Thursday, May 28, 2009

Money Laundering Provisions of FERA

I have previously noted that, in enacting the Fraud Enforcement and Recovery Act of 2009 (FERA), Congress, in its wisdom, dropped the Senate proposal to include tax crimes (§§ 7201 and 7201) to transportion money laundering. Of course, the IRS still considers that money laundering is "tax evasion in progress." See IRS Web Page here; for other references to this statement, see the cites at the bottom of this blog. I also cautioned that Senator Grassley seems intent on giving Congress other opportunities to pass the proposal, so stay tuned.

In all events, given the real or perceived connection between money laundering and tax crimes, practictioners are well advised to stay abreast of money laundering developments. The following are the key points from FERA as enacted:

1. The legislation overrides the Supreme Court's restrictive interpretation of the term "proceeds" as meaning the profits rather than gross revenue of specified unlawful activity. For further discussion, see Ellen Podgor's discussion on the White Collar Crime Prof Blog here.

2. Congress stated a "Sense of Congress" [not intended as an oxymoron] and reporting requirement regarding the following subject:
It is the sense of the Congress that no prosecution of an offense under section 1956 or 1957 of title 18, United States Code, should be undertaken in combination with the prosecution of any other offense, without prior approval of the Attorney General, the Deputy Attorney General, the Assistant Attorney General in charge of the Criminal Division, a Deputy Assistant Attorney General in the Criminal Division, or the relevant United States Attorney, if the conduct to be charged as ‘‘specified unlawful activity’’ in connection with the offense under section 1956 or 1957 is so closely connected with the conduct to be charged as the other offense that there is no clear delineation between the two offenses.
I am not sure exactly what Congress perceives the problem to be. From the "sense" of the stated "Sense of Congress," Congress appears to believe that the underlying substantive crime (the SUA) might be so coterminous with the money laundering offense itself that charging both presents a problem. I know courts have expressed concern about that. This have overtones of the doctrine of merger dealing with conviction of a greater and lesser offense with overlapping elements of conviction, and its cousin, the lesser included offense concept. But even if that is the concern, of course, the prosecutors could simply charge the greater offense (here money laundering) without charging the lesser offense, so that merger is not presented and thereby avoid the lesser included offense problem by making sure that the contested elements are overlapping. I will try to find out more on this and fill in later.


Other references to money laundering as tax evasion in progress. DOJ Press Release; see also TIGTA, The Criminal Investigation Function Provides Adequate Guidance to Field Offices for Money Laundering Investigations, Report No. 2002-10-150 (8/21/02). The IRS likes this catchy phrase and repeats it for emphasis, particularly when justifying its enforcement efforts against money laundering E.g., Richard Speier, IRS Civil and Criminal Enforcement Statement, reproduced at 2006 TNT 8-31 (1/11/06); see also Martin A. Sullivan, Sex, Drugs and Tax Evasion, 115 Tax Notes 1098 (June 18, 2007).

And while we are on catchy phrases, I throw out this one: "The only think to fear is FERA itself,' from this web site. The phrase is a play on FDR's famous line about the depression at the start of his presidency.

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