What is Money Laundering?
The Florida Money Laundering Act (2015) states that money laundering is “Knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity.” This means the individual knows the property involved represents proceeds from some form, though not necessarily which form of activity that constitutes a felony under state or federal law, regardless of whether or not such activity is specified in the paragraph. Money laundering refers to common financial schemes that aim to conceal the source, identity, and destination of illegally obtained money. When criminals obtain illegal money through criminal acts such as gambling, drug trafficking, or embezzlement, the monies are considered "dirty" and must be cleansed through a series of illegal actions. Because the money is illegal, it cannot be deposited into a bank or financial institution. The owner of the money must create records or paper trails of where the money came, and "clean" or send the money through legitimate businesses or techniques before depositing the money into his or her own personal bank account. The process of obtaining "dirty" money and turning it into "clean" money gives the illegal act the name "money laundering." The criminal activity must be a felony prohibited by state or federal laws and can be charged at either state or federal levels. To convict an individual of money laundering, a prosecutor must prove the defendant was fully aware of the unlawful criminal activity or source of proceeds. Additionally, the prosecutor must prove the defendant was fully aware of the proceeds rendered were a product of criminal activity. Under Florida law, many types of money laundering transaction can occur such as sales, purchase, monetary gifts, bank deposits, wires, vehicles, businesses, and real estate. Money laundering laws have been created to penalize organizations and individuals using financial institutions to hide proceeds deriving from criminal activity in the state of Florida. Anti-money laundering laws have been created by the government in an effort to put an end to money laundering methods involving financial institutions. Under the guidelines set forth by the anti-money laundering laws, financial institutions are now required to verify all large lump sums of money that pass through the financial institution. The financial institutions are also required to report any suspicious transactions or activity. Money launder has become such a globally prominent criminal activity, it is nearly impossible for the Financial Task Force to produce estimates or statistics as well as how vast of a scope the illegal act occurs globally and locally in the United States.
Money Laundering Stages
The process of money laundering can be complex and extensive. There are three stages involved in the money laundering scheme.
Placement - This is the process of moving money from the original source to a new source. Typically this process involves placing the money into offshore financial institutions, shops, casinos, and local and global businesses. This placement process can include currency smuggling, bank complicity, currency exchange, securities brokers, asset purchases, and fund blending.
Layering - The purpose of layering is to make detection difficult. This process is meant to derail law enforcement by hiding the trails of the illegal money. The two common methods include cash converted into monetary instruments such as money orders and material assets bought with cash then sold such as real estate or businesses.
Integration - This process involves the movement of money previously laundered and putting it back into the economy making the money appear to be normal business earning. Typically this is accomplished by depositing money into banking systems. Opposite to layering, the detection and identification usually stem from informants or whistleblowers. Common methods of integration include property dealings, false loans, front companies, foreign bank complicity, and false import/export invoices.
Money laundering comes in many forms in which some are more profitable than others. Some of the money laundering techniques commonly used include:
Bank Capture - This refers to money launderer's using their own banks to move their stash without fear of being investigated.
Bulk Cash Smuggling- this refers to an individual literally smuggling money or property by way of luggage, containers, or merchandise across U.S borders into another country by way of plane or boat. The money or property is then deposited into offshore banks or other financial institutions. This is common in drug trafficking.
Cash-intensive business - This occurs when a business will legitimately deal with large amounts of money and deposit that money into the business accounts as everyday business profits and as money obtained through illegal means. These businesses will also claim this money as legitimate income but use the proceeds for services rather than goods such as, vacations, strip clubs, and lavish dinners. The individuals will also use low-cost services such as parking fees and car washes.
Casino laundering - This occurs when the individual goes into a casino with illegally obtained money. The individual will purchase coins or chips, play the casino games, then cash out the wins, claiming the money is gambling winnings rather than laundered money. This makes the money look legally obtained.
Real estate laundering - This occurs when an individual purchases any sort of real estate with money illegally obtained, then turns around and sells the property. This scheme also makes it look as though the money is legitimate.
Shell companies - These companies are used to help disguise the true agent or owner of large amounts of illegal money.
Structuring - Also known as "smurfing," is when individuals take large amounts of illegal money and break them down into smaller amounts. Once smaller amounts are made, the individuals will purchase money orders or other monetary instruments. This helps avoid suspicion and detection.
