Money Laundering Requires More than Hiding Currency

Reprinted from the CCH Federal Banking Law Reporter.

A person who concealed nearly $81,000 with the apparent intent of smuggling it into Mexico was not proven to have engaged in money laundering, the U.S. Supreme Court has determined. In reversing the conviction, the Court said that the money laundering statute required more than simply transporting concealed funds --it required that the transportation of the funds be with the intent to conceal or disguise the nature, location, source, ownership or control of those funds.

As outlined in the Court's unanimous opinion, the person was stopped for driving erratically after having passed Eldorado, Texas, heading in the direction of the border with Mexico. His suspicious behavior eventually led officers to gain his consent to search his Volkswagen Beetle with the assistance of a drug detection dog. The search revealed the currency --wrapped in plastic bags and duct tape --in a hidden compartment under the car's rear floorboard. The court also noted that animal hair had been spread over the rear of the car, possibly to confuse the dog.

Based on these facts, the individual was convicted in the trial court of money laundering for attempting to transport illicit funds to a location outside of the country in order to conceal or disguise the nature, location, source, ownership or control of those funds. A three-judge panel of the U.S. Court of Appeals for the Fifth Circuit reversed that conviction, saying that it wasn't enough for the government to have proved that the money was concealed for the purpose of transporting it. Rather, the government had to prove that the transportation of the money was intended to disguise or conceal one of the listed attributes of the money (its nature, location, source, ownership or control). However, the full circuit court reheard the case and reinstated the conviction, concluding that the extensive efforts to conceal the funds proved an intent to conceal one of the attributes of the funds.

Appearance of Legitimate Wealth

The Court first considered and rejected the defendant's assertion that he would have committed money laundering only if his conduct had been intended to create the appearance that the money represented legitimate wealth. Although that would be consistent with the common understanding of money laundering, it was not required by the statute, the Court said. The law prohibited concealing or disguising the attributes of the money, and it could not be said that concealing or disguising the nature, location, source, ownership or control of illegitimate funds would necessarily make those funds appear legitimate.

The existence of a law against bulk currency smuggling did not help the individual, either. His claim that, since the smuggling law covered transporting concealed currency, the money laundering law must have been aimed at other conduct was rejected because there were differences between the two laws. The currency smuggling law only applied if there were an intent to avoid currency transaction reporting requirements, the Court noted, and could be violated by the transportation of funds derived from legal transactions.

Simple Concealment

However, the simple concealment of illicit funds during their transportation was not money laundering, the Court determined, even if substantial efforts had been made to accomplish that concealment. Transporting illicit funds in a secret manner, in and of itself, was not money laundering. It was necessary for the government to prove that the transportation of the funds was intended to conceal or disguise the nature, location, source, ownership or control of the funds. The Court noted that the method of concealment could be evidence of an intent to conceal the attributes of the money but was not, alone, enough to prove that intent conclusively.

Cuellar v. U.S. (US)