Proposals to Reform the Federal Money Laundering Statutes
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Proposal #3: Amend § 1957 to target significant third-party money laundering.
Section 1957 is essentially the same as § 1956 stripped of any requirement of promotion,
concealment, or avoiding a transaction reporting requirement. Thus, § 1957 is not a money
laundering statute, but rather a law against the depositing or withdrawal of more than $10,000 at one
time if you know it is the proceeds of crime. 19 No social purpose is served by criminalizing such
conduct. If a businessman commits a fraud, and his secretary knowingly deposits a check
representing $10,000 of the fraud proceeds in a bank account in the business ’ true name, with no
attempt to conceal anything, the secretary has committed a § 1957 offense that is punished much
more severely than the underlying fraud committed by her boss. Why? The act of depositing the
fraud proceeds in a bank harms no one. Would society be better off if the proceeds were hidden
under the fraudster ’ s mattress? 20
One ostensible purpose of § 1957 is to keep dirty money out of the U.S. banking system.
That sounds good as a slogan but accomplishes nothing. Once dirty money enters the banking
system it becomes visible to the authorities and can be seized or taxed. If the money remains under
19 For many years the Department of Justice barely used § 1957, reflecting the government ’ s doubts about the rationale and fairness of the provision. G. Richard Strafer, Money Laundering: The Crime of the ‘ 90's, 27 Am. Crim. L. Rev. 149, 161 (1989) (noting the small number of prosecutions commenced under § 1957 by 1989).
20 The Sentencing Guidelines treat the § 1957 offense as far more serious than the fraud offense .
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