Trade-based laundering - Similar to embezzlement, individuals will create altered invoices to show a higher or lower amount to disguise the true monetary amount and movement of illegal money.
Examples of Money Laundering
Theft or property crimes
White collar crimes
Exploitation of the elderly or disabled
Florida Money Laundering Penalties
Depending on the value of the financial transactions made by the offender, the severity of charges and penalties will vary. According to Florida Statue 896.101, the penalties of money laundering are as follows:
Financial transactions exceeding $300 but less than $20,000 in any 12-month period, commits a felony of the third degree
Financial transactions of $20,000 or more but less than $100,000 in any one year period, then the crime can be charged as a second degree felony
Financial transactions of $100,000 or more during any one year period, then the crime can be charged as a felony in the first degree
A person who violates this section is also liable for a civil penalty of not more than the value of the financial transactions involved or $25,000, whichever is greater
The punishments include penalties and fines which are provided for in s.775.082 and s.775.083. The penalties for habitual offenders are provided in 775.084.
3rd degree felony: up to five years in prison;
2nd degree felony: up to 15 years in prison;
1st degree felony: up to 30 years in prison.
In addition to the penalties authorized by s.775.082, s.775.083, or s.775.084, a person who has been found guilty of or who has pleaded guilty or nolo contendere to having violated this section may be sentenced to pay a fine not exceeding $250,000 or twice the value of the financial transactions, whichever is greater, except that for a second or subsequent violation of this section, the fine may be up to $500,000 or quintuple the value of the financial transactions, whichever is greater.
Statue of Limitations
Generally, money laundering is classified as a federal offense. Under federal laws, non-capital offenses such as money laundering cannot be prosecuted if the offender was not indicted within five (5) years of the criminal offense being committed. However, the state of Florida does provide the option of tolling if the offender is out of state.
Financial Action Task Force
Formed in 1989 by a coalition of countries, the Financial Action Task Force (FATF) was designed to promote and develop international cooperation to combat money laundering across the world. Currently, the Financial Action Task Force is made up of 36 countries with headquarters in Paris, France. The Financial Action Task Force is always looking to expand and gain the involvement of new countries. Besides fighting money laundering schemes, in 2001 the task force expand its forces to combat the financing of terrorism and proliferation of weapons of mass destruction. Collaborating with international stakeholders helps the Financial Action Task Force identify nation-level vulnerabilities with the aim to protect the international financial system from misuse by criminals.
Bank of Secrecy Act of 1970
Enacted by Congress in 1970, the Bank Secrecy Act (BSA) was created as an effort to combat criminals using financial institutions for money laundering crimes. The Act requires financial institutions to report transactions that look suspicious or is in the excess of $10,000. The financial institution must also file a Suspicious Activity Report (SAR) if they believe suspicious activity has occurred or believe the funds come from unlawful activity. The Bank Secrecy Act is also responsible for creating the Financial Crimes Enforcement Network. This organization creates reports suspicious activity or money laundering activity available to criminal investigators around the globe.
Other Anti-Money Laundering Acts
The Money Laundering Control Act of 1986 - This Act declares money laundering a federal crime and prohibits individuals engaging in financial transactions involving proceeds derived from illegal activity.
The 1992 Annunzio-Wylie Anti-Money Laundering Act - This Act requires strict sanctions for individuals and requires financial institutions to provide Suspicious Activity Reports as well as record keeping and verification of all wire transfers.
The Money Laundering Suppression Act of 1994 - This Act requires financial institutions to review and enhance training, and develop anti-money laundering examination procedures within the institution.
Money Laundering and Financial Crimes Strategy Act of 1998 - This Act requires banking agencies to develop training for examiners.
Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act) - The PATRIOT Act Criminalized the financing of terrorism and augmented the existing BSA framework by strengthening customer identification procedures. This Act also expanded the anti-money laundering program requirements to all financial institutions and increased civil and criminal penalties for money laundering
Intelligence Reform & Terrorism Prevention Act of 2004 - Amended the BSA to require the Secretary of the Treasury to prescribe regulations requiring certain financial institutions to report cross-border electronic transmittal of funds, if the Secretary determines that such reporting is "reasonably necessary" to aid in the fight against money laundering and terrorist financing