fraud. [Concealment money laundering makes it an offense to make "dirty" money look "clean" or that attempts to hide the money from the government in any way. Promotion money laundering criminalizes those who use the proceeds of their criminal activity to further or promote their criminal activity].
Under section 1957 a federal prosecutor must prove that: (1) the defendant engaged or attempted to engage in a monetary transaction; (2) the monetary transaction was of a value greater than $10,000; (3) the transaction derived from criminal activity; (4) the transaction either took place in the U.S. or the defendant is a U.S. person; and (5) the defendant knew that the property was criminally derived.
One critical distinction between the two statutes is the conduct being targeted. 1956 targets “financial transactions,” while 1957 targets “monetary transactions.” Financial transactions includes a broad range of financial dealings that affect interstate commerce. The term encompasses almost any deal, like bank transactions, gifts, purchases and other transfers of money and property. 1957 accomplishes its goal primarily by prohibiting “dirty” money from entering the financial system through monetary transactions (i.e. deposits, withdrawals, etc.) with financial institutions (i.e. banks). Thus the goal of 1956 is prohibiting the actual “laundering” of “dirty” money whereas 1957 is concerned with keeping the financial system clean by keeping “dirty” money out.
Another key distinction is that 1956 has no specified minimum value for the financial transactions to be subject to the statute. Thus, even the most miniscule financial transaction can subject someone to criminal prosecution under 1956. Quite by design, the statute broadly covers most everyday transactions and includes transactions of any value so long as the requisite intent is present. On the other hand, Section 1957 mirrors currency reporting laws and requires the monetary transaction to be worth at least $10,000.
Both statutes require the government to prove that the defendant knew the funds were criminally derived, but does not require the government to prove that the defendant knew the specific criminal activity underlying the transaction. Therefore, as long as the government can prove beyond a reasonable doubt that the defendant knew the funds he was transacting with were likley derived from some prohibited conduct, he can be liable under either money laundering statute. Willful ignorance is not a defense to this intent requirement. Thus, the defendant need not be involved in the criminal activity himself, let alone know what criminal acts were specifically undertaken to derive the funds, to be liable in these cases.
It is apparent that these statutes broadly apply to many people in many situations. Most of these situations would seem more economic in nature, rather than criminal. Bank tellers, traders, merchants, retailers, etc. are at risk and should understand these statutes because they directly relate to their lawful businesses. Thus people should be mindful of money transfers, purchases or transactions by performing some level of due diligence to ensure the funds are not derived from criminal activity. Further, people conducting trade or transactions on an international level should be mindful of the various economic sanctions programs, export/import laws, etc. in order to minimize their instances of possessing “dirty” money. In other words: know where the money is coming from and decline to work with those who cannot give you adequate assurances, even if those people are your customers, friends, or family.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
Smurfing: Individuals Structuring Monetary Transactions to Evade Reporting Requirements Can Be Imprisoned
The federal government has the authority to criminally prosecute individuals who structure their transactions in a manner that evades the $10,000 reporting requirements. See 18 USC 5324. Penalties range from 5 years in prison, to fines, or both. Enhanced penalties, including up to 10 years of imprisonment, can be assessed in aggravated cases like ones establishing a pattern of illegal activity or involve the violation of other federal laws, like economic sanctions. Of particular interest to the authors of this blog is part (c)(3) of this statute which prohibits individuals from structuring their monetary transactions to or from international locations. The statute states that “no person shall, for the purpose of evading the reporting requirements of section 5316, structure or assist in structuring, or attempt to structure or assist in structuring, any importation or exportation of monetary instruments.” The unfortunate reality of this law is that it targets U.S. persons who have family or friends overseas who may support or depend on one another financially.
Traditionally, federal laws regarding currency transaction reporting (CTR) targeted financial institutions such as banks, currency exchanges, credit unions, and other institutions that deal with large sums of currency. The definition of “financial institution” has always been broader than “depository instititution” and also includes pawnbrokers, travel agencies, and auto dealerships among others. These institutions would have to file a report whenever a currency transaction of over $10,000 took place. The laws never required individual customers to file the actual report, only the financial institution the individual was transacting with had to file a CTR. The obvious reaction by people who wanted to avoid having their transactions reported to the government was to structure their transactions so that no single transaction would be over $10,000. This practice was commonly referred to as “smurfing.” And since the reporting laws only targeted financial institutions, many individuals were able to escape liability. A few unlucky people were prosecuted under 18 USC 371 for conspiring to defraud the United States before any anti-structuring statutes existed, but that was not enough for Congress. Accordingly, in 1986, Congress decided to specifically target individuals who utilized the $10,000 loophole by passing 18 USC 5324.
Somewhat disturbingly, Chapter 53 of the U.S. code also empowers the Department of the Treasury to pay a reward to individuals who provide information which leads to a recovery of a criminal fine, civil penalty, or forfeiture for violations of these reporting and anti-structuring laws. The reward can be as high as 25% of the net amount of the fine, penalty, or forfeiture collected. A law that already targets U.S. persons who have family or friends overseas who may depend on or support one another is exacerbated by the fact that their neighbors now have an incentive to disclose the conduct to the government.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
